/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/080523.mbx T R O U B L E D C O M P A N Y R E P O R T E R Friday, May 23, 2008, Vol. 12, No. 122 Headlines AIRTRAN HOLDINGS: President & CEO Fornaro Elected Board Chairman AIRTRAN HOLDINGS: Board Elects William Usery as Director Emeritus ALASKA AIR: JPMorgan Analyst Expects Airline Bankruptcies ALOHA AIRLINES: Ch. 7 Trustee Proposes Recovery Incentive Plan AMEREN CORP: Moody's Holds Units' Low-B Ratings, Positive Outlook AMERICAN HOME: Panel Can Hire Hennigan as Conflicts Counsel AMERICAN HOME: Wells Fargo Wants to Appeal Cash Recovery Denial AMERICAN HOME: Court Approves Stipulation with Calyon New York AMR CORP: JPMorgan Analyst Expects Airline Bankruptcies ARTISTDIRECT INC: March 31 Balance Sheet Upside-Down by $21,000 ASARCO LLC: Conducts Plan Sponsor Selection Under Supervision ASCALADE COMM: Creditors to Vote on Plan of Arrangement June 17 AVADO BRANDS: Can File Chapter 11 Plan Until August 30 BAG 'N BAGGAGE: KCP Opportunity Fund Named Stalking Horse Bidder BALL CORP: Fitch Holds 'BB+' Rating on Revolving Credit Facility BCE INC: NoteHolders Succeed in Opposing Plan of Arrangement BCE INC: Wants to Reverse Court's Ruling on Planned Privatization BEAR STEARNS: Advisory Firm Urges Shareholders' OK on JPMorgan Bid BENICORP INSURANCE: Fitch Withdraws 'Bq' Q-ISF Rating BIOTIME INC: March 31 Balance Sheet Upside Down by $3.3 Million BMB MARKETPLACE: Gets Okay to Hire Lyndon Steimel as Counsel BSML INC: March 29 Balance Sheet Upside-Down by $1,708,000 BUILDING MATERIALS: Moody's Junks Probability of Default Rating CALPINE CORP: Receives All-Stock Takeover Bid From NRG Energy CARBON CAPITAL: S&P Retains 'BB' Rating Under Negative CreditWatch CONTINENTAL AIRLINES: JPMorgan Analyst Sees Airline Bankruptcies CRICKET COMMUNICATIONS: Moody's Holds Corp. Family Rating at B2 DECRANE AIRCRAFT: Delayed Fin'l Statements Cue Moody's Rtng Review DOMTAR CORP: S&P Holds 'BB-' Rating and Revises Outlook to Pos. DORADO BECKVILLE: Wants to Publicly Sell Assets on June 30 DORADO BECKVILLE: Creditors' Panel Taps Jason Searcy as Counsel E3 BIOFUELS: Creditors Have Until May 27 to File Proofs of Claim EACO CORPORATION: April 2 Balance Sheet Upside-Down by $938,200 ECHOSTAR DBS: Fitch Assigns 'BB-' Rating on $750MM Notes Offering EDUCATION RESOURCES: Can Hire Craig & Macauley as Special Counsel EDUCATION RESOURCES: Panel Taps FTI Consulting as Fin. Advisor EDUCATION RESOURCES: Can Hire Grant Thornton as Financial Advisor ENCORE ACQUISITION: Mulls Sale, Merger; Hires Lehman as Advisor ENERSYS: Moody's Assigns Ba1 Rating on Proposed Credit Facility ENRON CORP: Court OKs Merger of Certain Affiliates to Save Costs ENRON CORP: Wants Former Employees to Return Settlement Money ENRON CORP: Shareholders Re-Assert Fraudulent Conduct Claims EOS AIRLINES: Court Okays Bid Procedures For Sale of All Assets FORD MOTOR: Adjusts Production Plan to Lower Industry Volume FORD MOTOR: Volvo Plans to Cut Jobs at Gothenburg Plant FRESH DEL MONTE: S&P Holds Ratings and Revises Outlook to Positive GAP INC: Net Income Increases 40% to $249MM in Quarter Ended May 3 GENERAL MOTORS: Resumes Malibu Production as Workers OK Contract HCA INC: Fitch Affirms 'B' Issuer Default Rating HOMETOWN COMMERCIAL: S&P Junks Ratings on Seven Cert. Classes HUMAN TOUCH: Moody's Lowers Corporate Family Rating to Caa3 IDLEAIRE TECHNOLOGIES: U.S. Trustee Forms Three-Member Committee IDLEAIRE TECH: Wants 20% Incentive Pay for Key Workers Approved INTERSTATE BAKERIES: Wants Small Sale Cap Increased by $5 Million IMPATH INC: To Distribute $29 Million to Class A Holders on June 3 JOANNE'S BED: Closes Sale of Stores to Healthy Back JETBLUE AIRWAYS: JPMorgan Analyst Expects Airline Bankruptcies JETBLUE AIRWAYS: Moody's Junks CF Rating on Weak Fin'l Performance JOHN TOLFREE: S&P Lowers Rating to BB from BBB- on $12.8MM Bonds KANSAS CITY SOUTHERN: Moody's Lifts Ratings on Good Profitability KING PHARMACEUTICALS: Moody's Affirms Ba3 Ratings MADILL EQUIPMENT: May Use Cash Collateral; Mulls Sale of Assets MAJESTIC STAR: March 31 Balance Sheet Upside-Down by $175 Million MARCO CANTU: Case Summary & Two Largest Unsecured Creditors MARK BARROW: Case Summary & Five Largest Unsecured Creditors MERITAGE HOMES: Stockholders Adopt Changes to 2006 Incentive Plan MESA AIR: Warns of Bankruptcy if Delta Air Terminates Contract MIRANT CORP: Completes Share Repurchase Program With JP Morgan MOHEGAN TRIBAL: Moody's Chips Corp. Family Rating to Ba2 from Ba1 MORRIS PUBLISHING: Revenue Decline Cues S&P to Cut Rating to B- MOTHERS WORK: S&P Cuts Rating to B- from B on Merchandising Issues MOVIE GALLERY: Names C.J. Gabriel, Jr. as President and CEO MOVIE GALLERY: Can Sell MovieBeam Assets to Dar Capital for $2MM MTM LIFE: Fitch Withdraws 'Bq' Quantitative IFS Rating NATIONAL INDEPENDENT: A.M. Best Lifts IC Rating to bbb- from bb NOMURA HOME: Fitch Junks Ratings on Six Classes of NIM Notes NORTEL NETWORKS: S&P Holds 'B-' Rating; Revises Outlook to Pos. NORTEL NETWORKS: Moody's Rates Add-On $500MM Debt Issue B3 NORTH AMERICAN TECH: March 30 Balance Sheet Upside-Down by $5.8MM NORTHWEST AIRLINES: JPMorgan Analyst Expects Airline Bankruptcies NOVASTAR FINANCIAL: March 31 Balance Sheet Upside-Down by $494MM O'CHARLEY'S INC: Weak Performance Cues Moody's to Revise Outlook ONCO PETROLEUM: Gets Default Notice from OSC on Financials Filing PAPPAS TELECASTING: U.S. Trustee Selects 7-Member Creditors Panel PASA FUNDING: Trustee's Notice Prompts S&P to Chip Six Rating PLAINS EXPLORATION: Moody's Rates Sr. Unsecured Note Offering B1 PETCO ANIMAL: Moody's Cuts Rating on $700MM Sr. Sec. Loan to B1 PLASTECH ENGINEERED: Intends to Close Five Plants in Three States PLASTECH ENGINEERED: Eisenmann Pursues Breach of Contract Suit PLASTECH ENGINEERED: Court OKs Pact to Return Hyundai Tools to JCI POLAR MOLECULAR: Ch. 11 Case Junked; Patent Foreclosure Continues POPE & TALBOT: Court OKs Sale Bidding Procedures for Halsey Assets POPE & TALBOT: Ch. 7 Trustee Can Continue Debtors' Operations POPE & TALBOT: Canadian Court Appoints PwC as Interim Receiver POPE & TALBOT: Ch. 7 Trustee Taps Miller Coffey as Accountant PRO-FIT HOLDINGS: Files for Chapter 15; Wants Civil Actions Stayed PRO-FIT HOLDINGS: Chapter 15 Petition Summary QUAKER FABRIC: Files Disclosure Statement and Chapter 11 Plan QUAKER FABRIC: Wants Plan Filing Period Extended to June 18 RCS-CHANDLER: Unsecured Creditors Unwilling to Serve on Committee RESIDENTIAL CAPITAL: Noteholders Tender $8.6 Billion in Old Notes SABINE PASS: Moody's Cuts Rating on Parent's Liquidity Position SENTRY SELECT: Unitholders Approve Resolution to Dissolve Fund SOUTH DAKOTA: A.M. Best Chips FS Rating to B(Fair) from B+(Good) SPECTRUM BRANDS: $692.5MM Salton Deal Cues Fitch to Hold Ratings SPECTRUM BRANDS: Salton Deal Cues S&P to Put Ratings Under Watch STEVEN CARROLL: Voluntary Chapter 11 Case Summary SYMBION INC: Moody's Rates Unsecured Notes Caa1; Outlook Negative TIME WARNER: Fitch Holds BB+ Rating on Redeemable Preferred Stock TRIAD FINANCIAL: S&P Changes B Rating's Outlook to Negative UAL CORP: JPMorgan Analyst Anticipates Airline Bankruptcies US AIRWAYS: JPMorgan Analyst Anticipates Airline Bankruptcies VERENIUM CORP: Posts $23.3 Million Net Loss in 2008 First Quarter VERTIS INC: March 31 Balance Sheet Upside-Down by $916.0 Million VOTORANTIM CIMENTOS: S&P's 'BB+' Credit Rating Remains Unchanged WATERFORD GAMING: Moody's Trims Corp. Family Rating to B1 from Ba3 WCI COMMUNITIES: S&P Cuts Ratings on Possible Liquidity Shortfall WELLMAN INC: Creditors' Panel Demands Review of Final DIP Order ZOOM TECHNOLOGIES: Gets Delisting Warning on Bid Price Deficiency * Fitch Says Despite Receptive Envi. ABCP Paper Market Stays Tough * Fitch Says Higher Life Expectancy Could Raise Firm's Obligations * Fitch Puts Certain Notes Across 59 CDOs Under Watch Negative * S&P Revises the Outlook on Seven of Fund of Funds to Neg. * NHB Names Charles Lewis as Senior Consultant in Delaware Office * BOOK REVIEW: Business Wit & Wisdom ********* AIRTRAN HOLDINGS: President & CEO Fornaro Elected Board Chairman ---------------------------------------------------------------- AirTran Airways, a subsidiary of AirTran Holdings, Inc., disclosed at its annual meeting in Charleston, South Carolina, that Bob Fornaro, president and CEO of AirTran Airways, will also take on the role of chairman of the board, effective June 1, 2008. Mr. Fornaro will take over the chairmanship from Joe Leonard, who is retiring from the AirTran board effective May 31, 2008, and served as Chairman and CEO of AirTran Airways from 1999 to 2007. Mr. Fornaro joined AirTran Airways in March 1999 as president and CFO. He was named chief operating officer and elected to the board of directors in 2001. Mr. Fornaro took the helm as president and chief executive officer in November 2007. The company's shareholders, including those at the annual meeting, had re-elected three members -- Peter D'Aloia, Jere A. Drummond and John F. Fiedler -- to the Board of Directors, the terms of which will expire in 2011. "We are extremely pleased that shareholders overwhelmingly agree with the direction and leadership that these three Board members have provided to AirTran Airways," Mr. Fornaro said. "I have the utmost confidence they will uphold our commitment to provide low fares, outstanding service and shareholder value." Headquartered in Orlando Florida, AirTran Holdings Inc. (NYSE: AAI) -- http://www.airtran.com/-- a Fortune 1000 company, is the parent company of AirTran Airways Inc., which offers more than 700 daily flights to 56 U.S. destinations. * * * To date, AirTran Holdings Inc. carries Moody's Investors Service 'B3' long-term corporate family and 'Caa2' senior unsecured debt ratings. Outlook is Stable. AIRTRAN HOLDINGS: Board Elects William Usery as Director Emeritus ----------------------------------------------------------------- AirTran Holdings, Inc., parent company of AirTran Airways, disclosed at its annual meeting in Charleston, South Carolina, that board member William J. Usery, Jr., is retiring but being elected by the board as a Director Emeritus. "Bill has served on the board for nearly a decade, and his experience as a director, along with his unique experience in labor relations and knowledge of our company, are invaluable," Joe Leonard, chairman of the board, said. "We feel that he will continue to be an asset to AirTran as our first Director Emeritus, and we will tap his expertise on company matters to help guide us in the future." The board created the new title of Director Emeritus to allow a retiring director to continue providing specific and immediate value to the company on relevant issues. Retiring board members can be elected as a Director Emeritus for a one-year term, but only on a vote of the full board. The title can be extended if the board determines that the director still satisfies the standard of providing specific, immediate and continuing value to AirTran. A Director Emeritus will not vote on board matters and will not receive any fees from the board. Mr. Usery has served on the AirTran board of directors since 2000. He has served as president of Bill Usery Associates, Inc., a labor-management consulting firm, since 1978. Previously, Mr. Usery served in many labor-management positions with the federal government, including as secretary of labor under President Ford from 1976 to 1977, as national director of the Federal Mediation and Conciliation Service from 1973 to 1976, and as assistant secretary of labor for labor-management relations under President Nixon from 1969 to 1973. Headquartered in Orlando Florida, AirTran Holdings Inc. (NYSE: AAI) -- http://www.airtran.com/-- a Fortune 1000 company, is the parent company of AirTran Airways Inc., which offers more than 700 daily flights to 56 U.S. destinations. * * * To date, AirTran Holdings Inc. carries Moody's Investors Service 'B3' long-term corporate family and 'Caa2' senior unsecured debt ratings. Outlook is Stable. ALASKA AIR: JPMorgan Analyst Expects Airline Bankruptcies --------------------------------------------------------- Christopher Hinton at MarketWatch reports that Jamie Baker, an analyst at J.P. Morgan, on Monday said U.S. airline industry stands to post a collective $7,200,000,000 in operating losses in 2008. The results would be wider than an initial forecast of $4,600,000,000 loss, the analyst said. According to MarketWatch, Mr. Baker, in his research note, said though investors, management and analysts may talk about airlines acting collectively to reduce capacity to firm up revenue, the reality is that they are more likely to dig in and try to outlast each other. MarketWatch relates the JPMorgan analyst noted that capacity cuts have falled far short of what executives have said are necessary. Mr. Baker, MarketWatch says, indicated that another round of airline bankruptcy -- even among the legacy carriers -- is a question of when rather than if. According to the report, Mr. Baker said U.S. Airways has the highest risk of bankruptcy, followed by Northwest Airlines, United Air Lines' parent UAL Corp., AMR Corp., JetBlue, Continental Airlines, AirTran, Delta Air Lines, Alaska Air Lines and Southwest Airlines. Mr. Baker, the report adds, said credit card companies could pose more significant risk to airlines than debt. He explained the credit card companies could impose unilateral holdbacks, which will toll on a carrier's liquidity and cash balances. In the Red Except for Southwest, the major U.S. Airlines posted net losses for the period ended March 31, 2008: Net Income for Period Ended ----------------------------------- March 31, 2008 March 31, 2007 -------------- -------------- US Airways ($236,000,000) $66,000,000 Northwest ($4,139,000,000) ($292,000,000) UAL ($537,000,000) ($152,000,000) AMR ($328,000,000) $81,000,000 JetBlue ($8,000,000) ($22,000,000) Continental ($80,000,000) $22,000,000 AirTran ($34,813,000) $2,158,000 Delta ($6,261,000,000) $155,000,000 Alaska Air ($24,000,000) ($3,700,000) Southwest $34,000,000 $93,000,000 Balance Sheet at March 31, 2008 ----------------------------------- Total Assets Total Debts ------------ ----------- US Airways $8,013,000,000 $6,435,000,000 Northwest $21,032,000,000 $17,746,000,000 UAL $23,813,000,000 $21,647,000,000 AMR $28,766,000,000 $26,277,000,000 JetBlue $6,050,000,000 $4,721,000,000 Continental $12,542,000,000 $11,071,000,000 AirTran $2,198,009,000 $1,783,470,000 Delta $26,755,000,000 $22,804,000,000 Alaska Air $4,379,800,000 $3,520,600,000 Southwest $18,031,000,000 $10,846,000,000 On April 14, Northwest announced an agreement to merge with Delta. United and US Airways are also in talks for a possible merger. Continental was initially eyed as a top merger partner for United. Small and medium-sized carriers have tumbled one after the other into bankruptcy. Aloha Airlines commenced bankruptcy proceedings in Hawaii in March and later ceased operations. ATA Airlines Inc. ceased operations and filed for chapter 11 protection on April 2, and Skybus Airlines Inc. tumbled into bankruptcy on April 5. Frontier Airlines went belly up and filed for chapter 11 on April 14. EOS Airlines filed a chapter 11 petition on April 26. About Alaska Air Group Seattle, Wash.-based Alaska Air Group Inc. (NYSE: ALK) -- http://alaskaair.com/-- is a holding company with two principal subsidiaries, Alaska Airlines Inc. and Horizon Air Industries Inc. Alaska Airlines and Horizon Air together serve 89 cities through an expansive network throughout Alaska, the Lower 48, Canada and Mexico. * * * As reported in the Troubled Company Reporter on May 16, 2008, Moody's Investors Service affirmed all debt ratings of Alaska Air Group and its primary subsidiary Alaska Airlines, Inc. -- corporate family rating of B1. The outlook has been changed to negative from stable. The negative outlook reflects Moody's expectation that Alaska will record a net loss and negative cash flow from operations in 2008 due to the impact of materially higher fuel costs and weakening economic conditions which are likely to pressure yields. Although the company has fuel hedges that are meaningfully more beneficial than competitors, Alaska will be challenged to generate positive cash flow from operations if current fuel prices persist, Moody's said. On May 5, according to the TCR, Standard & Poor's Ratings Services lowered its ratings on Alaska Air Group Inc. and its major operating subsidiary, Alaska Airlines Inc., including lowering the long-term corporate credit ratings on both to 'B+' from 'BB-'. The outlook is stable. The downgrade, S&P explained, is based on an expected weakening in the company's financial profile in 2008 because of sustained high fuel prices and weaker demand in the second half of 2008 as a result of the slowing economy. ALOHA AIRLINES: Ch. 7 Trustee Proposes Recovery Incentive Plan -------------------------------------------------------------- Dane S. Field, the interim chapter 7 trustee appointed to oversee the liquidation of the estates of Aloha Airlines, Inc., Aloha Airgroup, Inc., and Airgroup Acquisition Corp., asks the U.S. Bankruptcy Court for the District of Hawaii to approve a recovery incentive carve-out plan. Aloha's lender, GMAC Commercial Finance LLC, has agreed to the RICOP so that the Debtors' senior management may continue wind- down efforts uninterrupted. Ms. Field relates that GMAC will fund certain sums based on the recovery achieved from the liquidation of its collateral. The amount of the incentive funds will be determined based on the permanent pay-down of the outstanding GMAC obligations from the sale of the Debtors' assets from and after May 1, 2008. GMAC was owed roughly $49,000,000 as of May 1, 2008, the Chapter 7 Trustee relates. Half of the Incentive Funds, the Chapter 7 Trustee says, will be paid to Aloha's president, David Banmiller, and the other to Jeffrey Kessler, its chief financial officer. Members of the Aloha senior management team, led by Messrs. Banmiller and Kessler, have been engaged in wind-down efforts. Ms. Field believes implementation of the RICOP will help her efficiently and successfully liquidate as much of the Debtors' remaining assets as quickly as possible. As reported by the Troubled Company Reporter, the Court at a hearing on May 1, authorized the Chapter 7 Trustee to continue to operate the Debtors' remaining business, including their air cargo business. The Court also authorized the Trustee to consummate the sale of the Debtors' contract services assets to Pacific Air Cargo LLC. On May 12, the Court permitted Ms. Field to sell the Debtors' Air Cargo assets to Saltchuk Resources, Inc. The sale closed two days later. Ms. Field says the Debtors have significant remaining assets that must be liquidated, including but not limited to, intellectual property, owned aircraft, engines and parts, and other personal property, including receivables. 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. On April 29, the Bankruptcy Court converted the Debtors' cases into chapter 7 liquidation proceedings. The next day, the United States Trustee appointed Dane S. Field to serve as chapter 7 trustee for the cases. AMEREN CORP: Moody's Holds Units' Low-B Ratings, Positive Outlook ----------------------------------------------------------------- Moody's Investors Service downgraded the long-term debt ratings of Union Electric Company (d/b/a AmerenUE; Issuer Rating to Baa2 from Baa1). The rating outlook is stable. Moody's placed the ratings of Ameren Corp. (Ameren) and AmerenEnergy Generating Company (AmerenGenco) on review for possible downgrade, including Ameren's Baa2 Issuer Rating and Prime-2 rating for commercial paper and AmerenGenco's Baa2 senior unsecured rating. Moody's also placed Union Electric Company's Prime-2 rating for commercial paper on review for possible downgrade. Moody's affirmed the ratings of Central Illinois Public Service Company (d/b/a AmerenCIPS, Ba1 Issuer Rating); CILCORP Inc. (Ba1 Corporate Family Rating); Central Illinois Light Company's (d/b/a AmerenCILCO, Ba1 Issuer Rating), and Illinois Power Company (d/b/a AmerenIP, Ba1 Issuer Rating) and maintained a positive rating outlook on these four subsidiaries. "The downgrade of Union Electric Company reflects declining cash flow coverages; increased operating costs; growing capital expenditures for environmental compliance, transmission and delivery system reliability; and higher debt level being incurred to finance these investments", said Michael G. Haggarty, Vice President and Senior Credit Officer. Union Electric has experienced higher fuel, purchased power, and labor costs over the last several years. As a result, cash flow from operations before working capital adjustments has fallen from the 30% range as recently as 2004 to slightly under 20% in 2007 and could decline further in coming years. The utility's capital expenditures are projected to increase by 65% in 2008 to $1.03 billion from $625 million in 2007 and are expected to remain at elevated levels for at least the next several years. As a result, the utility's financial metrics are more likely to remain at levels more in line with the middle range of the Baa rating category than the high Baa range. The downgrade also reflects the challenging regulatory environment for electric utilities operating in the state of Missouri, as Union Electric is one of the relatively few utilities in the country operating without fuel, purchased power, and environmental cost recovery mechanisms. The lack of such automatic cost recovery provisions creates uncertainty regarding the timely recovery of the higher costs and investments being incurred and leads to significant regulatory lag. The utility has filed to implement a fuel and purchased power recovery clause as part of its pending $251 million rate case, which is not expected to be completed and implemented until March 2009. The utility requested a similar fuel adjustment clause in its last rate case and the request was denied. "Longer term challenges facing the utility include uncertainties associated with pending climate control legislation, which could have a significant effect on this predominantly coal fired utility, as well as risks associated with the construction of a potential second unit at its Callaway nuclear power station, which is under consideration", said Mr. Haggarty. The review of parent company Ameren's ratings is prompted by the downgrade of Union Electric, its largest utility subsidiary; declining consolidated cash flow coverage metrics; and capital expenditures that are projected to increase substantially to $2.2 billion in 2008 from $1.4 billion in 2007 and remain high going forward. The review will focus on the parent company's plans to finance these capital expenditures; the amount of long-term debt to be issued at the parent, if any; the magnitude of planned capital contributions to be made to support capital programs at its subsidiaries; and the likely impact on coverage metrics, particularly considering the company's relatively high dividend payout ratio. The review will also consider Ameren's plans to reduce its reliance on short-term borrowings under its bank credit facilities, which have been heavily drawn for much of the last year; the outcome of pending distribution rate cases at its Illinois utilities; as well as any progress on the successful implementation of new power procurement policies and procedures in Illinois. Moody's does not expect the review to result in more than a one notch downgrade of Ameren's ratings. The review of AmerenGenco's ratings is prompted by increased capital spending for environmental compliance and an anticipated higher level of debt issuance at the subsidiary to finance this capital spending over the next several years. It also reflects the likelihood that controls on carbon emissions will limit the upside potential of this relatively small, undiversified, predominantly coal based unregulated merchant generating subsidiary. The review will focus on the magnitude of environmental compliance and other capital spending at the subsidiary, the amount of debt financing that will be necessary to fund these expenditures; the resulting pressure on the generating company's cash flow coverage metrics over the long-term; and the liquidity profile and hedging strategy of the subsidiary going forward. Moody's does not expect the review to result in more than a one notch downgrade of AmerenGenco's rating. The review of Union Electric's Prime-2 rating for commercial paper is prompted by the review of parent company Ameren's Prime-2 short-term rating and takes into consideration the shared bank credit facility between the utility and the parent, as well as the money pool arrangement in place between the two entities, which allows Union Electric to borrow from Ameren. It also reflects the close relationship and mutual interdependence between the utility and the parent company in terms of liquidity and financial support, as has been most recently demonstrated by a $380 million capital contribution made by Ameren to Union Electric in 2007 and a $122 intercompany note payable from Union Electric to Ameren outstanding at March 31, 2008. The maintenance of a positive outlook on Ameren's Illinois utilities reflects the potential for modest upward movement in their rating in the event there is a supportive outcome of their pending distribution rate cases, resulting in an improvement in some of their relatively low cash flow coverage metrics; a reduction in high short-term debt levels, increasing financial flexibility; and the successful implementation of new power procurement policies and procedures in Illinois. Ratings downgraded and assigned a stable outlook include: * Union Electric's senior secured debt, to Baa1 from A3; Issuer Rating; to Baa2 from Baa1; subordinated debt, to Baa3 from Baa2; and preferred stock, to Ba1 from Baa3. Ratings placed under review for possible downgrade include: * Ameren's Baa2 Issuer Rating and Prime-2 short-term rating for commercial paper; * AmerenGenco's Baa2 senior unsecured long-term debt rating; and * Union Electric's Prime-2 short-term rating for commercial paper. Ratings affirmed with a positive outlook include: * Central Illinois Public Service Company's Baa3 senior secured debt, Ba1 Issuer Rating, and Ba3 preferred stock; * Illinois Power Company's Baa3 senior secured debt, Ba1 Issuer Rating, and Ba3 preferred stock; * CILCORP, Inc.'s Ba1 Corporate Family Rating; * CILCORP's Probability of Default Rating at Ba1. Ratings affirmed with a positive outlook/LGD assessments revised include: * CILCORP's senior unsecured debt at Ba2 (LGD5, 82%) from Ba2 (LGD5, 79%); * Central Illinois Light Company's senior secured debt at Baa2 (LGD2, 20%) from Baa2 (LGD2, 15%); and Ba1 Issuer Rating; * Central Illinois Light Company's preferred stock at Ba2 (LGD4, 59%) from Ba2 (LGD4 51%). Ratings and Loss Given Default assessments for CILCORP and its subsidiary Central Illinois Light Company have been determined in accordance with Moody's Loss-Given Default Methodology. Ameren Corporation is a public utility holding company headquartered in St. Louis, Missouri. It is the parent company of Union Electric Company (d/b/a AmerenUE), Central Illinois Public Service Company (d/b/a AmerenCIPS), CILCORP Inc., Central Illinois Light Company (d/b/a AmerenCILCO), Illinois Power Company (d/b/a AmerenIP), and AmerenEnergy Generating Company. AMERICAN HOME: Panel Can Hire Hennigan as Conflicts Counsel ----------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware authorized the Official Committee of Unsecured Creditors of American Home Mortgage Investment Corp. and its debtor-affiliates to retain Hennigan, Bennett & Dorman LLP, as special conflicts counsel, in accordance with the terms of a retainer letter. James J. McGinley, co-chairman of the Creditors Committee, said the creditors decided to retain Hennigan Bennett to avoid any issues with respect to actual or potential conflicts of interest arising from the fact that Bank of America, N.A., administrative agent for certain prepetition secured lenders, and certain of its affiliates are clients of the Creditors Committee's bankruptcy counsel. As conflicts counsel, Hennigan Bennett will provide, among other things, legal services in connection with: -- any matter, in which the Creditors Committee may be adverse to BofA, including any matter relating to the Debtors' use of BofA's cash collateral and the investigation of the extent, validity and priority of BofA's asserted security interests in the Debtors' assets; -- any matter, in which the Creditors Committee may be adverse to one of the prepetition secured lenders, JPMorgan Chase Bank; -- representing the Creditors Committee in other bankruptcy and commercial litigation matters; and -- providing other advice and representation as may be necessary or appropriate in the Chapter 11 cases. Hennigan Bennett will not provide the Committee substantive legal advice outside of the insolvency and business litigation areas, including advice in areas as patent, labor, criminal or real estate law. The firm will also not devote attention to, form professional opinions as to, or advise the Creditors Committee with respect to its disclosure obligations under federal securities or other non-bankruptcy laws. Hennigan Bennett will be paid on its ordinary and customary hourly rates: Attorneys $265 to $875 Financial consultants $425 to $690 Paralegals and clerks $85 to $265 Hennigan Bennett will also be reimbursed of all reasonable costs and expenses it incurred. Pursuant to the parties' Retention Agreement, the Creditors Committee agreed to pay the firm additional amounts as would constitute a reasonable fee, based upon factors as the complexity of the problems presented, the nature and extent of the opposition encountered, the results accomplished, and the skill exercised in accomplishing those results. Joshua D. Morse, an associate of Hennigan Bennett, assured the Court that the firm and its attorneys are disinterested persons, who do not hold or represent an interest adverse to the Creditors Committee, and who do not have any connection with the Debtors, their creditors, or any other party-in-interest. The Court also ruled that Hennigan, Bennett & Dorman LLP, as special conflicts counsel, is authorized to represent the Official Committee of Unsecured Creditors solely in connection with these matters: (1) any matter, in which the Creditors Committee may be adverse to Bank of America, N.A., administrative agent for certain prepetition secured lenders, including any matter relating to the Debtors' use of BofA's cash collateral and the BofA Investigation; (2) any matter, in which the Creditors Committee may be adverse to JPMorgan Chase Bank, one of the prepetition secured lenders; and (3) any other bankruptcy or commercial litigation matters, in which the Creditors Committee's bankruptcy counsel, Hahn & Hessen LLP or Blank Rome LLP, will not be representing the committee due to actual or potential conflict of interest issues. About American Home Based in Melville, New York, American Home Mortgage Investment Corp. (NYSE: AHM) -- http://www.americanhm.com/-- is a mortgage real estate investment trust engaged in the business of investing in mortgage-backed securities and mortgage loans resulting from the securitization of residential mortgage loans originated and serviced by its subsidiaries. American Home Mortgage and seven affiliates filed for chapter 11 protection on Aug. 6, 2007 (Bankr. D. Del. Case Nos. 07-11047 through 07-11054). James L. Patton, Jr., Esq., Joel A. Waite, Esq., and Pauline K. Morgan, Esq. at Young, Conaway, Stargatt & Taylor LLP represent the Debtors. Epiq Bankruptcy Solutions LLC acts as the Debtors' claims and noticing agent. The Official Committee of Unsecured Creditors selected Hahn & Hessen LLP as its counsel. As of March 31, 2007, American Home Mortgage's balance sheet showed total assets of $20,553,935,000, total liabilities of $19,330,191,000. The U.S. Bankruptcy Court for the District of Delaware extended the exclusive periods for American Home Mortgage Investors Corp. and its debtor-affiliates to file a plan of reorganization through June 2, 2008; and solicit and obtain acceptances for that plan through July 31, 2008. (American Home Bankruptcy News, Issue No. 35; Bankruptcy Creditors' Service, Inc., Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). AMERICAN HOME: Wells Fargo Wants to Appeal Cash Recovery Denial --------------------------------------------------------------- Wells Fargo Bank, National Association, would like to verify whether the U.S. Bankruptcy Court for the District of Delaware erred in denying Wells Fargo the ability to recoup $462,049, which was paid in error from securities held by American Home Mortgage Investment Corp. in the AHMIT 2007-SD1 transaction. As reported by the Troubled Company Reporter on May 5, 2008, the Court denied a request by Wells Fargo Bank, N.A. to lift the automatic stay to the extent necessary to recover a payment made in error to, and unjustly retained by, American Home through recoupment, the imposition of a constructive trust, and the imposition of an equitable lien against certain securities owned by AHM Investment. As reported by the TCR on April 3, 2008, Wells Fargo is the securities administrator, to a certain indenture dated as of March 13, 2007, along with American Home Mortgage Assets Trust 2007-A & SD1, as issuing entity, and Deutsche Bank National Trust Company, as indenture trustee. On March 26, 2007, Wells Fargo paid in error to AHM Investment $462,049 on account of the Class IV-M-4 Note held by the Debtor. Wells Fargo promptly notified the Debtor of the error and requested the immediate return of the Payment to the Trust. The Debtor, however, has refused to return the Payment. Todd C. Schiltz, Esq., at WolfBlock LLP, in Wilmington, Delaware, told Judge Christopher Sontchi that the Payment should never have been made because no distributions were owing to any holders of Class IV-M-4 Notes at that time. He noted that the Debtor knew, or should have known, that it was very unlikely that any payments would be distributed to the Debtor on its Class IV-M- 4 Note. Debtors Objected As reported by the TCR on April 23, the Debtors objected, pointing out that Wells Fargo seeks relief from the automatic stay to recover payments made before the bankruptcy filing. Wells Fargo sought relief from the automatic stay to assert equitable remedies of recoupment, constructive trust and equitable lien to recover a M-4 Note Payment made in March 2007, more than 4 months before the Petition Date. The Debtors added that Wells Fargo, prior to filing its lift stay request, twice violated the automatic stay through impermissible postpetition set-offs of $269,245 from distributions owed to the Debtors on wholly separate and distinct securities. About American Home Based in Melville, New York, American Home Mortgage Investment Corp. (NYSE: AHM) -- http://www.americanhm.com/-- is a mortgage real estate investment trust engaged in the business of investing in mortgage-backed securities and mortgage loans resulting from the securitization of residential mortgage loans originated and serviced by its subsidiaries. American Home Mortgage and seven affiliates filed for chapter 11 protection on Aug. 6, 2007 (Bankr. D. Del. Case Nos. 07-11047 through 07-11054). James L. Patton, Jr., Esq., Joel A. Waite, Esq., and Pauline K. Morgan, Esq. at Young, Conaway, Stargatt & Taylor LLP represent the Debtors. Epiq Bankruptcy Solutions LLC acts as the Debtors' claims and noticing agent. The Official Committee of Unsecured Creditors selected Hahn & Hessen LLP as its counsel. As of March 31, 2007, American Home Mortgage's balance sheet showed total assets of $20,553,935,000, total liabilities of $19,330,191,000. The U.S. Bankruptcy Court for the District of Delaware extended the exclusive periods for American Home Mortgage Investors Corp. and its debtor-affiliates to file a plan of reorganization through June 2, 2008; and solicit and obtain acceptances for that plan through July 31, 2008. (American Home Bankruptcy News, Issue No. 35; Bankruptcy Creditors' Service, Inc., Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). AMERICAN HOME: Court Approves Stipulation with Calyon New York -------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware approved the stipulation between American Home Mortgage Investment Corp., its debtor-affiliates, and Calyon New York Branch, settling certain disputes. The Court maintained that Ca1yon's request to compel the Debtors to return improperly withheld funds, consisting of $14,474,813 in advanced funds and other mortgage assets, is deemed withdrawn, with prejudice, except as to, and solely with respect to, the relief sought related to the $415,752 disputed principal and interest payments. The Court also noted that the parties' rights to resolve the Disputed P&I through the Calyon's request are reserved. As reported by the Troubled Company Reporter on April 28, 2008, pursuant to Rule 9019(a) of the Federal Rules of Bankruptcy Procedure, American Home Investment Corp., the parties asked the Court to approve their stipulation, which settles, without further litigation, Calyon's request to obtain certain advanced funds, and certain other disputes. Calyon New York Branch sought a declaratory judgment, injunctive relief and damages, including a demand for an accounting and a constructive trust, against the Debtors pursuant to the Debtors' refusal to turnover certain and records and transfer funds on account of the termination of their mortgage loans repurchase agreement. Pursuant to a Repurchase Agreement dated November 21, 2006, Calyon, as administrative agent, on behalf of various parties, was requested to purchase and did purchase, from time to time, certain mortgage loans from the Debtors. The Debtors agreed to repurchase the loans on applicable dates at set prices. Pursuant to the Repurchase Agreement, American Horne Mortgage Servicing, Inc., as servicer, was responsible for administering the underlying Mortgage Loans, including, without limitation, collecting monthly mortgage payments, monitoring past-due accounts, and reporting on defaulted loans. On August 1, 2007, Calyon sent the Debtors notices of default, which, among others, notified of the acceleration all amounts due, and the termination of the facility. The Repurchase Price for the Mortgage Loans $1,178,225,176, plus a "price differential", interest and costs, including attorney fees. Pursuant to the Stipulation: -- Calyon is provided with a cash recovery of $11,546,262; -- the Debtors agree to use reasonable efforts to trace and recover a total of $2,017,291 in unpaid funds, which will be paid to Calyon, if recovered; -- Calyon agrees that, in addition to the right to enforce the provisions of the Stipulation, Calyon's only rights and claims against the Debtors for the Unpaid Funds are general unsecured claims in connection with the Repurchase Agreement; -- Calyon waives its right to $2,729,164, which will be placed into an escrow account maintained by the Debtors and held pending further Court order or agreement of the parties that may assert an interest in the funds; -- Calyon and the Debtors agree to place $415,752 -- the disputed principal and interest payments -- in an escrow account, and retain all rights and claims to the Disputed P&I; and -- the Debtors agree to determine by June 2, 2008, whether any portion of certain remaining amounts aggregating $334,407 are due to Calyon. The Debtors agree to recover any portion of the Remaining Amounts, which are due to Calyon, if any. The aggregate amounts referenced in the Stipulation were calculated based on the identification of specific funds related to certain mortgage loans that never closed and were funded by Calyon under the Repurchase Agreement. While the Parties have not broken down the specific amounts and identified the related Mortgage Loans, they have shared the relevant data supporting the aggregate amounts referenced. About American Home Based in Melville, New York, American Home Mortgage Investment Corp. (NYSE: AHM) -- http://www.americanhm.com/-- is a mortgage real estate investment trust engaged in the business of investing in mortgage-backed securities and mortgage loans resulting from the securitization of residential mortgage loans originated and serviced by its subsidiaries. American Home Mortgage and seven affiliates filed for chapter 11 protection on Aug. 6, 2007 (Bankr. D. Del. Case Nos. 07-11047 through 07-11054). James L. Patton, Jr., Esq., Joel A. Waite, Esq., and Pauline K. Morgan, Esq. at Young, Conaway, Stargatt & Taylor LLP represent the Debtors. Epiq Bankruptcy Solutions LLC acts as the Debtors' claims and noticing agent. The Official Committee of Unsecured Creditors selected Hahn & Hessen LLP as its counsel. As of March 31, 2007, American Home Mortgage's balance sheet showed total assets of $20,553,935,000, total liabilities of $19,330,191,000. The U.S. Bankruptcy Court for the District of Delaware extended the exclusive periods for American Home Mortgage Investors Corp. and its debtor-affiliates to file a plan of reorganization through June 2, 2008; and solicit and obtain acceptances for that plan through July 31, 2008. (American Home Bankruptcy News, Issue No. 35; Bankruptcy Creditors' Service, Inc., Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). AMR CORP: JPMorgan Analyst Expects Airline Bankruptcies -------------------------------------------------------------- Christopher Hinton at MarketWatch reports that Jamie Baker, an analyst at J.P. Morgan, on Monday said U.S. airline industry stands to post a collective $7,200,000,000 in operating losses in 2008. The results would be wider than an initial forecast of $4,600,000,000 loss, the analyst said. According to MarketWatch, Mr. Baker, in his research note, said though investors, management and analysts may talk about airlines acting collectively to reduce capacity to firm up revenue, the reality is that they are more likely to dig in and try to outlast each other. MarketWatch relates the JPMorgan analyst noted that capacity cuts have falled far short of what executives have said are necessary. Mr. Baker, MarketWatch says, indicated that another round of airline bankruptcy -- even among the legacy carriers -- is a question of when rather than if. According to the report, Mr. Baker said U.S. Airways has the highest risk of bankruptcy, followed by Northwest Airlines, United Air Lines' parent UAL Corp., AMR Corp., JetBlue, Continental Airlines, AirTran, Delta Air Lines, Alaska Air Lines and Southwest Airlines. Mr. Baker, the report adds, said credit card companies could pose more significant risk to airlines than debt. He explained the credit card companies could impose unilateral holdbacks, which will toll on a carrier's liquidity and cash balances. Bloomberg News on Wednesday reported that analysts at Soleil Securities Corp. say there's a potential Chapter 11 filing by AMR by 2009, and UAL some time after that. In the Red Except for Southwest, the major U.S. Airlines posted net losses for the period ended March 31, 2008: Net Income for Period Ended ----------------------------------- March 31, 2008 March 31, 2007 -------------- -------------- US Airways ($236,000,000) $66,000,000 Northwest ($4,139,000,000) ($292,000,000) UAL ($537,000,000) ($152,000,000) AMR ($328,000,000) $81,000,000 JetBlue ($8,000,000) ($22,000,000) Continental ($80,000,000) $22,000,000 AirTran ($34,813,000) $2,158,000 Delta ($6,261,000,000) $155,000,000 Alaska Air ($24,000,000) ($3,700,000) Southwest $34,000,000 $93,000,000 Balance Sheet at March 31, 2008 ----------------------------------- Total Assets Total Debts ------------ ----------- US Airways $8,013,000,000 $6,435,000,000 Northwest $21,032,000,000 $17,746,000,000 UAL $23,813,000,000 $21,647,000,000 AMR $28,766,000,000 $26,277,000,000 JetBlue $6,050,000,000 $4,721,000,000 Continental $12,542,000,000 $11,071,000,000 AirTran $2,198,009,000 $1,783,470,000 Delta $26,755,000,000 $22,804,000,000 Alaska Air $4,379,800,000 $3,520,600,000 Southwest $18,031,000,000 $10,846,000,000 On April 14, Northwest announced an agreement to merge with Delta. United and US Airways are also in talks for a possible merger. Continental was initially eyed as a top merger partner for United. Small and medium-sized carriers have tumbled one after the other into bankruptcy. Aloha Airlines commenced bankruptcy proceedings in Hawaii in March and later ceased operations. ATA Airlines Inc. ceased operations and filed for chapter 11 protection on April 2, and Skybus Airlines Inc. tumbled into bankruptcy on April 5. Frontier Airlines went belly up and filed for chapter 11 on April 14. EOS Airlines filed a chapter 11 petition on April 26. About JetBlue Airways Based in Forest Hills, New York, JetBlue Airways Corporation (Nasdaq: JBLU) -- http://www.jetblue.com/-- is a passenger airline that provides customer service primarily on point-to-point routes. As of Dec. 31, 2007, the company served 53 destinations in 21 states, Puerto Rico, Mexico and the Caribbean. At Dec. 31, 2007, the company's consolidated balance sheeet showed $5.598 billion in total assets, $4.562 billion in total liabilities, and $1.036 billion in total stockholders' equity. * * * As reported in the Troubled Company Reporter on May 21, 2008, Moody's Investors Service downgraded the corporate family rating of JetBlue Airways Corporation to Caa1 from B3, well as the ratings of its outstanding corporate debt instruments and selected classes of JetBlue's Enhanced Equipment Trust Certificates. The rating outlook is negative. ARTISTDIRECT INC: March 31 Balance Sheet Upside-Down by $21,000 --------------------------------------------------------------- ARTISTdirect Inc.'s consolidated balance sheet at March 31, 2008, showed $47,643,000 in total assets, and $47,664,000 in total liabilities, resulting in a $21,000 total stockholders' deficit. At March 31, 2008, the company's consolidated balance sheet also showed strained liquidity with $12,353,000 in total current assets available to pay $47,473,000 in total current liabilities. The company reported a net loss of $4,760,000 for the first quarter ended March 31, 2008, compared with net income of $3,535,000 in the same period last year. The company's net revenue decreased by $1,245,000 or 22.9%, to $4,201,000 for the three months ended March 31, 2008, as compared to $5,446,000 for the three months ended March 31, 2007, primarily as a result of a decrease in MediaDefender revenues. MediaDefender's revenue accounted for 68.8% of the company's total net revenue for the three months ended March 31, 2008, as compared to 70.5% of the company's total net revenue for the three months ended March 31, 2007. Largely as a result of the decline in revenue and the increase in general and administrative expenses, the company recorded a loss from operations of $2,725,000 for the three months ended March 31, 2008, from a loss from operations of $915,000 for the three months ended March 31, 2007. For the three months ended March 31, 2008 and 2007, the company recorded income of $65,000 and $1,226,000, respectively, to reflect the change in warrant liability during such periods. For the three months ended March 31, 2008 and 2007, the company recorded income of $171,000 and $5,241,000, respectively, to reflect the change in derivative liability during such periods. Full-text copies of the company's consolidated financial statements for the quarter ended March 31, 2008, are available for free at http://researcharchives.com/t/s?2c5d Going Concern Disclaimer/Possible Bankruptcy Gumbiner Savett Inc. in Santa Monica, Calif., expressed substantial doubt about Artistdirect Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the years ended Dec. 31, 2007, and 2006. The auditing firm said that the company is in default under its senior and subordinated debt agreements. During 2007 and 2008, the company entered into a series of forbearance agreements with the investors in the senior notes with respect to these defaults. On Feb. 7, 2008, the company retained the services of Salem Partners LLC to serve as a financial advisor to the company in connection with the sale, merger, consolidation, reorganization or other business combination and the restructuring of the material terms of the company's senior notes and/or subordinated convertible notes. To the extent that the company is unable to complete a sale or merger or restructure its senior and subordinated debt obligations in a satisfactory manner or the lenders begin to exercise additional remedies to enforce their rights, the company said it will not have sufficient cash resources to maintain its operations. In such event, the company may be required to consider a formal or informal restructuring or reorganization, including a filing under Chapter 11 of the United States Bankruptcy Code. About ARTISTdirect Inc. Headquartered in Santa Monica, California, ARTISTdirect Inc. (OTC.BB: ARTD) -- http://artistdirect.com/-- is a digital media entertainment company that is home to an online music network and, through its MediaDefender subsidiary, is a provider of anti-piracy solutions in the Internet-piracy-protection industry. ASARCO LLC: Conducts Plan Sponsor Selection Under Supervision ------------------------------------------------------------- ASARCO LLC and its debtor-affiliates commenced its final step to select a plan sponsor as part of its goal to successfully emerge from Chapter 11 protection. The process is proceeding pursuant to a bidding procedure supported by the Debtors' creditors and approved by the U.S. Bankruptcy Court for the Southern District of Texas and under the close observation of a Court-appointed examiner. Companies, who previously submitted bids to purchase the Debtors' operating assets, are meeting today with the Debtors' lawyers and financial advisors as well as those of their creditors. The Debtors intend to select the highest and best bid that would be in their best interests and its creditors. "We are convinced that this bidding process will result in the overall best value for the company, its employees, creditors and the communities in which we operate," said Joseph F. Lapinsky, President and Chief Executive Officer of Asarco. Earlier this year, the Court appointed an examiner at the request of ASARCO Incorporated, the immediate parent company of Asarco. The examiner was appointed by the Court to observe the bidding process to see that it proceeds according to the Court's order. About ASARCO Based in Tucson, Arizona, ASARCO LLC -- http://www.asarco.com/-- is an integrated copper mining, smelting and refining company. Grupo Mexico S.A. de C.V. is ASARCO's ultimate parent. The Company filed for chapter 11 protection on Aug. 9, 2005 (Bankr. S.D. Tex. Case No. 05-21207). James R. Prince, Esq., Jack L. Kinzie, Esq., and Eric A. Soderlund, Esq., at Baker Botts L.L.P., and Nathaniel Peter Holzer, Esq., Shelby A. Jordan, Esq., and Harlin C. Womble, Esq., at Jordan, Hyden, Womble & Culbreth, P.C., represent the Debtor in its restructuring efforts. Lehman Brothers Inc. provides the ASARCO with financial advisory services And investment banking services. Paul M. Singer, Esq., James C. McCarroll, Esq., and Derek J. Baker, Esq., at Reed Smith LLP give legal advice to the Official Committee of Unsecured Creditors and David J. Beckman at FTI Consulting, Inc., gives financial advisory services to the Committee. When the Debtor filed for protection from its creditors, it listed $600 million in total assets and $1 billion in total debts. The Debtor has five affiliates that filed for chapter 11 protection on April 11, 2005 (Bankr. S.D. Tex. Case Nos. 05-20521 through 05-20525). They are Lac d'Amiante Du Quebec Ltee, CAPCO Pipe Company, Inc., Cement Asbestos Products Company, Lake Asbestos of Quebec, Ltd., and LAQ Canada, Ltd. Details about their asbestos-driven chapter 11 filings have appeared in the Troubled Company Reporter since April 18, 2005. Encycle/Texas, Inc. (Bankr. S.D. Tex. Case No. 05-21304), Encycle, Inc., and ASARCO Consulting, Inc. (Bankr. S.D. Tex. Case No. 05- 21346) also filed for chapter 11 protection, and ASARCO has asked that the three subsidiary cases be jointly administered with its chapter 11 case. On Oct. 24, 2005, Encycle/Texas' case was converted to a Chapter 7 liquidation proceeding. The Court appointed Michael Boudloche as Encycle/Texas, Inc.'s Chapter 7 Trustee. Michael B. Schmidt, Esq., and John Vardeman, Esq., at Law Offices of Michael B. Schmidt represent the Chapter 7 Trustee. ASARCO's affiliates, AR Sacaton LLC, Southern Peru Holdings LLC, and ASARCO Exploration Company Inc., filed for Chapter 11 protection on Dec. 12, 2006 (Bankr. S.D. Tex. Case No. 06-20774 to 06-20776). ASARCO and its debtor affiliates are scheduled to file a plan of reorganization on June 10, 2008. ASCALADE COMM: Creditors to Vote on Plan of Arrangement June 17 --------------------------------------------------------------- Ascalade Communications Inc. disclosed that in connection with the on-going legal proceedings filed by Ascalade and Ascalade Technologies Inc. in Canada under the Companies' Creditors Arrangement Act, the companies obtained an order from the Supreme Court of British Columbia setting the date of June 17, 2008, for a Meeting of Creditors to consider a plan of compromise or arrangement. The Administrative Order sets out the procedure for filing Proofs of Claim and voting at the Meeting of Creditors. In addition to the Administrative Order, the companies filed with the Court their Plan accompanied by other supporting documentation. Any recovery in the CCAA for creditors and other stakeholders of the companies, including shareholders, is uncertain and is highly dependent upon a number of factors, including the recovery from the sale of the factory, equipment and inventory in the PRC and the outcome of the Scheme in Hong Kong. Based in Richmond, British Columbia, Ascalade Communications Inc. (TSE:ACG) -- http://www.ascalade.com/ -- is an innovative product company that designs, develops and manufactures digital wireless and communication products. The company deliver products by offering its partners and customers complete vertical integration, from product design and development to final production. The company's products include digital cordless phones, Voice over Internet Protocol phones, digital wireless baby monitors and digital wireless conference phones. Ascalade products have been distributed in more than 35 countries and under 80 regional brands. Ascalade also has facilities in Qingyuan, China, Hong Kong and a sales office in Hertfordshire, United Kingdom. On April 29, 2008, Jervis Rodrigues, senior vice-president of Deloitte & Touche Inc., filed separate petitions for protection under Chapter 15 of the U.S. Bankruptcy Code on behalf of Ascalade Communications Inc. and its debtor-affiliate (Bankr. N.D. Ill. Case Nos. 08-10612 and 08-10616). Jeffrey G. Close, Esq. at Chapman and Cutler LLP represents the Petitioner in the Chapter 15 case. Ascalade's financial condition as of September 2007 showed total assets of $99,630,000 and total debts of $40,410,000. AVADO BRANDS: Can File Chapter 11 Plan Until August 30 ------------------------------------------------------ The Hon. Mary J. Walrath of the United States Bankruptcy Court for the District of Delaware further extended the exclusive periods of Avado Brands Inc. and its debtor affiliates to: a) file a Chapter 11 plan until Aug. 30, 2008; and b) solicit acceptances of that plan until Oct. 29, 2008. The Debtors maintain that they need sufficient time to complete the "363 Sale" process, and properly determine an appropriate exit plan for these cases. 363 Sale Process On Nov, 2 2007, the Debtors said that they filed with the Court a request to approve the sale of substantially of their assets to the highest and best bidders at the auction. The Court approved the sale of certain of the Debtors' assets to five different buyers. As previously reported in the Troubled Company Reporter, the Court approved the sale of the Debtors' 61 restaurants to Rita Acquisition Corp., a company set up by DDJ Capital Management LLC for the transaction. The sale will facilitate the termination of at least $23 million of the Debtors' debt against DDJ Capital. The Debtors told the Court that the sale process could take at least a few more months to complete and the disruption to this process could pose a threat to their ability to successfully sell their assets. The Debtors also said that they are currently exploring other options for bringing these cases to a conclusion, including a chapter 11 plan of liquidation, a chapter 7 conversion or structured dismissal. About Avado Brands Madison, Georgia-based Avado Brands Inc., aka Applesouth, -- http://www.avado.com/-- operates about 120 casual dining restaurants under the banners Don Pablo's Mexican Kitchen and Hops Grillhouse & Brewery. The restaurants are located in 22 states in the U.S. As of Sept. 5, 2007, the Debtors employed about 9,970 people. For the year ended July 31, 2007, the Debtors generated about $227.8 million in revenues and a negative EBITDA of $7.8 million. The Debtor filed for chapter 11 protection on Feb. 4, 2004 (Bankr. N.D. Tex. Case No. 04-1555). On April 26, 2005, Judge Steven Felsenthal confirmed Avado's Modified Plan of Reorganization and that Plan became effective on May 19, 2005. On Sept. 5, 2007, Avado filed a voluntary chapter 22 petition (Bankr. D. Del. Case No. 07-11276) to complete an orderly sale of its assets, via Section 363 of the Bankruptcy Code. About 10 of Avado's affiliates also filed for bankruptcy protection on the same date (Bankr. D. Del. Case Nos. 07-11277 through 07-11286). Michael Tuchin, Esq., and Stacia A. Neeley, Esq., at Klee, Tuchin, Bogdanoff & Stern LLP, represent the Debtors. Donald J. Detweiler, Esq., at Greenberg Traurig, LLP, is the Debtors' local counsel. Kurtzman Carson Consultants LLC acts as the Debtors claims and noticing agent. The U.S. Trustee for Region 3 has appointed creditors to serve on an Official Committee of Unsecured Creditors to this cases. Greenberg Traurig LLP represents the Committee. In their second filing, the Debtors disclosed estimated assets and debts between $1 million to $100 million. BAG 'N BAGGAGE: KCP Opportunity Fund Named Stalking Horse Bidder ---------------------------------------------------------------- KCP Opportunity Fund I, L.P. received court approval from the U.S. Bankruptcy Court as "stalking horse" bidder for the primary assets of the distressed retail chain Bag n Baggage Ltd. KCP Opportunity Fund I did not disclose its offer for the Debtors' assets. The Fund intends to maintain Bag'n Baggage as a going concern and build upon the core competencies of this prominent national brand. "We look forward to providing new capital to Bag'n Baggage as they seek to reorganize and focus on growing and expanding their business," said Andrew H. Moser, Co-Founder and Partner of Kairos Capital Partners. "We're committed to financing the needs of Bag'n Baggage and working closely with management, trade vendors and related constituencies to help foster their business plan." "This is a tremendous opportunity to impart our expertise in retailing and a vision for what this category can be going forward," continues Moser. "An exceptional team of senior management and store personnel are already in place and are eager to see this company reach its true potential." About Kairos Capital Partners Kairos Capital Partners, LLC, based in Boston and New York City -- http://www.kairoscapitalpartners.com/-- was founded by Andrew H. Moser and Lynda Davey in 2007 to provide 'one-stop' investment capital to retail and consumer products companies. Investments are focused primarily in the retail and direct-to-consumer sectors, including a broad range of distribution channels, as well as wholesale companies, brands and intellectual property. With each portfolio company, Kairos becomes a significant participant through dynamic partnership with management and owners seeking to enhance shareholder value with patience and a long-term perspective. KCP Opportunity Fund I, L.P. was formed by Kairos Capital Partners as an opportunistic investment fund structured to provide hybrid, equity and debt investments in turnaround, distressed and arbitrage opportunities in the retail and consumer sectors. The Fund targets companies that have a fundamentally sound business model, but may have been overlooked by traditional sources of private equity or mezzanine capital due to their size, complexity or circumstances, or are in situations where the Funds value-add strategy of partnering with direct industry operators is an important consideration. About Bag'n Baggage Bag'n Baggage -- http://www.bagnbaggage.com/-- has been the nation's leading retailer of travel and business gear for more than 35 years. They offer all the top brands in luggage and travel goods including Tumi, Hartmann, Victorinox, Rimowa and many more, with an unmatched selection and several exclusive products. The company operates 34 stores in upscale malls and lifestyle centers located in 11 states -- including Texas, Florida, California, Arizona, Washington, Massachusetts, North Carolina, Virginia, Pennsylvania, Nevada and Hawaii -- trading under the names Bagn Baggage, Malm Luggage, Niccolo & Mafeo and Houston Trunk Factory. Bag'n Baggage and related entity, 900 Corp., filed for Chapter 11 Bankruptcy protection on May 4, 2008, in the U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division (Case Nos. 08- 32096 and 08-32097). The Debtors are represented by Carol E. Jendrzey, Esq., Lindsey Doherty Graham, Esq., and Mark Edward Andrews, Esq., at Cox Smith Matthews, Inc., in San Antonio, Texas. Upon filing for bankruptcy, Bag 'n Baggage, Ltd., reported between $10 million and $50 million in estimated assets and debts. BALL CORP: Fitch Holds 'BB+' Rating on Revolving Credit Facility ---------------------------------------------------------------- Fitch Ratings has affirmed Ball Corp.'s Issuer Default Rating at 'BB'. In addition, Fitch has affirmed these ratings for the company: -- Senior secured revolving credit facility at 'BB+'; -- Senior secured term bank debt at 'BB+'; -- Senior unsecured notes at 'BB'. Approximately $2.6 billion of debt is covered by the ratings. The Rating Outlook is Stable. The ratings are supported by the company's leading market positions, good cash flow generation, diversified product offering, diverse packaging substrates, stable end markets, and a favorable defense spending environment. Ball's renewed focus on growing its presence in foreign markets is viewed favorably by Fitch. Concerns relate to shareholder focused cash deployment, customer concentration, pressure from raw materials and other cost inflation, underperformance and related restructuring initiatives in some businesses, total revenue derived predominantly from one product, and domestic sales bias. Fitch's Stable Outlook incorporates expectations of a stable capital structure, the company's solid cash flow generation capacity, steady trends in packaging end-markets, and the company's leading market positions in its product categories. Ball continues to deliver consistent performance. Credit metrics improved slightly in 2007 compared to 2006. Total leverage fell to 2.8 times at fiscal-year-end 2007 from 3.1x prior year. Although EBITDA margin has contracted modestly over the past few years, the company has generated good operating and free cash flow. Free cash flow to Total Adjusted Debt improved to 10.1% in FY2007 from 2.4% in 2006 as higher operating cash outpaced an increase in capital spending leading to free cash flow of $324 million in 2007 vs. $81 million in 2006. On a latest-twelve-month basis as of Mar. 30, 2008, leverage moved up to 3.3x as the company borrowed on its revolver to fund a larger than usual working capital build, in addition to the effects of a weaker dollar on foreign denominated debt balances. Free cash flow for the LTM period of $231 million also weakened somewhat compared to the year-end figure. Nonetheless, Fitch expects 2008 will be a solid year for Ball with free cash flow of $250 million or more, while credit metrics should be relatively stable overall. Ball is moving aggressively to expand international operations. Fitch views this trend favorably as it diversifies the company's exposure to any given market and provides the opportunity to capture volume growth in developing markets where packaged food, beverages and other products are in the growth phase of the industry cycle. As Ball is targeting growth opportunities overseas, the company is strategically addressing slower performance in certain domestic product lines related to custom and decorative tinplate container business. Fitch views both the growth and consolidation as positive developments for the overall business. The international expansion will make Ball more competitive, in Fitch's view, and helps to diversify the earnings sources away from mature markets, which has been a modest concern for Fitch. The capacity reductions also seem reasonable as Fitch has expected targeted cost initiatives to be ongoing at Ball. Fitch believes further asset realignment may be forthcoming in the plastic packaging segment, depending how pricing negotiations unfold during 2008. The capacity decisions do not materially affect the firm's credit profile as cash outlays are not expected to be material, although they are expected to boost capital spending modestly in addition to higher spending on top-line growth initiatives. Raw materials and other cost inflation continue to be key concerns to be monitored going forward. Contractual pass-through arrangements typically mitigate raw materials pricing risk for the company, but substantial increases in input prices can present challenges. The recent contract dispute settlement for $70 million with SAB Miller, a key customer, highlights this risk. After funding growth and rationalization initiatives, Fitch expects Ball's cash distribution to be focused on shareholders. Fitch expects free cash flow to largely offset $300 million of share repurchases ($125 million of which was already completed in first quarter 2008). Capital expenditures were nearly $310 million in 2007 and could be $350 million or more in 2008. Ball made an incremental pension funding payment of $27 million, net of tax in 2007, and Fitch expects lower cash pension payments this year as the obligation is now 95% funded. Cash flows in 2008 will be reduced by higher cash taxes, higher capital expenditures and the one-time payment of $70 million related to the dispute over metal pricing mentioned above. Meaningful debt reduction is not likely, and Fitch anticipates modest, if any, acquisition activity. Liquidity at Mar. 30, 2008 was about $555 million, comprised of $90 million in cash and $465 million of revolver availability. Ball's liquidity position is adequate to meet funding requirements, although the first quarter's working capital usage of $343 million was somewhat higher than usual, which caused overall liquidity to decline as the company drew $240 million on its U.S. revolver. BCE INC: NoteHolders Succeed in Opposing Plan of Arrangement ------------------------------------------------------------ The Committee comprising certain institutional holders of 1997 Bell Canada debentures have succeeded in suspending a proposed plan of arrangement under which BCE would have been acquired by a consortium led by the Ontario Teachers' Pension Plan when the Quebec Court of Appeal issued its judgment rejecting the plan of arrangement. Committee members objected to the proposed plan of arrangement because they believed it was unfair to debenture holders. The proposed plan would have forced Bell Canada, the BCE subsidiary in which committee members hold bonds, to guarantee $34 billion in loans that the purchaser would have incurred to purchase the shares of BCE. Committee members believed that Bell would receive nothing in return for guaranteeing that debt. The proposed plan had already led to a dramatic decrease in the market value of the bonds and had led some credit agencies to downgrade the bonds' status from investment grade to junk bond status. Committee members also believed that it would have been unfair for the directors of Bell to have allowed Bell to guarantee the debt without considering the issue from the perspective of Bell and its bondholders. In rejecting the plan of arrangement, the Court of Appeal found that the BCE board had failed to consider the interests of the debenture holders as they were bound to do under Canadian law. Instead, the BCE board acted on the assumption that they had an overriding duty to shareholders which was wrong in law. "Our clients are obviously delighted with the result of the decision" said Markus Koehnen and Max Mendelsohn, Partners with McMillan Binch Mendelsohn LLP and counsel to the 97 bondholders. "They are gratified that the Court of Appeal recognized the unfairness that the proposed plan of arrangement would have imposed on the unit holders, pension fund beneficiaries, insurers and others on behalf of whom our clients were contesting the plan of arrangement. Our clients are pleased that they have been able to stand up and protect the interests of those who have entrusted the management of funds into their care." The Committee was one of two bondholder groups that contested the proposed plan of arrangement. It is comprised of a "blue chip" roster of life insurance companies and money managers in the North American market place such as Addenda Capital Inc., CIBC Global Asset Management Inc., Franklin Templeton Investments Corp., Her Majesty the Queen in Right of Alberta, as Represented by the Minister of Finance, Manulife Financial Corporation, Phillips, Hager & North Investment Management Ltd., Sun Life Assurance Company of Canada, TD Asset Management Inc. and The Wawanesa Life Insurance Company. About BCE Headquartered in Montreal, Quebec, BCE Inc. (TSX/NYSE: BCE) -- http://www.bce.ca/-- is a communications company, providing comprehensive and innovative suite of communication services to residential and business customers in Canada. Under the Bell brand, the company's services include local, long distance and wireless phone services, high-speed and wireless Internet access, IP-broadband services, information and communications technology services (or value-added services) and direct-to-home satellite and VDSL television services. Other BCE holdings include Telesat Canada and an interest in CTVglobemedia. Bell Canada -- http://www.bell.ca/-- is a wholly owned subsidiary of BCE Inc. Bell offers integrated information and communications technology services to businesses and governments, and is the Virtual Chief Information Officer to small and medium businesses. * * * As reported in the Troubled Company Reporter on Dec. 14, 2007, Standard & Poor's Ratings Services kept its ratings on BCE Inc. and its related entities on CreditWatch with negative implications, pending the completion of the company's leveraged buyout by a consortium of private equity investors led by Teachers Private Capital as announced on June 30, 2007. As a result of the proposed LBO, S&P expect reported debt to increase to about CDN$37 billion from about CDN$10 billion at Sept. 30, 2007. As reported in the Troubled Company Reporter on Sept. 26, 2007, Standard & Poor's Ratings Services lowered its long-term corporate credit ratings on BCE Inc. and wholly owned subsidiary Bell Canada to 'BB-' from 'A-'. BCE INC: Wants to Reverse Court's Ruling on Planned Privatization ----------------------------------------------------------------- BCE Inc. together with the investor group led by Teachers' Private Capital, will seek leave to appeal to the Supreme Court of Canada a decision by the Quebec Court of Appeal denying the company's plan of arrangement related to the BCE's proposed privatization. On May 21, 2008, the Quebec Court of Appeal held that directors of a corporation that is involved in a change of control transaction must follow a process that considers the interests of debentureholders including their reasonable expectations, and that does not focus only on whether the transaction maximizes value for shareholders. If the decision stands, it will represent an important statement on directors duties in change of control transactions and will have significant implications for directors in balancing various stakeholder interests. In connection with a proposed arrangement involving BCE Inc., certain BCE debentureholders challenged the plan of arrangement on a number of grounds, including that the Plan, by failing to consider the interests of the Debentureholders, was not fair and reasonable in the circumstances. On June 29, 2007, BCE entered into an agreement to be purchased by a group including the Ontario Teachers Pension Plan Board and its partners Providence Equity Partners Inc., Madison Dearborn Partners LLC, and Merrill Lynch Global Private Equity in a leveraged buy-out that would greatly increase BCEs debt. The increased debt load of BCE would result in a loss of investment grade status and would cause the value of the debentures held by the existing Debentureholders to diminish. In a unanimous judgment, five judges of the Quebec Court of Appeal held that a final order would not be issued to approve the Plan. Given the commercial importance of the decision and the circumstances surrounding the arrangement, hearing this case on an expedited basis would require the SCC to abridge the normal timeline governing the leave to appeal process and the hearing of any appeal. While there are relatively few cases where this has been done, the SCC can do so if it wishes. Much will turn on the SCCs view as to the public importance of this case and the need to clarify any legal principles enunciated by the Quebec Court of Appeal. The Court of Appeal's Decision The Court of Appeal had to rule on four issues: the Debentureholders standing; the declaratory judgment regarding the applicability of certain provisions of BCEs trust indentures; the availability of the oppression remedy; and the approval of the Plan. 1) Standing The Court of Appeal confirmed the trial judges decision that the Debentureholders had standing to oppose the Plan. The Court of Appeal also granted standing to all Debentureholders with respect to the oppression remedy; the trial judge had only granted such standing to the one category of Debentureholders. 2) Declaratory Judgment The Court of Appeal upheld the trial judges decision and confirmed that a provision in the trust indentures for two sets of debentures, those issued in 1976 and 1996, which governs when the Trustee's approval is required to proceed with a transaction was not triggered by the transaction. The Court of Appeal reviewed authorities defining the terms "reorganization" and "reconstruction" and concluded that these terms refer to transactions that involve the transfer of assets to a separate corporate entity - something that was not taking place under the Plan. Accordingly, the Trustee's approval was not required to proceed with the transaction. 3) Oppression Remedy The Court of Appeal first noted that the Debentureholders reasonable expectations are an important element affecting their right to a remedy. These expectations are not limited to the legal rights spelled out in their Trust Indentures, though they cannot run contrary to the express contractual terms. The Court of Appeal also stated that a focus on fairness is critical in assessing both the oppression remedy and the approval of a plan of arrangement. The Court noted that an oppressive transaction cannot be approved as fair, but a transaction that is not oppressive can still be considered unfair. The Court of Appeal decided that it only needed to deal with the approval of the Plan since if the Plan is considered to be fair, it cannot be said to be oppressive to the Debentureholders. The Court of Appeal thus dismissed the Debentureholders oppression remedy claim on the basis that it was moot. 4) Approval of the Plan The Court of Appeal first agreed with the trial judges conclusions that the burden to prove that the Plan is fair and reasonable rests on BCE, and that the Debentureholders are a class of affected security holders even if their legal rights are not being altered by the Plan. It is sufficient that the proposed transaction fundamentally alters the Debentureholders investment. The Court of Appeal noted that BCE succeeded in showing that the Plan satisfies the statutory requirements and that it complies with the interim order. However, the Court of Appeal held that the board of directors focus on shareholder value maximization to the exclusion of the interests of the Debentureholders, beyond their contractual legal rights, was erroneous. The Court of Appeal referred to the Supreme Court of Canada's decision in Peoples v. Wise as authority for this proposition. The Court held that the board of directors of BCE was required to consider the interests including the reasonable expectations of the Debentureholders and that, although the directors had acted in good faith, they had failed to consider these interests, given that they did not adequately address whether the transaction could have been structured so as to attenuate the adverse impact it would have on the Debentureholders. The Court noted: BCE never attempted to justify the fairness and reasonableness of an arrangement that results in a significant adverse economic impact on the Debentureholders while at the same time it accords a substantial premium to the shareholders. As a result, the directors were not entitled to the deference otherwise due to them by virtue of the business judgment rule which normally protects informed, good faith director decision making from second guessing by the courts. Finally, the Court of Appeal added that the board of directors effort to maximize shareholder value could not be considered in isolation from the interests of the Debentureholders and that the directors had to assess the relative weight of the Debentureholders interests with the interests of the shareholders. The Court noted that the weight of the interests of the shareholders is likely higher than that of the Debentureholders in the event of an LBO. However, the Court held that it is up to the board of directors to make this decision and structure an arrangement that takes into account and reasonably satisfies the interests of the various security holders. All parties involved submitted that the Plan had to be approved as it is currently crafted or rejected, and that the Court of Appeal should not envision any amendment of the Plan. Accordingly, the Court did not do so and, in effect, denied the approval of the Plan for failure on the part of BCE to present evidence as to whether the Plan could have been structured to provide a satisfactory price for the shares, while avoiding an unacceptable adverse effect on the Debentureholders. "If the decision stands," lawyers at Osler, Hoskin & Harcourt LLP said in an e-mailed update, "it will represent an important statement on directors duties in change of control transactions and will have significant implications for directors in balancing various stakeholder interests." In heavy trading Thursday, after the decision by the Quebec Court of Appeal, shares in BCE tumbled 12%, shaving more than C$4 billion from the communication company's market capitalization. "The judgment overturning the Quebec Superior Court decision rewrites Canadian law relating to the duty of Canadian boards of directors to maximize value for shareholders in the context of a change of control transaction, well as to the entitlements of bondholders in those circumstances," Martine Turcotte, chief legal officer of BCE and Bell Canada, said. "Both the transaction and the issues of law involved are of public importance in Canada," Ms. Turcotte added. "We believe the Supreme Court of Canada should reverse this decision, and allow the transaction to proceed." The appeal will require the Supreme Court of Canada to grant leave to appeal. BCE will be seeking directions from the Supreme Court of Canada to expedite the disposition of such application for leave to appeal, and any appeal. In light of Quebec Court of Appeal decision, the expected timing for the closing of the transaction will be contingent on the Supreme Court granting leave to appeal and the timing related to any such appeal. About BCE Headquartered in Montreal, Quebec, BCE Inc. (TSX/NYSE: BCE) -- http://www.bce.ca/-- is a communications company, providing comprehensive and innovative suite of communication services to residential and business customers in Canada. Under the Bell brand, the company's services include local, long distance and wireless phone services, high-speed and wireless Internet access, IP-broadband services, information and communications technology services (or value-added services) and direct-to-home satellite and VDSL television services. Other BCE holdings include Telesat Canada and an interest in CTVglobemedia. Bell Canada -- http://www.bell.ca/-- is a wholly owned subsidiary of BCE Inc. Bell offers integrated information and communications technology services to businesses and governments, and is the Virtual Chief Information Officer to small and medium businesses. * * * As reported in the Troubled Company Reporter on Dec. 14, 2007, Standard & Poor's Ratings Services kept its ratings on BCE Inc. and its related entities on CreditWatch with negative implications, pending the completion of the company's leveraged buyout by a consortium of private equity investors led by Teachers Private Capital as announced on June 30, 2007. As a result of the proposed LBO, S&P expect reported debt to increase to about CDN$37 billion from about CDN$10 billion at Sept. 30, 2007. As reported in the Troubled Company Reporter on Sept. 26, 2007, Standard & Poor's Ratings Services lowered its long-term corporate credit ratings on BCE Inc. and wholly owned subsidiary Bell Canada to 'BB-' from 'A-'. BEAR STEARNS: Advisory Firm Urges Shareholders' OK on JPMorgan Bid ------------------------------------------------------------------ Shareholder advisory firm Proxy Governance Inc. recommended The Bear Stearns Companies Inc. shareholders to approve J.P. Morgan Chase & Co.'s acquisition proposal, yet, berated Bear Stearns executives who undermined the risks related to its liquidity, Andrew Edwards of The Wall Street Journal reports. "Poor oversight of inherent business risks which left the company with few alternatives as the liquidity crisis escalated, some of which could credibly be argued to have fueled the crisis itself," the firm wrote, according to WSJ. "While we do not necessarily believe that management could have foreseen this particular liquidity crisis, we do believe the risks to which the company succumbed in the last two weeks of March 2008 are recognizable, inherent risks of its business segment and its business model, and management's culpability in failing to plan for those risks is no less significant for their rarity." The firm's report also indicated that the proposed transaction will rescue shareholder value and will ensure success to the surviving entity, Reuters recounts. WSJ relates that the executives' notes is expected to get $4.3 million in severance split once the transaction is completed. The shareholder vote is scheduled for May 29, 2008. As reported in the Troubled Company Reporter on March 25, 2008, JPMorgan and Bear Stearns disclosed an amended merger agreement regarding JPMorgan Chase's acquisition of Bear Stearns. Under the revised terms, each share of Bear Stearns common stock would be exchanged for 0.21753 shares of JPMorgan Chase common stock -- up from 0.05473 shares -- reflecting an implied value of approximately $10 per share of Bear Stearns common stock based on the closing price of JPMorgan Chase common stock on the New York Stock Exchange on March 20, 2008. WSJ has said the amended deal values Bear Stearns at about $1.2 billion. WSJ, citing data from Sanford C. Bernstein firm, says the breakup value of Bear Stearns' continuing business could be roughly $7.7 billion: Prime Brokerage $3.0 billion Merchant Banking $1.3 billion Asset Management $1.3 billion High-Net-Worth Brokerage $1.0 billion Servicing $0.6 billion Energy Assets $0.5 billion ------------ $7.7 billion The Boards of Directors of both companies have approved the amended agreement and the purchase agreement. All of the members of the Bear Stearns Board of Directors have indicated that they intend to vote their shares held as of the record date in favor of the merger. As previously reported in the TCR, a Federal Reserve System's $29 billion term financing that facilitated JPMorgan's acquisition of Bear Stearns was made to bolster the global economy and financial system, Fed Board Chairman Ben S. Bernanke said at a hearing before the U.S. Congress Joint Committee on April 2, 2008. Mr. Bernanke stated that the impact of Bear Stearns downfall would have fazed investor confidence and would have bring into question the stance of the thousands of Bear Stearns' counterparties as well as other financial services firms. He added that the effects would have not been limited to the financial system but would have spread to the American and world economic system, had it not been for the aid from Federal Reserve and the Treasury Department. About Bear Stearns New York City-based The Bear Stearns Companies Inc. (NYSE: BSC) -- http://www.bearstearns.com/-- is a leading financial services firm serving governments, corporations, institutions and individuals worldwide. The company's core business lines include institutional equities, fixed income, investment banking, global clearing services, asset management, and private client services. The company has approximately 14,000 employees worldwide. * * * As reported in the Troubled Company Reporter on Dec. 28, 2007, Fitch Ratings' affirmed its Negative Outlook for The Bear Stearns Companies Inc. following the announcement of the company's fiscal year earnings for 2007. On Nov. 14, 2007, Fitch affirmed Bear Stearns' long-term credit ratings, along with its subsidiaries. Fitch also downgraded the short-term rating to 'F1' from 'F1+', and Individual rating to 'B/C' from 'B'. BENICORP INSURANCE: Fitch Withdraws 'Bq' Q-ISF Rating ----------------------------------------------------- Fitch Ratings has withdrawn its quantitative insurer financial strength ratings on three life insurance companies that no longer meet Fitch's criteria to be eligible to receive a Q-IFS rating. These ratings are withdrawn by Fitch: MTM Life Insurance Company (NAIC Code 66222) --Q-IFS 'Bq'. Farmers & Traders Life Insurance Company (NAIC Code 63193) --Q-IFS 'BBBq'. Benicorp Insurance Company (NAIC Code 69752) --Q-IFS 'Bq'. BIOTIME INC: March 31 Balance Sheet Upside Down by $3.3 Million --------------------------------------------------------------- BioTime, Inc. reported financial results for the first quarter ended March 31, 2008. For the three months ended March 31, 2008, BioTime's total quarterly revenue, including both royalty income and revenue recognition of deferred license fees, increased 55% to $381,018 versus $245,698 for the same period last year. BioTime reported a net loss of $476,048, or $0.02 per basic and diluted share, for the three months ended March 31, 2008, compared to a net loss of $553,862, or $0.02 per basic and diluted share, for the three months ended March 31, 2007. BioTime recognized $308,900 in royalty revenue versus $199,264 during the three months ended March 31, 2007, an increase of 55%. The growth in royalties is attributable to the increase in sales of Hextend to both hospitals and the United States Armed Forces. Hextend is an artificial colloidal solution classified as a plasma volume expander for supporting oncotic pressure as well as providing electrolytes to patients suffering from blood loss in surgery or from trauma. BioTime recognizes royalty revenues in the quarter in which sales reports are received versus the quarter in which the sales take place. Therefore, royalty revenue for the three months ended March 31, 2008 includes royalties on sales of Hextend during the three months ended December 31, 2007. Additionally, in April 2008, BioTime received royalties in the amount of $341,153 from Hospira, Inc., an increase of 108% from the same period one year ago. This amount is based on the sales of Hextend made by Hospira, Inc. during the first quarter of 2008, and will be reflected in BioTime's consolidated financial statements for the second quarter of 2008. The growth is also attributable to increased sales both to hospitals and the United States Armed Forces. Hospira is the exclusive distributor of Hextend in the United States. CJ CheilJedang Corp. is the exclusive distributor of Hextend in South Korea. Michael D. West, Ph.D, BioTime's Chief Executive Officer, noted, "Our primary pharmaceutical product, Hextend(R), continues to gain traction among hospitals in the United States and abroad. Further, knowing that Hextend is assisting medical efforts to save lives, including the lives of the members of our Armed Forces, is a great source of pride for our company." Dr. West continued, "BioTime has recently entered the field of regenerative medicine through our wholly owned subsidiary Embryome Sciences, Inc., which plans to develop new medical research products using embryonic stem cell technology. We believe that stem cell technology will have broad application in medicine and will likely be one of the leading technology platforms of the coming decades." License revenue increased 42.5% to $66,183 during the first quarter of 2008 versus $46,434 in the same period last year. Most of this increase consists of license fees received during prior accounting periods from CJ CheilJedang Corp. and Summit Pharmaceuticals International Corporation, and are reflected as deferred revenue on BioTime's balance sheet. BioTime amortizes those license fees and recognizes them as current revenues over the expected life of the patents related to the applicable licenses. Shareholders' Deficit Cash and cash equivalents totaled $307,471 as of March 31, 2008, compared with $277,280 as of March 31, 2007. Total shareholder deficit was $3,349,599 as of March 31, 2008, compared with total shareholders' deficit of $2,372,548 at March 31, 2007, a 41% increase. As of March 31, 2008, the Company had lines of credit for $2,578,600, from which $1,265,519 had been drawn at that date. The Company drew an additional $575,000 on one of our lines of credit during April 2008. As of March 31, 2008, the company had total assets of $561,728 and total liabilities of $3.8 million. It is BioTime's intention to raise the additional capital needed to finance the further development of its products because its current lines of credit and royalty revenues are not sufficient to fund anticipated operating expenses beyond November 15, 2008. About BioTime, Inc. BioTime, headquartered in Alameda, California, develops blood plasma volume expanders, blood replacement solutions for hypothermic (low temperature) surgery, organ preservation solutions, and technology for use in surgery, emergency trauma treatment and other applications. BioTime's lead product Hextend is manufactured and distributed in the U.S. by Hospira, Inc. and in South Korea by CJ CheilJedang Corp. under exclusive licensing agreements. BioTime has recently entered the field of regenerative medicine through its wholly owned subsidiary Embryome Sciences, Inc., through which it plans to develop new medical and research products using embryonic stem cell technology. Additional information about BioTime can be found on the web at www.biotimeinc.com. Hextend(R), PentaLyte(R), HetaCool(R), EmbryomicsTM, ESpyTM, and EScalateTM are trademarks of BioTime, Inc. BMB MARKETPLACE: Gets Okay to Hire Lyndon Steimel as Counsel ------------------------------------------------------------ The United States Bankruptcy Court for the District of Arizona authorized BMB Marketplace, LLC, to employ the Law Office of Lyndon B. Steimel to represent it in its Chapter 11 bankruptcy case. As counsel, the firm will: -- give the Debtor legal advice with respect to the Debtor's powers and duties in the continued operation of its business and management of its property; -- represent the Debtor in the Chapter 11 bankruptcy case, including the attendance at all hearings necessary or required by the Bankruptcy Code or the Bankruptcy Court; -- prepare on behalf of the Debtor the pleadings, motions and other documents necessary to effectuate the Debtor's responsibilities; -- attend all hearings, depositions, creditor examinations, and meetings necessary to adequately ensure proper representation of the Debtor; and -- prepare a Chapter 11 Plan or prepare the documents necessary to dismiss the Chapter 11 proceeding. Mr. Steimel ascertains that his firm is disinterested and has no connection with the creditors, or any other party-in-interest, or their attorneys. The firm will be paid for its services at these standard hourly rates: Partners and Of Counsel Lyndon B. Steimel $250 per hour Paralegals/Legal Assistants $95 per hour The Debtor has paid the firm a $6,461 initial retainer from non- estates assets. The Debtor has agreed to pay any further sums necessary to pay accrued fees and costs as approved by the Bankruptcy Court. The firm has that Mr. and Mrs. Steven S. Bunch personally guarantee payment of the firm's fees and costs. Mr. Bunch serves as BMB Marketplace's manager. To contact Lyndon B. Steimel, Esq.: Law Office of Lyndon B. Steimel 14614 N. Kierland Blvd., Suite N-135 Scottsdale, AZ 85254 Tel: (480) 367-1188 Fax: (480) 367-1174 fax E-mail: lyndon@steimellaw.com Based in Scottsdale, Arizona, BMB Marketplace, LLC filed for Chapter 11 protection on Mar. 21, 2008 (Bankr. D. Ariz. Case No. 08-02945). The Debtor reported $10,389,852 in total assets, and $8,471,918 in total debts pursuant to schedules of assets and liabilities filed with the Bankruptcy Court. BSML INC: March 29 Balance Sheet Upside-Down by $1,708,000 ---------------------------------------------------------- BSML Inc.'s consolidated financial statements at March 29, 2008, showed $7,654,000 in total assets and $9,362,000 in total liabilities, resulting in a $1,708,000 total stockholders' deficit. At March 29, 2008, the company's consolidaed balance sheet also showed strained liquidity with $3,642,000 in total current assets available to pay $8,610,000 in total current liabilities. The company reported a net loss of $576,000 for the first quarter ended March 29, 2008, compared with a net loss of $388,000 in the same period of 2007. Revenues declined 25.0%, to $5,409,000 in the first quarter of 2008 compared to $7,161,000 in the first quarter of 2007, primarily as a result of a decline in Whitening revenues. Full-text copies of the company's consolidated financial statements for the quarter ended March 29, 2008, are available for free at http://researcharchives.com/t/s?2c60 Going Concern Disclaimer As reported in the Troubled Company Reporter on April 29, 2008, Stonefield Josephson Inc., in Los Angeles, expressed substantial doubt about BSML Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the year ended Dec. 29, 2007. To date, the company has yet to achieve profitability. The company has an accumulated deficit of $177,199,000 and working capital deficiency of $4,968,000 as of March 29, 2008. The company's net loss and net cash used by operating activities were $576,000 and $3,990,000, respectively, for the thirteen weeks ended March 29, 2008. About BSML Inc. Based in Walnut Creek, Calif., BSML Inc. (NasdaqCM: BSML) -- http://www.britesmile.com/-- markets teeth whitening technology and manages BriteSmile Professional Teeth Whitening Centers. BUILDING MATERIALS: Moody's Junks Probability of Default Rating --------------------------------------------------------------- Moody's Investors Service lowered the ratings of Building Materials Holding Corporation, including its corporate family rating to B3 from B2, its probability-of-default rating to Caa1 from B3, and its first-lien bank credit facility rating to B3 (LGD-3, 32%) from B2 (LGD-3, 39%). The ratings outlook remains negative. The downgrade was prompted by BMHC's declining sales, credit metrics that are deteriorating more rapidly and by a larger amount than anticipated, and the expectation that the company may run into covenant compliance difficulties in the latter half of 2008, even under the recently amended bank credit facility. Moody's expectation that weak homebuilding market conditions will continue throughout 2008 and potentially into 2009, could exert further pressure on the company's operating performance and credit profile, with credit availability remaining tight throughout this period. BMHC's scale, its leading industry position, and its longer term prospects as one of the nation's largest providers of residential construction services and building materials continue to support its B3 rating. The negative ratings outlook reflects continued weakness in new home construction, large inventories of unsold homes, declining home prices and weak consumer confidence. Tightened mortgage lending practices also weigh heavily on intermediate term prospects for a recovery in housing demand. The company's ability to cut costs, reduce capital expenditures, manage working capital needs, and maintain adequate liquidity until homebuilding industry fundamentals stabilize partially mitigate downward pressure. Going forward, BMHC's ratings would be considered for further downgrade in the event that 1) cash flow were to continue to weaken, or 2) covenant compliance were to appear increasingly unlikely. The outlook could stabilize if the company were able to cut costs, reduce capital expenditures, manage working capital needs, and maintain adequate liquidity until homebuilding industry fundamentals stabilize. These rating actions were taken: * Corporate family rating lowered to B3 from B2; * Probability of default rating lowered to Caa1 from B3; * First-lien bank credit facility rating lowered to B3 (LGD-3, 32%) from B2 (LGD-3, 39%). Headquartered in San Francisco, California, BMHC, is one of the largest providers of residential construction services and building materials in the United States. BMHC serves the homebuilding industry through two subsidiaries: SelectBuild provides construction services to high-volume production homebuilders in key growth markets across the country; and BMC West distributes building materials and manufactures building components for professional builders and contractors in the western and southern states. CALPINE CORP: Receives All-Stock Takeover Bid From NRG Energy ---------------------------------------------------------------- Calpine Corporation said it received a take-over offer from NRG Energy, Inc., on May 14, 2008. The offer proposes to purchase all of Calpine's outstanding capital stock in a non-taxable all stock transaction. Details of the offer were made public after Harbinger Capital Partners, Calpine's largest shareholder owning more than 24% of the company's outstanding shares, disclosed with the U.S. Securities and Exchange Commission that Calpine received the letter from NRG proposing the take-over. NRG confirmed the offer. As of May 21, 2008, shares of Calpine common stock are trading at $21.28 per share, and 421,676,288 shares of the company's common stock were outstanding. MarketWatch yesterday valued the bid at $9.56 billion. The Associated Press on May 21 valued the bid at $11.3 billion. The AP yesterday said NRG's all-stock offer was valued at $10.8 billion as of Thursday's close. Calpine shares surge $23.25 in after hours trading on Thursday, according to information from Yahoo! Finance. According to a news statement by NRG, the offer proposes a fixed exchange ratio of 0.534x, which represents $23.0 per Calpine share based on the May 13, 2008 closing prices. The offer represents a 16% premium to the May 13 closing price and approximately 20% to the 30-day trading average for Calpine stock price. Consolidation of the two companies would generate more than 45,000 megawatts, a $38,000,000,000 enterprise value, a $20,000,000,000 market cap company with four highly coherent regions of at least 8-GW each, NRG said. The Bloomberg News said NRG, which uses a mix of gas, coal and nuclear units to fuel its power plants, stands to benefit from Calpine's natural gas-fueled power generation units if the U.S. Government regulate emissions of carbon dioxide because gas pollutes less than coal. According to the Wall Street Journal, the consolidation of the two firms "would begin to fulfill predictions of consolidation among independent power producers, which need to get bigger and more diverse to protect against regional downturns or price increases for particular fuels." "[The consolidation] would be unparalleled. There is nothing like this in the competitive power generation industry," Mr. Crane said, according to Bloomberg News. "The combined company would be the culmination of what we in this industry have aspired to become," Mr. Crane said in public statements. "We look forward to working with Calpine to demonstrate the full potential of the benefits enumerated in our letter for our respective shareholders. This is, quite simply, the right deal, at the right point in time, between the right partners." Calpine said in a press release that its Board of Directors will continue to review the NRG proposal to determine if it is in the best interest of Calpine's shareholders. Calpine said in a press release that its shareholders need not take any action at this time. Goldman Sachs & Co., is serving as Calpine's financial advisor. Skadden, Arps, Slate, Meagher & Flom LLP, serves as its legal counsel. The offer, according to the Journal citing people familiar with the matter, was proposed after William Patterson, chairman of Calpine's Board of Directors contacted NRG Chief Executive Officer David Crane to see if he is interested in becoming Calpine's CEO. Mr. Crane didn't want the job, the Journal said citing people familiar with the issue. Calpine emerged from bankruptcy on January 31, 2008. According to the Associated Press, Calpine is facing a "leadership void" when Robert May, the company's current chief executive officer announced immediately after company's emergence from Chapter 11 that he will step down by the end of 2008. Harbinger, in a letter to the Calpine Board, recommended full public disclosure of the offer so all shareholders can express their opinions to the Board. Harbinger added that the Calpine Board must also put the search for a management team on hold for a brief period so that it may explore the offer in a comprehensive manner with all deliberate speed and diligence. A full-text copy of the letter sent on May 14, 2008, is available for free at http://ResearchArchives.com/t/s?2c69 About NRG Energy Headquartered in Princeton, New Jersey, NRG Energy Inc. -- http://www.nrgenergy.com/-- engages in the development, ownership and operation of non-utility power generation facilities and the sale of energy, capacity and related products. The company and 25 of its affiliates filed for Chapter 11 protection on May 14, 2003 (Bankr. S.D.N.Y. Lead Case No.03-12024). Matthew A. Cantor, Esq., and Robbin L. Itkin, Esq., at James H.M. Sprayregen, P.C. in New York, represent the Debtors in their restructuring efforts. The U.S. Trustee for Region 2 appointed creditors to serve on an Official Committee of Unsecured Creditors. Evan D. Flaschen, Esq., Patrick J. Trostle, Esq., and Renee M. Dailey, Esq., at Bingham McCutchen LLP in Connecticut, represent the Committee. When the Debtors filed for protection against their creditors, they listed total assets of $10,310,000,000 and total debts of $9,229,000,000. As reported in the Troubled Company Reporter on Dec. 8, 2003, NRG Energy, Inc., has successfully completed its Chapter 11 reorganization and has emerged from bankruptcy. NRG filed its Chapter 11 petition less than seven months earlier, on May 14, 2003. The U.S. Bankruptcy Court for the Southern District of New York confirmed NRG's Plan of Reorganization on November 24 and all conditions have been met clearing the way for NRG to emerge from Chapter 11. About Calpine Corporation Based in San Jose, California, Calpine Corporation (OTC Pink Sheets: CPNLQ) -- http://www.calpine.com/-- supplies customers and communities with electricity from clean, efficient, natural gas-fired and geothermal power plants. Calpine owns, leases and operates integrated systems of plants in 21 U.S. states and in three Canadian provinces. Its customized products and services include wholesale and retail electricity, gas turbine components and services, energy management and a wide range of power plant engineering, construction and maintenance and operational services. The company and its affiliates filed for chapter 11 protection on Dec. 20, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-60200). Richard M. Cieri, Esq., Matthew A. Cantor, Esq., Edward Sassower, Esq., and Robert G. Burns, Esq., Kirkland & Ellis LLP represent the Debtors in their restructuring efforts. Michael S. Stamer, Esq., at Akin Gump Strauss Hauer & Feld LLP, represents the Official Committee of Unsecured Creditors. As of Aug. 31, 2007, the Debtors disclosed total assets of $18,467,000,000, total liabilities not subject to compromise of $11,207,000,000, total liabilities subject to compromise of $15,354,000,000 and stockholders' deficit of $8,102,000,000. On Feb. 3, 2006, two more affiliates, Geysers Power Company, LLC, and Silverado Geothermal Resources, Inc., filed voluntary chapter 11 petitions (Bankr. S.D.N.Y. Case Nos. 06-10197 and 06-10198). On Sept. 20, 2007, Santa Rosa Energy Center, LLC, another affiliate, also filed a voluntary chapter 11 petition (Bankr. S.D.N.Y. Case No. 07-12967). On June 20, 2007, the Debtors filed their Chapter 11 Plan and Disclosure Statement. On Aug. 27, 2007, the Debtors filed their Amended Plan and Disclosure Statement. Calpine filed a Second Amended Plan on Sept. 19, 2007 and on Sept. 24, 2007, filed a Third Amended Plan. On Sept. 25, 2007, the Court approved the adequacy of the Debtors' Disclosure Statement and entered a written order on September 26. On Dec. 19, 2007, the Court confirmed the Debtors' Plan. The Amended Plan was deemed effective as of January 31, 2008. CARBON CAPITAL: S&P Retains 'BB' Rating Under Negative CreditWatch ------------------------------------------------------------------ Standard & Poor's Ratings Services said its ratings on five classes from Carbon Capital II Real Estate CDO 2005-1 Ltd. remain on CreditWatch with negative implications, where they were placed on March 11, 2008. The CreditWatch update follows S&P's review of the monthly trustee report dated April 30, 2008, which no longer classified the Macklowe EOP Manhattan Portfolio as an impaired asset. However, the report did indicate that the status of the East Village asset had been changed to impaired. The Macklowe EOP Manhattan Portfolio ($17.7 million, 4% of noncash assets) was previously classified as an impaired asset following Macklowe Properties' default on approximately $7 billion of financing on Feb. 9, 2008. When combined with the impairment of the Bermuda Dunes asset ($12 million, 3%), the Macklowe EOP Manhattan Portfolio impairment caused the transaction to fail its par value coverage tests. Subsequently, the borrower reached an agreement to extend the maturity of all of the defaulted Macklowe Properties debt by one year to facilitate an orderly sale of the underlying commercial properties and pay off the debt. While the Macklowe EOP Manhattan Portfolio is no longer considered impaired, the East Village asset ($22.8 million, 5%) was classified as impaired on the recent monthly trustee report. The transaction's two impaired assets (Bermuda Dunes and East Village) have an aggregate balance of $34.8 million (8%). While the par value tests are no longer failing, the previous failures caused funds to be diverted to pay down the balance of the most senior class in the transaction by $9.6 million. As part of its analysis to resolve the CreditWatch negative placements, Standard & Poor's will consider the current credit characteristics of the assets as well as the transaction's current liabilities. Ratings Remaining on Creditwatch Negative Carbon Capital II Real Estate CDO 2005-1 Ltd. Collateralized debt obligations series 2005-1 Class Rating ----- ------ F BBB+/Watch Neg G BBB/Watch Neg H BBB-/Watch Neg I BB+/Watch Neg J BB/Watch Neg CONTINENTAL AIRLINES: JPMorgan Analyst Sees Airline Bankruptcies ---------------------------------------------------------------- Christopher Hinton at MarketWatch reports that Jamie Baker, an analyst at J.P. Morgan, on Monday said U.S. airline industry stands to post a collective $7,200,000,000 in operating losses in 2008. The results would be wider than an initial forecast of $4,600,000,000 loss, the analyst said. According to MarketWatch, Mr. Baker, in his research note, said though investors, management and analysts may talk about airlines acting collectively to reduce capacity to firm up revenue, the reality is that they are more likely to dig in and try to outlast each other. MarketWatch relates the JPMorgan analyst noted that capacity cuts have falled far short of what executives have said are necessary. Mr. Baker, MarketWatch says, indicated that another round of airline bankruptcy -- even among the legacy carriers -- is a question of when rather than if. According to the report, Mr. Baker said U.S. Airways has the highest risk of bankruptcy, followed by Northwest Airlines, United Air Lines' parent UAL Corp., AMR Corp., JetBlue, Continental Airlines, AirTran, Delta Air Lines, Alaska Air Lines and Southwest Airlines. Mr. Baker, the report adds, said credit card companies could pose more significant risk to airlines than debt. He explained the credit card companies could impose unilateral holdbacks, which will toll on a carrier's liquidity and cash balances. In the Red Except for Southwest, the major U.S. Airlines posted net losses for the period ended March 31, 2008: Net Income for Period Ended ----------------------------------- March 31, 2008 March 31, 2007 -------------- -------------- US Airways ($236,000,000) $66,000,000 Northwest ($4,139,000,000) ($292,000,000) UAL ($537,000,000) ($152,000,000) AMR ($328,000,000) $81,000,000 JetBlue ($8,000,000) ($22,000,000) Continental ($80,000,000) $22,000,000 AirTran ($34,813,000) $2,158,000 Delta ($6,261,000,000) $155,000,000 Alaska Air ($24,000,000) ($3,700,000) Southwest $34,000,000 $93,000,000 Balance Sheet at March 31, 2008 ----------------------------------- Total Assets Total Debts ------------ ----------- US Airways $8,013,000,000 $6,435,000,000 Northwest $21,032,000,000 $17,746,000,000 UAL $23,813,000,000 $21,647,000,000 AMR $28,766,000,000 $26,277,000,000 JetBlue $6,050,000,000 $4,721,000,000 Continental $12,542,000,000 $11,071,000,000 AirTran $2,198,009,000 $1,783,470,000 Delta $26,755,000,000 $22,804,000,000 Alaska Air $4,379,800,000 $3,520,600,000 Southwest $18,031,000,000 $10,846,000,000 On April 14, Northwest announced an agreement to merge with Delta. United and US Airways are also in talks for a possible merger. Continental was initially eyed as a top merger partner for United. Small and medium-sized carriers have tumbled one after the other into bankruptcy. Aloha Airlines commenced bankruptcy proceedings in Hawaii in March and later ceased operations. ATA Airlines Inc. ceased operations and filed for chapter 11 protection on April 2, and Skybus Airlines Inc. tumbled into bankruptcy on April 5. Frontier Airlines went belly up and filed for chapter 11 on April 14. EOS Airlines filed a chapter 11 petition on April 26. About Continental Airlines Continental Airlines Inc. (NYSE: CAL) -- http://continental.com/ -- is the world's fifth largest airline. Continental, together with Continental Express and Continental Connection, has more than 2,900 daily departures throughout the Americas, Europe and Asia, serving 144 domestic and 139 international destinations. More than 500 additional points are served via SkyTeam alliance airlines. With more than 45,000 employees, Continental has hubs serving New York, Houston, Cleveland and Guam, and together with Continental Express, carries approximately 69 million passengers per year. * * * The Troubled Company Reporter said May 21, 2008, that Moody's Investors Service affirmed the B2 Corporate Family Rating of Continental Airlines, Inc. as well as the ratings of its outstanding corporate debt instruments and selected classes of Continental's Enhanced Equipment Trust Certificates. The Speculative Grade Liquidity rating was lowered to SGL-3 from SGL- 2. The outlook has been changed to negative from stable. As reported by the Troubled Company Reporter on April 22, 2008, Standard & Poor's Ratings Services revised its rating outlook on Continental Airlines Inc. (B/Negative/B-3) to negative from stable. S&P also placed its ratings on selected enhanced equipment trust certificates that are secured by regional jets on CreditWatch with negative implications. As reported in the Troubled Company Reporter on Dec. 27, 2007, Fitch Ratings affirmed Continental Airlines 'B-' issuer default rating with a stable outlook. CRICKET COMMUNICATIONS: Moody's Holds Corp. Family Rating at B2 --------------------------------------------------------------- Moody's Investors Service raised Cricket Communications Inc.'s speculative grade liquidity rating to SGL-1 from SGL-4 and affirmed the ratings on the company's senior secured facilities and the B2 corporate family rating. The upgrade of Cricket's liquidity rating reflects the delivery of the restated financial statements at the end of 2007, and the greater clarity on the company's forward capital spending, aided by the company's absence from the expensive 700Mhz spectrum auction. In addition, Moody's upgraded the company's $1.1 billion 9.375% senior unsecured notes to B3 -- LGD5-75%, in conformity with the Loss Given Default methodology, and the unsecured debt's relative ranking in the overall capital structure as the company has been amortizing the senior secured term loan. In September 2007, Moody's changed Cricket's outlook to Developing to reflect the potential that the company's parent (Leap Wireless International Inc., "Leap") may reach an agreement to merge with MetroPCS Communications Inc ("PCS"), and the combined companies' scale may merit a more favorable outlook. While PCS has withdrawn its offer for Leap, Moody's believes the potential for a merger continues to exist evidenced in part by Leap's request and its lenders' approval to amend the timing of when a change of control provision is triggered (at closing of the event rather than at the announcement). Ratings Upgraded: * Speculative grade liquidity rating to SGL-1 from SGL-4 * $1.1 billion 9.375% senior unsecured notes due 2014 to B3, LGD5 (75%) from Caa1, LGD5 (77%) Ratings Affirmed: * Corporate family rating at B2 * Probability of default rating at B2 * $200 million senior secured revolving credit facility due 2011 Ba2, LGD2 (19%) * $900 million senior secured term loan due 2013 Ba2, LGD2 (19%) Cricket had approximately $500 million of cash and equivalents, about $200 million of unused committed bank lines at the end of Q1/08, plus the $70 million deposit for the 700MHz auction which was refunded in early Q2/08. Moody's believes the resulting $770 million in liquidity to be sufficient to fund expected operating cash consumption over the next year, which in Moody's view will include about $630 million in capital expenditures (Moody's adjusted) to support existing and new markets. Moody's assumed that the spending will support the company's intention to launch new markets with up to 20 million new POPs by mid 2009. Moody's also believes that the company could reduce the pace of its market expansion and curtail its rate of cash consumption, if unexpected liquidity strains were to arise. Moody's also notes that the company's absence from the very expensive 700 MHz auction has bolstered the company's near term liquidity profile. Cricket's $2.2 billion in debt consists of roughly $1.1 billion in senior unsecured notes, due 2014 and a $1.1 billion senior secured bank facility, which consists of a $900 million term loan ultimately due 2013 and a $200 million revolver due 2011. The term loan requires only minimal amortization before its maturity date in 2013, and Moody's does not expect the operating facility to be drawn before the end of 2009. LCW Wireless Operations LLC, in which Cricket owns 73%, has its own $40 million term credit facility, which is subject to various financial and operational covenants. The facility is non-recourse to Cricket, although Moody's believes Cricket has the liquidity to provide support, if needed. Cricket's term facility is subject only to a senior secured debt to consolidated EBITDA maintenance test (as defined in the credit agreement) of 4.5x compared to approximately 2.0x currently, while the total leverage, interest coverage and the fixed charge coverage tests only apply to if the revolving credit facility if drawn. The remaining financial covenants are incurrence based and not overly restrictive. Finally, Moody's notes that Cricket's bank facilities are secured either directly or indirectly by essentially all of the company's assets, which restricts its ability to obtain cash through asset sales. Moody's, however, also recognizes the company has a fairly broad spectrum portfolio and its assets are divisible by markets, which could potentially be sold, if needed. Leap Wireless International, Inc. wholly-owns Cricket Communications Inc., which is a wireless service provider. Both companies are headquartered in San Diego, California. DECRANE AIRCRAFT: Delayed Fin'l Statements Cue Moody's Rtng Review ------------------------------------------------------------------ Moody's Investors Service has placed all the ratings of DeCrane Aircraft Holdings, Inc. on review for downgrade as a result of the ongoing delay in the delivery of the company's audited 2007 financial statements. Moody's expects to conclude the review after the audited financial statements have been received and considered. The ratings that have been placed on review for downgrade: -- $30 million guaranteed first lien revolving credit facility due 2013 ... B1 LGD2, 26% -- $195 million guaranteed first lien term loan due 2013 ... B1 LGD2, 26% -- $150 million guaranteed second lien term loan due 2014 ... Caa1 LGD5, 78% The ratings outlook has be placed on review from stable. DeCrane Aircraft Holdings, Inc., headquartered in Columbus, OH, is a leading provider of aircraft cabin interior systems and components for business, VIP and head-of-state aircraft, and a provider of aircraft retrofit, interior completion and refurbishment services. Its customers include original manufacturers of business, VIP and head-of-state aircraft, the U.S. and foreign militaries, and aircraft repair, modification centers and completion centers. DOMTAR CORP: S&P Holds 'BB-' Rating and Revises Outlook to Pos. --------------------------------------------------------------- Standard & Poor's Ratings Services revised the outlook on Montreal-based Domtar Corp. to positive from stable, reflecting the company's ongoing debt reduction and successful integration of Weyerhaeuser Co.'s (BBB/Negative/A-2) fine paper assets. At the same time, S&P affirmed the ratings, including the 'BB-' long-term corporate credit rating, on Domtar. "The ratings reflect Domtar's leading market position in the North American uncoated free sheet market and good cost profile," said Standard & Poor's credit analyst Jatinder Mall. "The ratings are constrained, however, by declining demand for uncoated free sheet; volatile prices for commodity paper, pulp, and lumber products; and a weak lumber business," Mr. Mall added. With 34% of industry capacity, Domtar is the largest manufacturer of uncoated free sheet in North America. It has 4.6 million metric tons of integrated fine paper capacity at 12 pulp and paper mills. Most of its paper capacity is located in the U.S.; Domtar also manufactures and sells pulp and lumber. The company operates in a consolidated UFS industry in which the top five producers make up about 80% of industry capacity, and Domtar's large and modern mills provide it with a good cost profile. Although demand for UFS has been steadily declining due to electronic substitution, the industry has become disciplined and adjusts capacity quickly in response to declines in demand. In the past year, the industry has closed about 1.5 million metric tons of capacity resulting in an improved shipment-to-capacity ratio of more than 90%. Given the continuous decline in UFS demand over time, producers will continue rationalizing capacity. While Domtar's lumber business is a cash drain given depressed lumber prices, S&P expect it to divest of this business if the right opportunity comes along. The positive outlook reflects that while S&P expect demand for UFS to continue to decline, higher UFS prices should offset increasing input costs and ongoing synergies should lead to improved EBITDA in 2008 over 2007. If Domtar can meet its expectation of sustaining about a 3x leverage in the long term, S&P would upgrade the company. In the meantime, S&P would expect management to continue using excess cash flow to reduce debt further. Given the company's current financial risk profile, there would have to be an accelerated decline in demand leading to a leverage ratio of more than 4x before S&P downgraded the company. DORADO BECKVILLE: Wants to Publicly Sell Assets on June 30 ---------------------------------------------------------- Dorado Beckville Partners I LP asked the Hon. Barbara Houser of the U.S. Bankruptcy Court for the Northern District of Texas for permission to auction its leasehold and related property on June 30, 2008. Prior the bankruptcy filing, Beckville told the Court that it was a party to a purchase and sale agreement dated Dec. 21, 2007, as amended Feb. 1, 2008, involving all of its assets. The sale agreement had an effective date of Dec. 1, 2007, and a purchase price of $31,500,000. According to Beckville, funds needed to close the sale were in escrow when it terminated the sale agreement on March 28, 2008. Since April 2, 2008, Beckville said that it identified 280 sales prospects and, began marketing its assets to 30 prospects considered as qualified purchasers. These qualified purchasers are companies who have been and are active in buying oil and gas properties in East Texas, Beckville related. To date, Beckville said that nine interested parties have accessed an online data room, six visited the physical data room in Houston, Texas, and another eight are expected to access the data room when they execute a confidentiality agreement. Beckville said it expects to utilize the bankruptcy-sale process to obtain value for its estate. Hence, it seeks permission on a proposed bidding procedure presented to the Court. About Dorado Beckville Dallas, Texas-based Dorado Beckville Partners I LP and Dorado Operating Inc. -- http://www.doradoexploration.com/-- are diversified oil and gas exploration and production companies active in the East Texas Basin, the inland waters of South Louisiana, and Western Alabama. Beckville owns 64% to 75% of the working interest in each owned gas unit. The properties owned by Beckville are operated by Dorado Operating, a 99% limited partner of Beckville and a wholly owned unit of Dorado Exploration Inc. Beckville and Dorado Operating sought chapter 11 protection on April 15, 2008 (Bankr. N.D. Texas Case Nos. 08-31796 and 08- 31800). Judge Barbara J. Houser presides the case. Marcus Alan Helt, Esq., and Richard McCoy Roberson, Esq., at Gardere Wynne Sewell LLP is counsel to Dorado Beckville. Cox Smith Matthews Incorporated is counsel to Dorado Operating. Dorado Beckville's schedules show total assets of $32,289,155 and total liabilities of $31,419,576 and Dorado Operating's schedules show total assets of $831,387 and total liabilities of $13,122,417. DORADO BECKVILLE: Creditors' Panel Taps Jason Searcy as Counsel --------------------------------------------------------------- The Official Committee of Unsecured Creditors of Dorado Beckville Partners I LP and Dorado Operating Inc. asked the U.S. Bankruptcy Court for the Northern District of Texas for permission to engage Jason R. Searcy & Associates PC as Committee counsel. The firm's professionals charge these rates: Jason R. Searcy, Esq. Senior Attorney $400 per hour Amy Bates Ames, Esq. Junior Attorney $200 per hour Joshua P. Searcy, Esq. Junior Attorney $200 per hour Legal Assistants $90 per hour The Committee related that the firm has extensive experience in bankruptcy, corporate reorganization and general debtor or creditor matters needed to to perform legal services required by the Committee. The firm can be reached at: Jason R. Searcy & Associates PC P. O. Box 3929 Longview, Texas 75606 Telephone: (903) 757-3399 Facsimile: (903) 757-9559 About Dorado Beckville Dallas, Texas-based Dorado Beckville Partners I LP and Dorado Operating Inc. -- http://www.doradoexploration.com/-- are diversified oil and gas exploration and production companies active in the East Texas Basin, the inland waters of South Louisiana, and Western Alabama. Beckville owns 64% to 75% of the working interest in each owned gas unit. The properties owned by Beckville are operated by Dorado Operating, a 99% limited partner of Beckville and a wholly owned unit of Dorado Exploration Inc. Beckville and Dorado Operating sought chapter 11 protection on April 15, 2008 (Bankr. N.D. Texas Case Nos. 08-31796 and 08- 31800). Judge Barbara J. Houser presides the case. Marcus Alan Helt, Esq., and Richard McCoy Roberson, Esq., at Gardere Wynne Sewell LLP is counsel to Dorado Beckville. Cox Smith Matthews Incorporated is counsel to Dorado Operating. Dorado Beckville's schedules show total assets of $32,289,155 and total liabilities of $31,419,576 and Dorado Operating's schedules show total assets of $831,387 and total liabilities of $13,122,417. E3 BIOFUELS: Creditors Have Until May 27 to File Proofs of Claim ---------------------------------------------------------------- Creditors of E3 Bio-Fuels Mead LLC have until May 27 to file their proofs of claim against the Debtor, Kris Byars of the Bellevue Leader reports. Documents submitted to the U.S. Bankruptcy Court for the District of Kansas indicate that the exlusive period for the Debtor to file its plan of reorganization had been extended several times, according to the Bellevue Leader. An attorney who represents creditors in the Mead said the deadlines were extended for the sake of the creditors. Once the May 27 deadline has passed, the Debtor will be given another extension of its exclusive period to file a plan of reorganization, the Bellevue Leader says. The Bellevue Leader relates that technical problems and bad economy plagued the plant's start-up. According to the Troubled Company Reporter on Jan. 16, 2008, Prime BioSolutions had expressed interest in buying the ethanol plant. About E3 BioFuels Headquartered in Shawnee, Kansas E3 BioFuels LLC -- http://www.e3biofuels.com/-- produces ethanol and is a subsidiary of Earth, Energy & Environment LLC. It was founded by chief executive officer Dennis Langley. E3 BioFuels projects, including the Genesis plant in Mead, Nebraska, are owned exclusively by E3 BioFuels-Mead LLC, an affiliate. The Mead plant opened in June, and was hailed as a model for improving the environment and for fighting global warming. It is the first plant to have a "closed- loop" system, which uses manure from 28,000 head of cattle in a nearby feedlot to make methane that fueled the plant. Distillers grain, a byproduct of ethanol production, was then fed to the cattle. E3 BioFuels-Mead LLC and E3 Biofuels Mead Holding LLC filed for Chapter 11 protection on November 30, 2007 (Bankr. D. Kan. Case Nos. 07-22733 and 07-22734). Carl R. Clark, Esq., and Jeffrey A. Deines, Esq., at Lentz & Clark PA represent the Debtors in their restructuring efforts. When the Debtors filed for bankruptcy, they listed assets and debts between $1 million and $100 million. EACO CORPORATION: April 2 Balance Sheet Upside-Down by $938,200 --------------------------------------------------------------- EACO Corporation's balance sheets at April 2, 2008, showed $15,635,100 in total assets and $16,573,300 in total liabilities, resulting in a $938,200 total stockholders' deficit. At April 2, 2008, the company's balance sheet also showed strained liqudity with $462,600 in total current assets available to pay $2,927,000 in total current liabilities. The company reported a net loss of $1,058,300, on rental revenue of $299,000, for the first quarter ended April 2, 2008, compared with a net loss of $626,900, on rental revenue of $234,200 in the same period ended March 28, 2007. Results for the three months ended April 2, 2008, included a loss from discontinued operations, net of income tax, of $596,200. This loss included the final settlement amount related to the Lurie trial that was completed in December 2007 and the Horn settlement that was reached in May 2008. In August 2005, the company was sued in Miami-Dade County Circuit Court by a broker who claimed that a commission was payable to him in connection with the company's sale of substantially all of its restarurant assets in June 2005. On May 9, 2008, the company, Horn Capital Realty and Jonathan Horn, individually and as president of Horn Capital Realty, entered into a written settlement agreement whereby the company, without admitting liability, agreed to pay Horn Capital Realty the amount of $550,000 and Horn Capital Realty agreed to dismiss the lawsuit. On the other hand, during the quarter ended March 28, 2007, the company recognized a loss of $226,100 related to the sale of equipment at one of the company's properties. The sale was the result of the expiration of the lease at that property. The company did not sell any capitalized property in the quarter ended April 2, 2008. Full-text copies of the company's financial statements for the quarter ended April 2, 2008, are available for free at: http://researcharchives.com/t/s?2c5b Headquartered in Anaheim, Calif., EACO Corporation (OTC BB: EACO) -- http://www.eacocorp.com/-- manages rental properties. At April 2, 2008, the company owns two restaurant properties, one located in Orange Park, Fla. and one in Brooksville, Fla. The company is obligated for leases of two restaurant locations, one located in Tampa, Fla. and another located in Deland, Fla. In addition, the company owns an income producing real estate property held for investment in Sylmar, Calif. ECHOSTAR DBS: Fitch Assigns 'BB-' Rating on $750MM Notes Offering ----------------------------------------------------------------- Fitch has assigned a 'BB-' rating to EchoStar DBS Corporation's $750 million offering of 7.75% senior unsecured notes due 2015. The notes were placed under the SEC rule 144A. EDBS is a wholly owned subsidiary of DISH Network Corporation (DISH, Issuer Default Rating of 'BB-'). Proceeds from the offering are expected to be used for general corporate purposes. The Rating Outlook is Stable. Given the DISH's operating profile and credit-protection metrics, Fitch believes that the company's overall credit profile is strong within the rating category, providing the company substantial financial flexibility. Fitch believes that DISH's leverage can increase to a range between 3.5x to 3.75x and maintain its current ratings. DISH's leverage metric, calculated on a latest 12 month basis, as of March 31, 2008 was 1.87 times on a consolidated basis. Pro forma for the new debt issuance the company's leverage metric was 2.12x. The company has approximately $1.9 billion of senior unsecured debt and capital lease payments scheduled to be repaid during the next three years including a $1.0 billion maturity in October 2008. In addition the company's 3% Convertible Senior Subordinated Notes due 2010 ($500 million principal value) contains a provision that provides DISH the option to redeem the notes or may require the company to repurchase the notes at principal value during July 2008. Historically, EchoStar has enjoyed strong access to capital markets and Fitch assumes that the company will successfully refinance the 2008 maturities. EchoStar's ratings reflect Fitch's opinion that the effects of growing competition and a slowing economy will weigh on EchoStar's operating results during 2008 and 2009 likely leading to lower gross additions, sluggish ARPU growth rates, higher subscriber churn rates, and higher subscriber acquisition costs. Key to EchoStar's continued EBITDA and free cash flow growth is its ability to control subscriber churn. EchoStar reported subscriber churn increased to 1.68% (monthly) for the quarter ended March 31, 2008 reflecting an increase of 22 basis points relative to the same period last year. and 26 basis points sequentially. In addition to increased competition, the higher churn level is also attributable to higher non pay disconnects due to economic factors, decreased customer satisfaction resulting from operational inefficiencies, expiration of promotional discounts and theft. In Fitch's opinion, some of these factors such as higher non pay disconnects and decreased customer satisfaction, appear to be longer term fixes and churn may remain elevated for an extended period of time. Fitch is concerned that EchoStar will have to significantly increase its customer retention spending to regain control over subscriber churn, which will have a negative effect on EchoStar's EBITDA and free cash flow generation. DISH, through wholly - owned subsidiary Frontier Wireless, LLC won 168 E Block licenses totaling nearly $712 million. While DISH has yet to articulate its wireless strategy, Fitch believes that the capital costs and execution risk associated with adding a wireless product to DISH's overall service offering will elevate the near term business risk attributable to DISH's credit profile. In Fitch's opinion the acquisition of wireless spectrum can position DISH to eventually offer a variety of wireless solutions including mobile video and possibly video on demand. Both of these potential solutions will serve to differentiate DISH's service offering and will strengthen DISH's competitive position among other multichannel video distributors. The Stable Rating Outlook reflects Fitch's belief that subscriber metrics will improve as the company's high definition offering matches competitive offerings, as well as the positive EBITDA and free cash flow prospects, expected over the near term, balanced by the very competitive operating environment. Outside of the existing share repurchase authorization; Fitch views the use of cash for shareholder-friendly actions as an erosion of financial flexibility that could result in pressure on the ratings or an outlook revision. Additionally, Fitch has concerns related to the uncertainty surrounding the company's wireless strategy and the potential cash requirements to launch a wireless service. EDUCATION RESOURCES: Can Hire Craig & Macauley as Special Counsel ----------------------------------------------------------------- Judge Henry J. Boroff of the U.S. Bankruptcy Court for the District of Massachusetts authorized The Education Resources Institute Inc., on a final basis, to employ Craig and Macauley PC, as special conflict counsel, effective as of the bankruptcy filing date. As reported in the Troubled Company Reporter on April 14, 2008, Craig and Macauley will represent the Debtor in matters identified by the Debtor's legal counsel, Goodwin Procter LLP, as potentially presenting a conflict of interest for Goodwin, and in other matters the Debtor, in consultation with Goodwin, deems appropriate. The Debtor agreed to pay Craig and Macauley in its customary hourly rates: Professional Hourly Rate ------------ ----------- Christopher J. Panos, Shareholder $450 Kathleen A. Rahbany, Associate $240 All other Shareholders $340 to $525 All other Associates $175 to $325 Of Counsel $335 to $450 Paralegal $125 to $150 Christopher J. Panos, Esq., shareholder at Craig and Macauley, assured the Court that his firm does not hold any interest adverse to the Debtor's and its estate, and is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. Mr. Panos disclosed that Craig and Macauley has received $2,172 from the Debtor for legal services performed and expenses incurred in connection with a potential restructuring. The firm also holds a $50,000 retainer, which will be reduced by any amounts applied to any prepetition fees or expenses incurred. Mr. Panos further disclosed that, during the one year before the Petition Date, Craig and Macauley rendered services and incurred legal fees and expenses totaling $2,172. Mr. Panos can be reached at: Craig and Macauley Professional Corporation Federal Reserve Plaza, 600 Atlantic Avenue Boston, Massachusetts 02210-2211 (Suffolk Co.) Tel (617) 367-9500 Fax (617) 742-1788 (617) 248-0886 About The Education Resources Institute Inc. Headquartered in Boston, Massachussetts, The Education Resources Institute Inc. -- http://www.teri.org/-- aka Boston Systems Resources Inc., Brockton Education Opportunity Center, TERI, TERI College Access, TERI College Access Centers and TERI Marketing Services Inc., is a nonprofit organization that promotes educational opportunities for all through its college access and loan guarantee activities. Founded in 1985, TERI is a guarantor of private or non-government student loans with more than $17 billion in outstanding guarantees. The Debtor filed for Chapter 11 petition on April 7, 2008 (Bankr. D. Mass. Case No.: 08-12540.) Daniel Glosband, Esq., Gina L. Martin, Esq. at Goodwin Procter LLP represent the Debtor in its restructuring efforts. The Debtor's financial advisor is Grant Thornton LLP, its Claims Agent is Epiq Bankruptcy Solutions LLC, its investment Banker is Citigroup Global Markets Inc., its financial advisor is FTI Consulting Inc. and its Public Relations & Public Affairs Advisor is Rasky Baerlein Strategic Communications Inc. Duane Morris LLP is the proposed counsel for the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it listed estimated assets of more that $1 billion and estimated debts of $500,000 to $1 billion. (TERI Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) EDUCATION RESOURCES: Panel Taps FTI Consulting as Fin. Advisor -------------------------------------------------------------- The Official Committee of Unsecured Creditors of The Education Resources Institute Inc. seeks authority from the U.S. Bankruptcy Court for the District of Massachusetts to employ FTI Consulting Inc. as financial advisor nunc pro tunc to the bankruptcy filing date. Thomas M. Cambern, chairperson of the Creditors Committee, says that FTI's services are deemed necessary to enable the Committee to assess and monitor the efforts of the Debtor and its professional advisors to maximize the value of its estate and reorganize successfully. FTI is well qualified and able to represent the Committee in a cost-effective, efficient and timely manner, Mr. Cambern says. As financial advisor, FTI will: a) assist the Committee in the review of financial-related disclosures required by the Court, including the Schedule of Assets and Liabilities, the Statement of Financial Affairs and Monthly Operating Reports; b) assist with a review of the Debtor's restricted and unrestricted pledge accounts and related cash management procedures; c) assist with a review of any proposed key employee retention and other critical employee benefit programs; d) assist and advise the Committee with respect to the Debtor's identification of core business assets and the disposition of assets or liquidation of unprofitable operations; e) assist with a review of the Debtor's performance of cost and benefit evaluations with respect to the affirmation or rejection of various executory contracts and leases; f) assist regarding the review of operations and identification of areas of potential cost savings, including overhead and operating expense reductions and efficiency improvements; g) assist in the review of financial information distributed by the Debtor to creditors and others, including, but not limited to, cash flow projections and budgets, cash receipts and disbursement analysis, analysis of various asset and liability accounts, and analysis of proposed transactions for which Court approval is sought; (h attend at meetings and assist in discussions with the Debtor, potential investors, banks, other secured lenders, the Committee and any other official committees organized in the Debtor's Chapter 11 proceeding, the U.S. Trustee, other parties-in-interest and their professionals; i) assist in the review and preparation of information and analysis necessary for the confirmation of a plan of reorganization in the Debtor's Chapter 11 case; j) assist in the evaluation and analysis of avoidance actions, including fraudulent conveyances and preferential transfers; k) provide litigation advisory services with respect to accounting and tax matters, along with expert witness testimony on case-related issues as required by the Committee; and l) render other general business consulting or other assistance as the Committee or its counsel may deem necessary that are consistent with the role of a financial advisor and not duplicative of services provided by other professionals in the Debtor's bankruptcy case. FTI will be paid according to its customary hourly rates, subject to periodic adjustments: Senior Managing Directors $540 to $720 Managing Directors $465 to $550 Directors $380 to $475 Senior Consultant $285 to $360 Consultant $220 to $270 Project Assistant $75 to $185 Samuel E. Star, senior managing director at FTI Consulting, assures the Court that the firm does not represent any other entity having an adverse interest in connection with the Debtor's Chapter 11 case, and thus believes it is eligible to represent the Committee under Section 1103(b). He adds FTI will conduct an ongoing review of its files to ensure that no conflicts or other disqualifying circumstances exist or arise. If any new material facts or relationships are discovered, FTI will supplement its disclosure to the Court. Mr. Star says FTI has agreed not to share with any person or firm the compensation to be paid for professional services rendered in connection with these cases. He says FTI is not owed any amounts with respect to fees and expenses. FTI will apply to the Court for allowances of compensation and reimbursement of expenses of its financial advisory services in accordance with the applicable provisions on the Bankruptcy Code, the Bankruptcy Rules, corresponding local rules, orders of this Court and guidelines established by the United States Trustee. About The Education Resources Institute Inc. Headquartered in Boston, Massachussetts, The Education Resources Institute Inc. -- http://www.teri.org/-- aka Boston Systems Resources Inc., Brockton Education Opportunity Center, TERI, TERI College Access, TERI College Access Centers and TERI Marketing Services Inc., is a nonprofit organization that promotes educational opportunities for all through its college access and loan guarantee activities. Founded in 1985, TERI is a guarantor of private or non-government student loans with more than $17 billion in outstanding guarantees. The Debtor filed for Chapter 11 petition on April 7, 2008 (Bankr. D. Mass. Case No.: 08-12540.) Daniel Glosband, Esq., Gina L. Martin, Esq. at Goodwin Procter LLP represent the Debtor in its restructuring efforts. The Debtor's Conflicts Counsel is Craig and Macauley PC, its financial advisor is Grant Thornton LLP, its Claims Agent is Epiq Bankruptcy Solutions LLC, its investment Banker is Citigroup Global Markets Inc., and its Public Relations & Public Affairs Advisor is Rasky Baerlein Strategic Communications Inc. When the Debtor filed for protection from its creditors, it listed estimated assets of more that $1 billion and estimated debts of $500,000 to $1 billion. (TERI Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) EDUCATION RESOURCES: Can Hire Grant Thornton as Financial Advisor ----------------------------------------------------------------- Judge Henry J. Boroff of the U.S. Bankruptcy Court for the District of Massachusetts authorized The Education Resources Institute Inc., on a final basis, to employ Grant Thornton Group LLP as their financial advisors. As reported in the Troubled Company Reporter on April 14, 2008, Grant Thornton will: (a) assist the Debtor's management in evaluating various strategic alternatives; (b) analyze the Debtor's financial position, business plans and financial projections prepared by management, including commenting on assumptions and comparing those assumptions to historical Debtor and industry trends; (c) assist the Debtor's management in connection with the development of financial and operational plans; (d) assist the Debtor's management with developing its communication plan with employees, government authorities, customers, suppliers, statutory committees, stakeholders, and other parties-in-interest; (e) analyze the Debtor's cash receipts and disbursements forecast and assess liquidity; (f) consult with Debtor's management regarding valuation of the Debtor on a going-concern and liquidation basis; (g) assist in developing a bankruptcy exit strategy; (h) assist with Debtor's oversight of vendors and agents; (i) assist the Debtor's management, in coordination with the Debtor's legal counsel, in the preparation of a disclosure statement, plan of reorganization and the underlying business plans from which the documents are developed; (j) assist the Debtor's management, in coordination with Debtor's legal counsel, in evaluating competing disclosure statements, plans and other strategic proposals made by the Committee of Unsecured Creditors, and other parties- in-interest, if any; (k) consult with Debtor's management regarding the preparation of required financial statements, schedules of financial affairs, monthly operating reports, and other financial disclosures required by the Court; and (l) provide testimony regarding financial matters related to, including, among other things, feasibility of any proposed plan of reorganization, and the evaluation of any securities issued in connection with the plan. The Debtor will pay Grant Thornton according to the firm's customary hourly rates: Professional Hourly Rate ------------ ----------- Partner/Principal/Director $590 to $645 Senior Manager $470 to $535 Manager $400 to $440 Consultant/Senior Consultant $210 to $350 Paraprofessional $75 to $155 Grant Thornton will be compensated in accordance with the procedures set forth in Sections 330 and 331 of the Bankruptcy Code and Bankruptcy Rules. Grant Thornton will receive only (a) its monthly compensation as specified in the Engagement Agreement, dated April 1, 2008, and (b) reimbursement of its expenses, which will not be subject to challenge except under the standard of review set forth in Section 328(a). The U.S. Trustee retains all rights to object to Grant Thornton's interim and final fee applications, including fee reimbursement, on all grounds, including but not limited to the reasonableness standard provided for in Section 330. All requests of Grant Thornton for payment of indemnity pursuant to the Engagement Agreement will be subject to review by the Court to ensure that payment of the indemnity conforms to the terms of the Engagement Agreement and is reasonable based on the litigation or settlement in respect of which indemnity is sought, provided. Grant Thornton will not be indemnified in the case of its own bad-faith, self-dealing, breach of fiduciary duty, gross negligence or willful misconduct. Grant Thornton will also not be indemnified if the Debtor or a representative of the estate asserts a claim for, and a court determines by final order that that claim arose out of Grant Thornton's own bad faith, self-dealing, breach of fiduciary duty, gross negligence, or willful misconduct. In the event that Grant Thornton seeks reimbursement for attorney's fees from the Debtor pursuant to the Engagement Agreement, the invoices and supporting time records from the attorneys will be included in Grant Thornton's own fee applications, both interim and final, and those invoices and time records will be subject to the U.S. Trustee's guidelines for compensation and reimbursement of expenses and the approval of the Court under the standards of Sections 330 and 331 without regard to whether that attorney has been retained under Section 327 and without regard to whether that attorney's services satisfy Section 330(a)(3)(C). About The Education Resources Institute Inc. Headquartered in Boston, Massachussetts, The Education Resources Institute Inc. -- http://www.teri.org/-- aka Boston Systems Resources Inc., Brockton Education Opportunity Center, TERI, TERI College Access, TERI College Access Centers and TERI Marketing Services Inc., is a nonprofit organization that promotes educational opportunities for all through its college access and loan guarantee activities. Founded in 1985, TERI is a guarantor of private or non-government student loans with more than $17 billion in outstanding guarantees. The Debtor filed for Chapter 11 petition on April 7, 2008 (Bankr. D. Mass. Case No.: 08-12540.) Daniel Glosband, Esq., Gina L. Martin, Esq. at Goodwin Procter LLP represent the Debtor in its restructuring efforts. The Debtor's Conflicts Counsel is Craig and Macauley PC, its Claims Agent is Epiq Bankruptcy Solutions LLC, its investment Banker is Citigroup Global Markets Inc., its financial advisor is FTI Consulting Inc. and its Public Relations & Public Affairs Advisor is Rasky Baerlein Strategic Communications Inc. Duane Morris LLP is the proposed counsel for the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it listed estimated assets of more that $1 billion and estimated debts of $500,000 to $1 billion. (TERI Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) ENCORE ACQUISITION: Mulls Sale, Merger; Hires Lehman as Advisor --------------------------------------------------------------- The Board of Directors of Encore Acquisition Company authorized the company's management team to explore a broad range of strategic alternatives to further enhance shareholder value, including, but not limited to, a sale or merger of the company. Lehman Brothers Inc. has been engaged as the company's financial advisor in this process. "Since Encore's formation in 1998, the Company has built a high quality portfolio of stable long-lived, oil-weighted properties that generate substantial free cash flow from our 231 MMBOE proved reserve base," Jon S. Brumley, Chief Executive Officer and President, commented. "We have a vast inventory of over 2,500 drilling locations and 35 enhanced oil recovery projects that represent more than 450 MMBOE of additional upside potential. Encore has sizeable and scalable projects in some of the most significant onshore domestic oil and natural gas plays which include the Bakken Shale play, the Haynesville Shale play, our West Texas joint venture with ExxonMobil, our Rocky Mountain CO2 opportunities, and our newest oil shale play, the Tuscaloosa Marine Shale." Mr. Brumley went on to state, "It is our belief that Encore's current share price is not reflective of our record operating results and our ability to efficiently fund these projects through our upstream MLP, Encore Energy Partners. We are determined to have the value of these opportunities recognized for our shareholders. Therefore we have retained Lehman Brothers to explore strategic alternatives, including a sale of the Company." There is no assurance that the review of strategic alternatives will result in Encore changing its current business plan, pursuing a particular transaction or completing any such transaction. Encore does not expect to update the market with any further information on the process unless and until its Board of Directors has approved a specific transaction or otherwise deems disclosure appropriate. Headquartered in Fort Worth, Texas, Encore Acquisition Company (NYSE: EAC) -- http://www.encoreacq.com/-- is an independent energy company engaged in the acquisition, development and exploitation of North American oil and natural gas reserves. Organized in 1998, Encore's oil and natural gas reserves are in four core areas: the Cedar Creek Anticline of Montana and North Dakota; the Permian Basin of West Texas and Southeastern New Mexico; the Mid Continent area, which includes the Arkoma and Anadarko Basins of Oklahoma, the North Louisiana Salt Basin, the East Texas Basin and the Barnett Shale; and the Rocky Mountains. * * * Moody's Investors Service confirmed Encore Acquisition Co.'s Ba3 corporate family rating, Ba3 probability of default rating, and B1 senior subordinated note rating in June 2007. The rating still holds to date. ENERSYS: Moody's Assigns Ba1 Rating on Proposed Credit Facility --------------------------------------------------------------- Moody's Investors Service affirmed the corporate family rating of EnerSys at Ba3 and probability of default at Ba3. Moody's also assigned a Ba1 rating to the company's proposed senior secured credit facility, and a B2 rating to the proposed senior unsecured convertible notes. As a result of EnerSys debt being rated, the Ba3 corporate family rating will now be assigned to EnerSys, the senior-most entity with rated debt in the corporate structure. EnerSys Capital Inc.'s existing rating of Ba2 for its senior secured bank credit facility was not affected by these rating actions and will be withdrawn once the new senior secured credit facility closes. In a related rating action Moody's changed EnerSys' outlook to positive reflecting strong operating performance and solid debt coverage metrics. EnerSys' Ba3 corporate family rating reflects the company's leading market position in industrial batteries in addition to its geographic breadth and customer diversity. The company's proprietary thin plate pure lead technology and other proprietary technology are expected to contribute to the company's continued growth. For LTM December 2007, EnerSys' key credit metrics were as: Debt/EBITDA at 3.5x; EBITA/interest expense near 2.8x; and, funds from operations/debt of 21% (all ratios adjusted per Moody's methodology). Tempering these strengths is the company's dependence on key end markets including industrial forklifts and telecommunications. Furthermore, the historical cyclicality of capital spending in its end markets and the company's current negative free cash flow constrain the corporate family rating as well. Free cash flow/debt was negative 6.1% for the last twelve months through December 30, 2007. The negative free cash is driven primarily by working capital usage, reflecting the company's sales growth. Also, the company is exposed to commodity price volatility especially lead, which comprised approximately 33% of the company's cost of goods sold for the first nine months of FY07 and resulted in cost of sales increasing by $147 million during the same time period. The positive outlook reflects Moody's expectation that EnerSys' debt protection measures will continue to improve over the next twelve to eighteen months as the company benefits from the robust demand in its end markets. Additionally, Moody's believes that the company will improve its internal operating efficiencies and reduce its working capital spend, which should translate into robust free cash flow during the company's 2009 fiscal year. Free cash flow is expected to be used for debt reduction. EnerSys' financial flexibility is also being enhanced as it is diversifying its funding sources away from an all bank capital structure with a combination of bank debt and convertible notes. The ratings for the proposed senior secured credit facility and senior unsecured convertible notes reflect the overall probability of default of the company, to which Moody's assigns a PDR of Ba3. The Ba1 rating assigned to the $375 million senior secured credit facility benefits from a priority of payment over the convertible notes in a liquidation scenario. The B2 rating assigned to the proposed $150 million senior unsecured convertible notes reflects its junior priority of payment relative to the senior secured credit facility. These ratings/assessments were affected by this action: EnerSys: -- Corporate family rating at Ba3; -- Probability of default rating at Ba3; -- $375 million senior secured credit facility assigned at Ba1 (LGD2, 27%); and, -- $150 million senior unsecured convertible notes due 2038 assigned at B2 (LGD6, 92%). EnerSys Capital Inc. -- $453.2 million senior secured bank credit facility affirmed Ba2 LGD2 (21%). EnerSys is the world's largest manufacturer, marketer and distributor of industrial batteries and also manufactures related products such as chargers, power equipment and battery accessories. Additionally, it provides related aftermarket and customer-support services for industrial batteries. Revenues for the fiscal year ended March 31, 2008 totaled approximately $2.0 billion. ENRON CORP: Court OKs Merger of Certain Affiliates to Save Costs ---------------------------------------------------------------- The Honorable Arthur Gonzales of the U.S. Bankruptcy Court for the Southern District of New York permitted the reorganized Enron Debtors to merge certain affiliates, as determined by the reorganized Debtors with Enron Creditors Recovery Corp., or any other Reorganized Debtor as appropriate. Judge Gonzalez authorizes the Reorganized Debtors to take all actions or enter into agreements necessary to effectuate the merger. Distributions to creditors will continue to be made in accordance with the Plan and all calculations will be maintained pursuant to the Distribution Model, as if the merger had not occurred. As reported in the Troubled Company Reporter on May 6, 2008, the Debtors explained that the merger of these affiliates, and other Enron-related entities, with Enron or other Reorganized Debtor as appropriate, should result in substantial cost savings for the Reorganized Debtors' estates. 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. 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, the Debtors contended. Before the hearing, National City Bank, as indenture trustee for certain debentures of Enron North America Corp. and Enron Transportation Services Company, as well as the Enron trust originated preferred securities debentures, filed documents with the Court saying it opposes the merger. The Bank's counsel, Edward M. Fox, Esq., at Kirkpatrick & Lockhart Preston Gates Ellis LLP, in New York, asserted that the Motion did not provide any information on the particular mergers contemplated by the Reorganized Debtors. The Motion also failed to indicate how those mergers might impact National City's rights, both monetary and non-monetary, under the complex series of indentures, trust agreements, and other contracts that govern its relationship with the Reorganized Debtors, he noted. Absent additional information regarding the specific mergers, Mr. Fox said, it will be impossible for National City or the Court to verify whether the relief sought will prejudice the creditors or to gauge the impact on the practical operation of the complex series of contractual documents, which serves as the basis for National City's claims. 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 Former Employees to Return Settlement Money ------------------------------------------------------------- Enron Creditors Recovery Corp. sent letters to about 26,000 former Enron employees asking them to return the money they received as settlement of their lawsuit relating to the Enron Savings Plan, or, if the money has been invested in a tax- deferred retirement plan, withdraw the principal and return it to Enron. According to Enron, Hewitt Associates miscalculated up to about $22,000,000, of the settlement payments. As a result of the miscalculations, 87% of the former employees were underpaid and 13% were overpaid, The Houston Chronicle reported. "It's an enormous mistake," the Chronicle said quoting Enron spokesman Harlan Loeb. Julie Macdonald, another Enron spokeswoman, said that Hewitt is no longer providing services to Enron in relation to the calculation or communication of the settlement allocations, the the Chronicle added. Enron said it discovered the miscalculations a year ago and notified the former employees of the miscalculations in letters, dated June 15, 2007. Demand letters, however, were sent to former employees only on May 6, 2008. "[W]e're certainly sympathetic to their plight and the issue, but as a fiduciary we have a legal obligation to make the request for the funds," Mr. Loeb said, the Chronicle quoted. "We had a fiduciary duty to make the books balance." 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: Shareholders Re-Assert Fraudulent Conduct Claims ------------------------------------------------------------ More than 1,600,000 Enron shareholders led by the University of California filed documents with the U.S. District Court for the Southern District of Texas asserting that Credit Suisse First Boston, Merrill Lynch & Co., and Barclays Bank Plc, had a duty to disclose at least the facts concerning their deceptive conduct and the effects of that conduct on Enron's reported financial results. William S. Lerach, Esq., at Lerach, Coughlin, Stoia, Geller, Rudman & Robbins LLP, in San Diego, California, on behalf of the shareholders, said that RBS and Barclays will be "doomed to lose" if a civil case against them is brought to court, The Edinburgh Paper reported. He also said that he is confident that District Judge Melinda Harmon is going to rule that the shareholders have presented enough evidence to show that the Banks' conduct was manipulative, the report added. Credit Suisse, Merrill Lynch, and Barclays are the remaining bank defendants in a class action complaint against numerous banks who were accused to have aided Enron in its fraudulent reporting of the company's financial health. The complaint, filed in 2001, seek to recover "tens of billions" of dollars from the Banks, including the Canadian Imperial Bank of Commerce, JP Morgan Chase, Citigroup, former Enron top executives, and Enron professionals, as a result of their participation in off-balance sheet transactions with Enron and deceiving its shareholders. The shareholders have obtained $2,400,000,000 from CIBC; $2,200,000,000 from JP Morgan; $2,000,000,000 from Citigroup; $222,500,000 from Lehman Brothers; $69,000,000 from BofA; 168,000,000 from Enron's outside directors, and $32,000,000 from Andersen Worldwide. In January 2008, the U.S. Supreme Court rejected the shareholders' petition for a review of a Fifth Circuit Court of Appeals ruling dismissing their claims against the Banks. 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. EOS AIRLINES: Court Okays Bid Procedures For Sale of All Assets --------------------------------------------------------------- The Hon. Adlai S. Hardin, Jr., of the United States Bankruptcy Court for the Southern District of New York approved proposed bidding procedures for the sale of substantially all assets of EOS Airlines Inc. free and clear of interests, subject to better and higher offers. The deadline for submission of bids for any of the assets of the Debtor will be on May 30, 2008. The Debtor will conduct an auction on or before June 9, 2008, at 10:00 a.m., followed by a sale hearing on June 13, 2008, at 11:00 a.m. As reported by the Troubled Company Reporter on May 22, through the auction and sale process, the Debtor hopes to sell either its business to a party interested in restarting EOS as a going concern or all of the Debtor's most valuable assets to one or more purchasers. The Debtor has separately sought Court authority to sell all assets valued at less than $225,000 on an expedited basis. Creditors Object to Proposed Auction Several airlines, including Delta Air Lines, Inc. and Compania Mexicana de Aviacion S.A., object to EOS Airlines' proposal to auction off assets, The Wall Street Journal reports. In court papers, Mexicana accused the airline of using the auction "to buy time in the faint hope of a last-minute rescue," the WSJ report stated. Mexicana leased EOS three aircraft in 2007. It is owed $2.4 million by EOS, according to WSJ. As reported by the Troubled Company Reporter on May 1, 2008, when EOS filed for bankruptcy, the company disclosed $697,293 in debt to Mexicana. EOS disclosed it owed Delta Air $363,692. Delta said some of the assets EOS wants to put up on the auction block aren't its own, according to the report. The report stated that EOS is seeking to sell leases to its fleet of custom-configured Boeing 757-200 aircraft, customer lists, facilities and federal licenses to operate the airline. The motion, containing details of the procedures and the schedule leading up to the auction can be found at http://www.kccllc.net/eosairlines/ Bidding procedures can also be obtained by contacting Robert Hershan of Alvarez & Marsal at rhershan@alvarezandmarsal.com. Eos is seeking Court approval to retain Alvarez & Marsal as its financial advisor. Menzies Corporate Restructuring is acting as joint administrators in the United Kingdom and Squire Sanders & Dempsey LLP is serving as bankruptcy counsel. All court filings and other information can be found at http://www.eosairlines.com/and at http://www.kccllc.net/eosairlines About EOS Airlines Based 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. The Debtor selected Kurztman Carson Consultants LLC as claims agent. The U.S. Trustee for Region 2 appointed creditors to serve on an Official Committee of Unsecured Creditors. Joseph M. Vann, Esq., and Robert A. Boghosian, Esq., at Cohen Tauber Spievack & Wagner P.C. in New York, represent the Committee in this case. When the Debtor filed for protection against it creditors, it listed total assets of $70,233,455 and total debts of $34,858,485. FORD MOTOR: Adjusts Production Plan to Lower Industry Volume ------------------------------------------------------------ Ford Motor Company is making adjustments to its production plan and revising downward its near-term North American Automotive profit outlook, while planning further manufacturing capacity realignments, additional cost reductions and changes to its product mix to respond to the rapidly changing business environment in the U.S. The company said it is increasing 2008 North American production of the hot-selling Ford Focus, Fusion, Edge and Escape, Mercury Milan and Mariner, as well as the Lincoln MKZ and Lincoln MKX. At the same time, Ford is reducing 2008 production of large trucks and SUVs, as gas prices soar and customers move more quickly to smaller and more fuel-efficient cars and crossovers. "We are continuing to make great progress on our plan," Ford President and CEO Alan Mulally said. "We are profitable and growing outside of North America, and our transformation plan in North America is working. The challenge affecting the entire industry is the accelerating shift in consumer demand away from large trucks and SUVs to smaller cars and crossovers -- combined with a steep rise in commodity prices and the weak U.S. economy." Ford said it now plans to produce 690,000 vehicles in North America during the second quarter, a further reduction of 20,000 units from previously announced planned production levels and a decline of 15% from the second quarter of 2007. The company plans to produce between 510,000 and 540,000 units in the third quarter, down 15 to 20% from the same period last year. Fourth-quarter production is expected to be between 590,000 and 630,000 units, down 2% to 8% from year-ago levels. The second-half production plan includes higher car and crossover production compared with a year ago and will be achieved through overtime and added shifts at Ford's smaller car and crossover assembly plants. Large truck and SUV production in the second half will be lower than a year ago, with reductions achieved through a combination of additional downtime, shift reductions and line-speed actions. The lower overall production, dramatic model mix shifts and substantially higher commodity costs are forcing a change in Ford's near-term financial outlook, the company said. "Rapidly rising commodity prices -- particularly steel prices -- and higher gasoline prices that are accelerating consumers' shift away from large trucks and SUVs together are having a tremendous impact on our sales, our manufacturing operations and our profitability as we look to 2009," Mark Fields, Ford's President of The Americas, said. "Unless there is a fairly rapid turnaround in U.S. business conditions, which we are not anticipating, it now looks like it will take longer than expected to achieve our North American Automotive profitability goal," Mr. Mulally said. "Overall, we expect to be about break-even companywide in 2009 -- with continued strong results in Europe and South America." Given the external challenges, Ford said it is more critical than ever to continue executing its transformation plan, which includes: -- aggressively restructuring to operate profitably at the current demand and changing model mix; -- accelerating the development of new products that customers want and value; -- financing the plan and improving the balance sheet; and -- working together effectively as one team, leveraging Ford's global assets. "The most important thing we can do right now is to continue to take decisive action implementing our plan to respond to the rapidly changing business environment," Mr. Mulally said. Ford remains on track to reduce by $5 billion its annual North American Automotive operating costs by the end of 2008 -- at constant volume, mix, and exchange and excluding special items -- compared with 2005. However, further cost reductions and recognition of anticipated retiree health care savings from Ford's recent UAW labor agreement will be needed to offset higher commodity costs. Ford previously had anticipated that ongoing retiree health care savings in 2008 would allow it to exceed the $5 billion target. In addition, the company said it is planning further manufacturing capacity realignments, as it accelerates the introduction of more fuel-efficient small cars and crossovers. Cash outflows associated with operating losses and employee separations now are projected to be between $14 billion and $16 billion for 2007 to 2009. This is a deterioration compared with previous guidance but remains better than the original $17 billion outflow projection. Ford's Automotive net liquidity remains substantial. Total liquidity -- including available credit lines, the majority of which are in place through Dec. 15, 2011 -- was $40.6 billion as of March 31. Ford said it will continue to evaluate overall liquidity and alternatives to further improve its balance sheet. Ford now expects 2008 U.S. industry volume, including medium and heavy trucks, to be between 15 million and 15.4 million units. Ford, Lincoln and Mercury U.S. market share is expected to be approximately 14% this year -- supported by the introduction of several new products. "We are making great progress on the acceleration of new products, and our initial quality is among the best in the business," Mr. Fields said. "The new Focus, Edge and Escape have had significant sales growth this year, and the pace of our product introductions accelerates even further this summer." Production of the Ford Flex crossover and Lincoln MKS sedan is under way and soon will begin for the new generation of the F-150. Ford also just introduced the 2009 Ford Escape and Mercury Mariner small utility vehicles. They have new 4- and 6-cylinder engines with 11% and 20% more horsepower, respectively, and 5% better fuel economy, thanks to new engine technology, aerodynamic improvements and new six-speed transmissions. In fact, Ford now offers more vehicles with fuel-saving six-speeds than any other automaker. New versions of the Ford Fusion, Mercury Milan and Lincoln MKZ mid-size cars also debut later this year, as do all-new hybrid versions of the Fusion and Milan. By the end of this year, 70% of all Ford, Lincoln and Mercury products by volume in North America will be new or significantly upgraded compared with 2006 models. By the end of 2010, 100% of the product lineup will be new, including the next-generation Mustang in 2009, new fuel-saving EcoBoost engines in 2009, a new European-engineered Transit Connect in 2009 and all-new Ford Fiesta small car in 2010 -- as well as several other vehicles not yet announced. As an example of working together and leveraging its global assets, Ford said that it is accelerating even further the North American introduction of many of the small cars and crossovers that the company profitably sells today in Europe and South America. "We remain absolutely committed to creating an exciting, viable Ford going forward -- and to transforming Ford into a lean global enterprise delivering profitable growth over the long term," Mr. Mulally said. "We continue to make progress on every element of our plan, and we are taking steps in the near term to ensure our long-term success." About Ford Motor Headquartered in Dearborn, Michigan, Ford Motor Co. (NYSE: F) -- http://www.ford.com/-- manufactures or distributes automobiles in 200 markets across six continents. With about 260,000 employees and about 100 plants worldwide, the company's core and affiliated automotive brands include Ford, Jaguar, Land Rover, Lincoln, Mercury, Volvo, Aston Martin, and Mazda. The company provides financial services through Ford Motor Credit Company. The company has operations in Japan in the Asia Pacific region. In Europe, the company maintains a presence in Sweden, and the United Kingdom. The company also distributes its brands in various Latin American regions, including Argentina and Brazil. * * * As reported in the Troubled Company Reporter on March 28, 2008, Standard & Poor's Ratings Services said that the ratings and outlook on Ford Motor Co. and Ford Motor Credit Co. (both rated B/Stable/B-3) were not affected by Ford's announcement of an agreement to sell its Jaguar and Land Rover units to Tata Motors Ltd. (BB+/Watch Neg/--) for $2.3 billion (before $600 million of pension contributions by Ford for Jaguar-Land Rover). As reported in the Troubled Company Reporter on Feb. 15, 2008, Fitch Ratings affirmed the Issuer Default Ratings of Ford Motor Company and Ford Motor Credit Company at 'B', and maintained the Rating Outlook at Negative. As reported in the Troubled Company Reporter on Nov. 19, 2007, Moody's Investors Service affirmed the long-term ratings of Ford Motor Company (B3 Corporate Family Rating, Ba3 senior secured, Caa1 senior unsecured, and B3 probability of default), but changed the rating outlook to Stable from Negative and raised the company's Speculative Grade Liquidity rating to SGL-1 from SGL-3. Moody's also affirmed Ford Motor Credit Company's B1 senior unsecured rating, and changed the outlook to Stable from Negative. These rating actions follow Ford's announcement of the details of the newly ratified four-year labor agreement with the United Auto Workers. FORD MOTOR: Volvo Plans to Cut Jobs at Gothenburg Plant ------------------------------------------------------- Volvo Cars, a unit of Ford Motor Co., intends to cut jobs as well as eliminate the night shift in its plant located in Gothenburg, Sweden, Reuters reports citing Olle Axelson, head of public affairs at Volvo. Reuters adds that the move will enable Volvo to "contend" with "market conditions." The Wall Street Journal had reported that Ford was "cutting production" of its Volvo brand in an effort to lower costs and losses. Around 700 employees are currently on the night shift, Reuters relates. Headquartered in Dearborn, Michigan, Ford Motor Co. (NYSE: F) -- http://www.ford.com/-- manufactures or distributes automobiles in 200 markets across six continents. With about 260,000 employees and about 100 plants worldwide, the company's core and affiliated automotive brands include Ford, Jaguar, Land Rover, Lincoln, Mercury, Volvo, Aston Martin, and Mazda. The company provides financial services through Ford Motor Credit Company. The company has operations in Japan in the Asia Pacific region. In Europe, the company maintains a presence in Sweden, and the United Kingdom. The company also distributes its brands in various Latin American regions, including Argentina and Brazil. * * * As reported in the Troubled Company Reporter on March 28, 2008, Standard & Poor's Ratings Services said that the ratings and outlook on Ford Motor Co. and Ford Motor Credit Co. (both rated B/Stable/B-3) were not affected by Ford's announcement of an agreement to sell its Jaguar and Land Rover units to Tata Motors Ltd. (BB+/Watch Neg/--) for $2.3 billion (before $600 million of pension contributions by Ford for Jaguar-Land Rover). As reported in the Troubled Company Reporter on Feb. 15, 2008, Fitch Ratings affirmed the Issuer Default Ratings of Ford Motor Company and Ford Motor Credit Company at 'B', and maintained the Rating Outlook at Negative. As reported in the Troubled Company Reporter on Nov. 19, 2007, Moody's Investors Service affirmed the long-term ratings of Ford Motor Company (B3 Corporate Family Rating, Ba3 senior secured, Caa1 senior unsecured, and B3 probability of default), but changed the rating outlook to Stable from Negative and raised the company's Speculative Grade Liquidity rating to SGL-1 from SGL-3. Moody's also affirmed Ford Motor Credit Company's B1 senior unsecured rating, and changed the outlook to Stable from Negative. These rating actions follow Ford's announcement of the details of the newly ratified four-year labor agreement with the United Auto Workers. FRESH DEL MONTE: S&P Holds Ratings and Revises Outlook to Positive ------------------------------------------------------------------ Standard & Poor's Ratings Services revised its outlook on Cayman Islands-based Fresh Del Monte Produce Inc. to positive from stable. Existing ratings on the company, including the 'BB-' corporate credit rating, were affirmed. About $197 million total debt was outstanding at March 28, 2008. "The outlook revision reflects the company's positive operating momentum despite a challenging cost environment," said Standard & Poor's credit analyst Alison Sullivan. Fresh Del Monte has sustained strong credit measures through EBITDA growth and debt repayment. For the 12 months ended March 28, 2008, lease- and pension-adjusted funds from operations to debt was very strong at more than 86%, compared with a little more than 8% in the prior- year period and a three-year average of 38%. Adjusted total debt to EBITDA was about 1.2x for the 12 months ended March 28, 2008, an improvement from 4.1x in the prior-year period and a three-year average of 2.9x. An upgrade would be dependent upon sustained improvement in operating performance and successful resolution of the ongoing European Commission antitrust investigation. The ratings on Fresh Del Monte reflect its participation in the highly variable, commodity-oriented fresh fruit and vegetable industry, which is affected by uncontrollable factors such as global supply, world trade policies, political risk, currency swings, weather, and disease. Mitigating these concerns are the company's leading positions in the production, marketing, and distribution of fresh produce. Fresh Del Monte is the No. 1 marketer of fresh pineapples worldwide, and the No. 3 marketer of bananas worldwide. However, product concentration remains a rating concern, because of the high sales and earnings concentration from bananas and pineapples, respectively, and intense competition in those markets. S&P assume Fresh Del Monte will maintain credit measures that are stronger than its rating to compensate for inherent volatility in the produce industry. The rating could be reviewed for an upgrade if operating performance remains stable, financial policy remains prudent, and the company sustains a rolling three-year average leverage of about 2.5x, and rolling three-year average FFO to total debt of 30%-35%. An upgrade would not be considered until the EC investigation has been successfully resolved in a manner in which credit measures would not weaken outside these parameters. The outlook could be revised to stable if there is a sizable settlement or fine arising from this investigation, and/or credit metrics deteriorate outside of these ranges. One such scenario could include a 150-basis- point EBITDA margin decline and low-to mid-single-digit revenue growth coupled with debt levels that exceed 2006 levels, which would result in about 3x leverage and about 25% FFO to total debt. GAP INC: Net Income Increases 40% to $249MM in Quarter Ended May 3 ------------------------------------------------------------------ Gap Inc.'s net earnings increased 40% to $249 million for the quarter ended May 3, 2008, compared with $178 million for the first quarter last year. Earnings from continuing operations for the first quarter of 2008 were $249 million compared with $205 million last year which represents an increase of 21%. Earnings from continuing operations exclude the loss from the discontinued operation of Forth & Towne. "We are pleased with our first quarter results, as we delivered solid earnings growth in a difficult environment," Glenn Murphy, chairman and chief executive officer of Gap Inc., said. "Looking ahead, we are focused on bringing compelling product and shopping experiences to our customers while managing costs tightly. We believe this approach is proving even more prudent given the current economic conditions." The company ended the first quarter with $1.8 billion in cash and investments. For the first quarter, free cash flow, defined as net cash provided by operating activities less purchases of property and equipment, was an inflow of $62 million. The company reaffirmed that for the full year it expects to generate about $900 million in free cash flow. On a year over year basis, the company reported that inventory per square foot was down 17% at the end of the first quarter. Looking toward the second quarter of 2008, the company expects inventory per square foot to be down in the mid teens compared with the second quarter of 2007. First quarter capital expenditures were $114 million. The company continues to expect capital spending of about $500 million in fiscal year 2008. During the first quarter of fiscal year 2008, the company opened 33 store locations and closed 23 store locations. This compares with 41 openings and 20 closings for the first quarter of the prior year, including one store closure related to Forth & Towne. The company ended the quarter with 3,177 store locations and net square footage increased less than half a percentage point from the end of fiscal year 2007. The company increased its guidance for store closures in fiscal year 2008 by 15 store locations, driven primarily by Gap brand. The company now expects to open about 115 store locations and to close about 115 store locations. The company does not expect any net square footage growth in fiscal year 2008. At May 3, 2008, the company's balance sheet showed total assets of $7.6 billion, total liabilities of $3.3 billion and total stockholders' equity of $4.3 billion. About Gap Inc. Headquartered in San Francisco, California, Gap Inc. (NYSE: GPS) -- http://www.gapinc.com/-- is an international specialty retailer offering clothing, accessories and personal care products for men, women, children and babies under the Gap, Banana Republic, Old Navy, Forth & Towne and Piperlime brand names. Gap Inc. operates more than 3,100 stores in the United States, the United Kingdom, Canada, France, Ireland and Japan. In addition, Gap Inc. is expanding its international presence with franchise agreements for Gap and Banana Republic in Southeast Asia and the Middle East. * * * Moody's Investor Service placed Gap Inc.'s corporate family, senior unsecured debt and probability of default ratings at 'Ba1' in February 2007. The ratings still hold to date with a stable outlook. GENERAL MOTORS: Resumes Malibu Production as Workers OK Contract ---------------------------------------------------------------- All production shifts will return to work at General Motors Corp.'s assembly factory in Fairfax, Kansas, following the approval of new labor contract by the plant's United Auto Workers Local 31 union members, according to the union local's Web site. Roughly 88% of skilled trades workers and 85% of production workers voted for the new pact. As reported in the Troubled Company Reporter on May 8, 2008, more than a thousand union workers in GM's assembly plant walked off the their jobs at 9 a.m. on May 5, 2008, after talks on a new labor deal failed. The automaker and the UAW were in discussions aimed at continuing plant production of Chevy Malibus and resolving plant-specific issues such as work rules, seniority, job selection and the use of outside contractors. The impasse, UAW representatives insist, is on the automaker's oversight in awarding jobs at the facility based on seniority. The sticking point supplements the national contract GM hourly employees ratified late last year. WSJ relates that others involved in the labor talks said that the protests were related to a nearly three-month strike against key GM supplier American Axle & Manufacturing Holdings Inc. The agreement between GM and the UAW will end the 18-day old protest and will allow GM to resume production of its in-demand Chevrolet Malibu, according to John D. Stoll of The Wall Street Journal. Under the new labor pact, 120 new entry-level positions at the plant will be created beginning September and 30 skilled trade jobs will be created or retained, David Twiddy of The Associated Press writes. Headquartered in Detroit, Michigan, General Motors Corp. (NYSE: GM) -- http://www.gm.com/-- was founded in 1908. GM employs about 266,000 people around the world and manufactures cars and trucks in 35 countries. In 2007, nearly 9.37 million GM cars and trucks were sold globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, HUMMER, Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. At March 31, 2008, GM's balance sheet showed total assets of $145,741,000,000 and total debts of $186,784,000,000, resulting in a stockholders' deficit of $41,043,000,000. Deficit, at Dec. 31, 2007, and March 31, 2007, was $37,094,000,000 and $4,558,000,000, respectively. * * * As reported in the Troubled Company Reporter on April 28, 2008, Standard & Poor's Ratings Services said that 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 CreditWatch update follows downgrades of 49%-owned subsidiaries GMAC LLC (B/Negative/C) and Residential Capital LLC (CCC+/Watch Neg/C). The rating actions on Residential Capital LLC and GMAC were triggered by the resignation of the only independent directors at Residential Capital LLC. HCA INC: Fitch Affirms 'B' Issuer Default Rating ------------------------------------------------ Fitch Ratings has affirmed HCA Inc.'s ratings as: -- Issuer Default Rating at 'B'; -- Secured bank credit facility at 'BB/RR1'; -- Senior unsecured notes at 'CCC+/RR6'. In addition, Fitch has upgraded these rating due to improved recovery prospects: -- Second lien notes to 'B+/RR3' from 'B/RR4'. Total rated debt at March 31, 2008 was approximately $27.5 billion. The Outlook is Stable. HCA's ratings reflect the company's significant leverage and challenging industry environment, partially offset by its improving credit statistics. Although the company has reduced its debt outstanding by almost $1 billion since its leveraged buy-out in 2006, its financial flexibility remains constrained by significant debt levels and negative free cash flow. In addition, HCA, along with the for-profit industry in general, is experiencing increasing competition and elevated levels of bad debt expense and uncompensated care. Fitch expects these factors to remain key credit concerns for the near future. Although leverage remains high, the recovery prospects for the second lien notes improved as a result of reduced debt levels and improved EBITDA expectations in a distressed scenario. HCA's leverage and debt levels increased substantially as a result of its 2006 LBO. As a result of the transaction, total debt increased to more than $28.4 billion at the end of 2006, but has since declined to approximately $27.5 billion at March 31, 2008. Leverage increased from approximately 2.8 times prior to the transaction to approximately 6.1x for the latest 12 months ended March 31, 2008. Going forward, Fitch expects slight leverage improvement as a result of modest debt reduction and EBITDA expansion, barring any major event, such as significant asset divestitures, an initial public offering, or similar transaction, which could have a more significant effect on the credit. Liquidity at March 31, 2008, was provided by the company's senior secured revolver ($1.897 billion available) and cash on hand (approximately $471 million). Free cash flow for the LTM ended March 31, 2008, was a negative $147 million. Fitch expects free cash flow to remain negative to slightly positive over the next couple of years, limiting HCA's ability to organically reduce debt. During the first quarter, HCA completed a tender offer to repurchase $500 million of its outstanding unsecured notes comprising approximately $200 million of the 8.75% notes due 2010, $202.5 million of the 7.875% notes due 2011, and $97.5 million of the 6.95% notes due 2012. HCA funded the purchase via revolver borrowings, resulting in no net reduction in debt but a reduction in interest expense and an extension of HCA's maturity profile. Fitch believes HCA has a manageable debt maturity schedule with the majority of debt expiring 2012 or later. HOMETOWN COMMERCIAL: S&P Junks Ratings on Seven Cert. Classes ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 17 classes of commercial mortgage pass-through certificates from Hometown Commercial Trust's series 2006-1 and 2007-1. Concurrently, S&P affirmed its ratings on the remaining 10 classes from these transactions. The downgrades reflect the unfavorable performance of the collateral pools and the anticipated credit support erosion upon the eventual resolution of the specially serviced assets in each of the aforementioned series. The affirmed ratings reflect credit enhancement levels that provide adequate support through various stress scenarios. Details on the two trusts are: -- The collateral pool for series 2006-1 consisted of 42 loans with an aggregate trust balance of $130.5 million as report, compared with 45 loans totaling $149.2 million at issuance. The master of the May 12, 2008, remittance servicer, Midland Loan Services Inc., reported financial information for 89% of the loans. The servicer-provided information comprised full-year 2007 data (76%), interim 2007 data (8%), and full-year 2006 data (5%). Using this information, Standard & Poor's calculated a weighted average debt service coverage of 1.01x, down from 1.23x at issuance. Seven loans totaling $32.5 million (24.9%), including four of the top 10 exposures, are with the special servicer, also Midland Loan Services Inc. One of the specially serviced assets is 90-plus- days delinquent (1.1%), one is 60-plus-days delinquent (3.4%), three are in their grace periods (18.3%), and one is real estate owned (REO) (0.9%). There are no other reported delinquencies. The master servicer, Midland, reported a watchlist of 18 loans ($49.2 million, 38%), including four of the top 10 exposures. Twelve loans ($39.0 million, 29.9%) have reported DSCs below 1.1x. Series 2006-1 has not experienced any losses to date. -- The collateral pool for series 2007-1 consisted of 49 loans with an aggregate trust balance of $142.5 million as of the May 12, 2008, remittance report, compared with 51 loans totaling $147.5 million at issuance. Midland reported financial information for 65% of the loans. The servicer-provided information comprised full-year 2007 data (57%), interim 2007 data (4%), and full-year 2006 data (4%). Using this information, Standard & Poor's calculated a weighted average DSC of 1.39x, up from 1.24x at issuance. Four loans totaling $16.8 million (11.8%), including one of the top 10 exposures, are with the special servicer. One of the specially serviced assets is 30-plus-days delinquent (5.6%), two are in their grace periods (3.8%), and one is current (2.4%). Midland reported a watchlist of 13 loans ($43.0 million, 30%), including three of the top 10 exposures. The two other reported delinquencies are also on the servicer's watchlist, and both are 30-plus-days delinquent (7.2%). Five loans ($17.7 million, 12.4%) have reported DSCs below 1.1x. Series 2007-1 has not experienced any losses to date. Standard & Poor's stressed the credit-impaired loans, including the specially serviced and watchlist loans, as part of its analysis. The resultant credit enhancement levels support the lowered and affirmed ratings. Ratings Lowered Hometown Commercial Trust 2006-1 Commercial mortgage-backed notes series 2006-1 Rating ------ Class To From Credit enhancement ----- -- ---- ------------------ F BBB- BBB 7.29% G BB BBB- 5.86% H B+ BB+ 5.00% J B BB 4.57% K B- BB- 4.00% L CCC+ B+ 3.72% M CCC B 3.29% N CCC- B- 2.86% Hometown Commercial Trust 2007-1 Commercial mortgage pass-through notes series 2007-1 Rating ------ Class To From Credit enhancement ----- -- ---- ---------------- D BBB BBB+ 7.51% E BBB- BBB 6.47% F BB- BBB- 5.18% G B BB+ 4.40% H B- BB 4.01% J CCC+ BB- 3.49% K CCC B+ 3.24% L CCC- B 2.85% M CCC- B- 2.33% Ratings Affirmed Hometown Commercial Trust 2006-1 Commercial mortgage-backed notes series 2006-1 Class Rating Credit enhancement ----- ------ ------------------ A AAA 18.01% B AA 15.43% C AA- 14.15% D A 11.72% E BBB+ 8.43% X AAA N/A Hometown Commercial Trust 2007-1 Commercial mortgage pass-through notes series 2007-1 Class Rating Credit enhancement ----- ------ ------------------ A AAA 15.79% B AA 13.46% C A 10.23% X AAA N/A N/A -- Not applicable. HUMAN TOUCH: Moody's Lowers Corporate Family Rating to Caa3 ----------------------------------------------------------- Moody's Investors Service downgraded Human Touch LLC's corporate family rating (CFR) to Caa3 from Caa1, its probability of default rating (PDR) to Caa2 from Caa1, and the rating on its senior unsecured notes to Caa3 from Caa2. The SGL-4 Speculative Grade Liquidity rating was affirmed. This concludes the review for possible downgrade that began on February 26, 2008. The downgrade of Human Touch's PDR to Caa2 reflects the increased probability of default over the next twelve months. This is due to its very weak liquidity stemming from the upcoming expiration of its revolving credit facility in March 2009, and its limited amount of unrestricted cash. The downgrade also reflects continued revenue and profitability declines stemming from reduced revenue with key customers and general declines in consumer discretionary spending. The CFR was lowered to Caa3, one notch below the PDR, to reflect Moody's view that recovery in a default scenario would likely be at below-average levels due to the very weak earnings in a tough economic environment, coupled with the highly discretionary nature of Human Touch's products. Due to the company's deteriorating financial condition, Moody's used a fundamental distressed EBITDA valuation approach (5 times multiple) to estimate loss-given-default rather than a mean family-level LGD estimate. Based on this approach, the company's recovery estimate decreased to 35% from 50%. The higher loss estimate resulted in the PDR deviating from the CFR by one notch. As a result of weak performance, Human Touch's leverage (debt/EBITDA, calculated using Moody's standard analytic adjustments) has increased to over 12.5 times and EBITA/interest has fallen below 1.0 time. The negative outlook reflects concerns that the company's liquidity profile may further erode if it is unable to maintain positive cash flow, extend the expiration of its revolving credit facility and/or sell other assets for cash. Ratings could be further lowered if it unable to address these concerns over the next several months. Ratings lowered: * Corporate Family Rating to Caa3 from Caa1 * Probability of Default Rating to Caa2 from Caa1 * Senior unsecured notes to Caa3 (LGD 5, 79%) from Caa2 (LGD 4, 63%) Ratings affirmed: * Speculative grade liquidity rating at SGL-4 Human Touch LLC, (operating subsidiary of Interactive Health, Inc.) located in Long Beach, CA, is a producer and marketer of robotic massage chairs, zero-gravity chairs and massage products. Sales for the LTM period ended March 31, 2008 were $85 million. IDLEAIRE TECHNOLOGIES: U.S. Trustee Forms Three-Member Committee ---------------------------------------------------------------- Roberta A. DeAngelis, the United States Trustee for Region 3, appointed three creditors to serve on an Official Committee of Unsecured Creditors for the Chapter 11 proceeding of IdleAire Technologies Corporation. The creditors committee members are: 1) Wells Fargo Bank, NA as Indenture Trustee and Collateral Agent Attn: James R. Lewis 45 Broadway, 14th Floor New York, New York 10006 Tel: (212) 515-5258 Fax: (866) 524-4681 2) PB Constructors, Inc. c/o Parsons Brinckerhoff, Inc. Attn: William Roman, One Penn Plaza New York, New York 10119 Tel: (212) 465-5045 Fax: (212) 465-5343 3) LodgeNet Interactive Corporation Attn: James G. Naro 3900 W. Innovation Street Sioux Falls, South Dakota 57107 Tel: (605) 988-1000 Fax: (605) 988-1323 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 IdleAire Technologies Knoxville, Tennessee-based IdleAire Technologies Corp. -- http://www.idleaire.com/-- is a privately held corporation founded in June 2000. It manufactures and services an advanced travel center electrification system providing heating, ventilation & air conditioning, Internet and other services to truck drivers parked at rest stops. The company delivers its services to long-haul drivers through its patented Advanced Travel Center Electrification(R) system, or ATE system, comprised of an in-cab service module connected to an external heating, ventilation and air conditioning unit, or HVAC unit, mounted on a truss structure above parking spaces. IdleAire has 131 locations in 34 states and employs about 1,200 people. The company filed chapter 11 petition on May 12, 2008 (Bankr. D. Del. Case No. 08-10960). Judge Kevin Gross presides over the case. Elihu Ezekiel Allinson, III, Esq., William A. Hazeltine, Esq., and William David Sullivan, Esq., at Sullivan Hazeltine Allinson, LLC represent the Debtor in its restructuring efforts. As of Dec. 31, 2007, the Debtor had total assets of $210,879,000 and total debts of $303,616,000. IDLEAIRE TECH: Wants 20% Incentive Pay for Key Workers Approved --------------------------------------------------------------- IdleAire Technologies Corp. asked the U.S. Bankruptcy Court for the District of Delaware to approve its proposed incentive plan for key employees and to continue existing employee severance plan. Line Workers Severance Plan According to the Debtor, it employs about 1,200 line workers. About 80% of the line workers is located at 130 truck stops throughout 30 states at which IdleAire has installed its equipment to service a total of 8,493 parking spaces. The rest of the line workers are located at four leased locations in Knoxville, Tennessee. During its formation in 2000, the Debtor related that it instituted an employee severance plan under which terminated line workers (other than for cause) were entitled to: (i) one week's pay for each year of service up to three week's pay, and (ii) accrued vacation pay, plus unpaid wages accrued as of the termination date. The Debtor indicated that uncertainties makes it a difficult task to ensure the retention of line workers. It added that without the line workers, the Debtor would be unable to operate or maintain its sites or manage the back-office operations that support those sites. The Debtor said it fears that the lack of line workers could reduce the price it may receive for its assets through a proposed competitive bidding. Hence, the Debtor wants the Court to maintain the severance plan through the last day on which the purchaser of the assets is permitted to determine which line workers to retain. IdleAire made it clear that it does not want to pay line workers additional retention-based compensation, but only to ensure them that loyal workers will get what has been promised upon hiring. The Debtor revealed that payments on account of the severance plan will not exceed $300,000. Management Employees Incentive Plan In addition to the severance plan for line workers, the Debtor sought the Court's authority to adopt a performance-based management sale incentive program conditioned upon the successful sale closing of the Debtor's business. The incentive plan will cover 22 principal employees involved in the proposed sale. The Debtor said it believes management employees require additional incentives to close the sale, given the hard work and dedication they have displayed regarding the sale. Pursuant to the proposed incentive plan, upon the earlier of: (i) the involuntary termination of the management employee, other than for cause, and (ii) the closing of a going concern sale of the Debtor's business, each of the management employee who fulfilled his or her obligations through the closing or termination will be entitled to get a one-time incentive payment of 20% of annual salary. Total payments under the incentive plan will not exceed $505,000 in the aggregate, which is about 5% of the estimated cash purchase price from the proposed sale. Payments under the incentive plan will be in lieu of other performance bonus, severance pay, or retention compensation for management employees. Plan to Sell Assets The Debtor acknowledged that it lacks sufficient funding to continue operations beyond a short period of time. As a result, the Debtor said that it has been actively marketing its business. The Debtor presently intends to sell its assets pursuant to Section 363 of the Bankruptcy Code for $10 million, plus assumption of debts. As reported by the Troubled Company Reporter on May 21, 2008, IdleAire might possibly have identified a buyer for its assets before it filed for bankruptcy. When the Debtor filed for bankruptcy, it reserved a corporate name "IdleAire Acquisition LLC" with the Delaware Division of Corporations that meant buyers may have been set to buy the company. IdleAire officials emphasized that the company has filed for chapter 11 reorganization, not chapter 7 liquidation, noting there was nothing in the company's petition to the court indicating any plans for cessation of services. About IdleAire Technologies Knoxville, Tennessee-based IdleAire Technologies Corp. -- http://www.idleaire.com/-- is a privately held corporation founded in June 2000. It manufactures and services an advanced travel center electrification system providing heating, ventilation & air conditioning, Internet and other services to truck drivers parked at rest stops. The company delivers its services to long-haul drivers through its patented Advanced Travel Center Electrification(R) system, or ATE system, comprised of an in-cab service module connected to an external heating, ventilation and air conditioning unit, or HVAC unit, mounted on a truss structure above parking spaces. IdleAire has 131 locations in 34 states and employs about 1,200 people. The company filed chapter 11 petition on May 12, 2008 (Bankr. D. Del. Case No. 08-10960). Judge Kevin Gross presides over the case. Elihu Ezekiel Allinson, III, Esq., William A. Hazeltine, Esq., and William David Sullivan, Esq., at Sullivan Hazeltine Allinson, LLC represent the Debtor in its restructuring efforts. As of Dec. 31, 2007, the Debtor had total assets of $210,879,000 and total debts of $303,616,000. INTERSTATE BAKERIES: Wants Small Sale Cap Increased by $5 Million ----------------------------------------------------------------- Interstate Bakeries Corp. and its debtor-affiliates seek authority from the U.S. Bankruptcy Court for the Western District of Missouri to increase the De Minimis Asset Sale Cap to an aggregate amount of $15,000,000 in net proceeds. The Court has authorized the Debtors to sell their de minimis assets in an aggregate amount not to exceed $10 million. The Debtors have identified additional de minimis assets, including multiple parcels of real property, which they wish to sell pursuant to the Court-approved De Minimis Asset Sale Procedures. However, the Debtors discovered that the De Minimis Asset Sale Cap is not enough to consummate the sales. J. Eric Ivester, Esq., at Skadden Arps Slate Meagher & Flom LLP, in Chicago, Illinois, relates that as of May 15, 2008, the Debtors have sold their De Minimis Assets in an aggregate amount exceeding $9 million in net proceeds. According to Mr. Ivester, increasing the De Minimis Asset Sale will allow the Debtors to more efficiently and economically dispose of certain unnecessary, underperforming or non-core De Minimis Assets. Consequently, a Cap increase is the most cost-effective means to maximize the value realized for the Assets, reduce expenses, and increase the Debtors' liquidity, he asserts. The De Minimis Assets are subject to the liens of the Debtors' debtor-in-possession lenders, pursuant to the terms of the Court- approved Second Amended and Restated Revolving Credit Agreement, dated as of May 9, 2008. Accordingly, all proceeds of De Minimis Asset Sales would be utilized consistent with the provisions of the Second Amended DIP Credit Agreement, Mr. Ivester notes. The Debtors' request is without prejudice to their rights to request authority for an increase in limit should circumstances later warrant. Headquartered in Kansas City, Missouri, Interstate Bakeries Corporation is a wholesale baker and distributor of fresh-baked bread and sweet goods, under various national brand names, including Wonder(R), Baker's Inn(R), Merita(R), Hostess(R) and Drake's(R). Currently, IBC employs more than 25,000 people and operates 45 bakeries, as well as approximately 800 distribution centers and approximately 800 bakery outlets throughout the country. The company and eight of its subsidiaries and affiliates filed for chapter 11 protection on Sept. 22, 2004 (Bankr. W.D. Mo. Case No. 04 45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,626,425,000 in total assets and $1,321,713,000 (excluding the $100,000,000 issue of 6% senior subordinated convertible notes due Aug. 15, 2014) in total debts. The Debtors' filed their Chapter 11 Plan and Disclosure Statement on Nov. 5, 2007. Their exclusive period to file a chapter 11 plan expired on November 8. On Jan. 25, 2008, the Debtors filed their First Amended Plan and Disclosure Statement. On Jan. 30, 2008, the Debtors received Court approval of the First Amended Disclosure Statement. IBC confirmed that it has not received any qualifying alternative proposals for funding its plan of reorganization in accordance with the Court-approved alternative proposal procedures. As a result, no auction was held on Jan. 22, 2008, as would have been required under those procedures. The deadline for submission of alternative proposals was Jan. 15, 2008. (Interstate Bakeries Bankruptcy News, Issue No. 98; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). IMPATH INC: To Distribute $29 Million to Class A Holders on June 3 ------------------------------------------------------------------ The post dissolution trustee of Impath Inc. and subsidiaries received $22,694,896 in federal income tax refunds and $5,492,544 in accrued interest from the United States Internal Revenue Service, Bankruptcy Data reports. The tax refunds covers the years from 1999 through 2005, the report adds. Holders of Impath Bankruptcy Liquidating Trust Class A Beneficial Interests will receive a total of $29,054,154.57, or equal to $1.73 per unit, Bankruptcy Data relates. Holders of the class A units as of May 23, 2008, are entitled to the distribution set for June 3, 2008, according to the report. The trustee expects another distribution to holders following the full collection of the state and local income tax refunds, Bankruptcy Data says. As reported in the Troubled Company Reporter on Jan. 28, 2008, the trustee disclosed that the Internal Revenue Service Office in New York City had recommended approval to the Joint Committee On Taxation, the Committee of the Congress that must approve all refunds over $2 million of a refund to Impath Inc. and subsidiaries covering the calendar years 1995 through 2005 in the amount of $22,650,486, plus interest. About Impath Inc. Headquartered in New York, New York, Impath Inc., together with its subsidiaries, is in the business of improving outcomes for cancer patients by providing patient-specific diagnostic and prognostic services to pathologists and oncologists, providing products and services to biotechnology and pharmaceutical companies, and licensing software to hospitals, laboratories, and academic medical centers. The company and its affiliates filed for chapter 11 protection on Sept. 28, 2003 (Bankr. S.D.N.Y. Case No. 03-16113). George A. Davis, Esq., at Weil, Gotshal & Manges LLP represents the Debtors in their restructuring efforts. When the company filed for protection from its creditors, it listed $192,883,742 in total assets and $127,335,423 in total debts. On March 22, 2005, the Court confirmed the Debtors' Third Amended Joint Plan of Liquidation. JOANNE'S BED: Closes Sale of Stores to Healthy Back --------------------------------------------------- The Healthy Back Store has completed its acquisition of JoAnne's Bed & Back Stores Inc.'s stores, Jeff Clabaugh of the Washington Business Journal reports. As reported in the Troubled Company Reporter on April 11, 2008, the Debtor entered into a deal to sell substantially all of its assets to Healthy Back, subject to better offers. In order to effect that transaction, the Debtor filed for Chapter 11 bankruptcy protection on April 2 with the U.S. Bankruptcy Court for the District of Maryland. The Debtor related that its collapse was due to "a dramatic drop in sales levels," which was attributed to the softening economy, weak consumer confidence, the housing slowdown and changing buying habits. Pursuant to the acquisition, Healthy Back will: -- operate nine of JoAnne's Bed and Back retail locations; -- close four JoAnne's stores in Washington, D.C.; and -- close three other undisclosed retail locations. Healthy Back promised to take in as many employees of the Debtor as it can, according to the Washington Journal. Based in Beltsville, Maryland, JoAnne's Bed & Back Stores Inc. sells specialty mattresses, adjustable beds and massage chairs. It operated 18 stores in Maryland, Virginia, and Washington. The company filed for Chapter 11 protection on April 2, 2008 (Bankr. D. Md. Case No. 08-14606). Michael J. Lichtenstein, Esq., at Shulman Rogers Gandal Pordy & Ecker P.A., represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed estimated assets and debts of $1 million to $10 million. JETBLUE AIRWAYS: JPMorgan Analyst Expects Airline Bankruptcies -------------------------------------------------------------- Christopher Hinton at MarketWatch reports that Jamie Baker, an analyst at J.P. Morgan, on Monday said U.S. airline industry stands to post a collective $7,200,000,000 in operating losses in 2008. The results would be wider than an initial forecast of $4,600,000,000 loss, the analyst said. According to MarketWatch, Mr. Baker, in his research note, said though investors, management and analysts may talk about airlines acting collectively to reduce capacity to firm up revenue, the reality is that they are more likely to dig in and try to outlast each other. MarketWatch relates the JPMorgan analyst noted that capacity cuts have falled far short of what executives have said are necessary. Mr. Baker, MarketWatch says, indicated that another round of airline bankruptcy -- even among the legacy carriers -- is a question of when rather than if. According to the report, Mr. Baker said U.S. Airways has the highest risk of bankruptcy, followed by Northwest Airlines, United Air Lines' parent UAL Corp., AMR Corp., JetBlue, Continental Airlines, AirTran, Delta Air Lines, Alaska Air Lines and Southwest Airlines. Mr. Baker, the report adds, said credit card companies could pose more significant risk to airlines than debt. He explained the credit card companies could impose unilateral holdbacks, which will toll on a carrier's liquidity and cash balances. In the Red Except for Southwest, the major U.S. Airlines posted net losses for the period ended March 31, 2008: Net Income for Period Ended ----------------------------------- March 31, 2008 March 31, 2007 -------------- -------------- US Airways ($236,000,000) $66,000,000 Northwest ($4,139,000,000) ($292,000,000) UAL ($537,000,000) ($152,000,000) AMR ($328,000,000) $81,000,000 JetBlue ($8,000,000) ($22,000,000) Continental ($80,000,000) $22,000,000 AirTran ($34,813,000) $2,158,000 Delta ($6,261,000,000) $155,000,000 Alaska Air ($24,000,000) ($3,700,000) Southwest $34,000,000 $93,000,000 Balance Sheet at March 31, 2008 ----------------------------------- Total Assets Total Debts ------------ ----------- US Airways $8,013,000,000 $6,435,000,000 Northwest $21,032,000,000 $17,746,000,000 UAL $23,813,000,000 $21,647,000,000 AMR $28,766,000,000 $26,277,000,000 JetBlue $6,050,000,000 $4,721,000,000 Continental $12,542,000,000 $11,071,000,000 AirTran $2,198,009,000 $1,783,470,000 Delta $26,755,000,000 $22,804,000,000 Alaska Air $4,379,800,000 $3,520,600,000 Southwest $18,031,000,000 $10,846,000,000 On April 14, Northwest announced an agreement to merge with Delta. United and US Airways are also in talks for a possible merger. Continental was initially eyed as a top merger partner for United. Small and medium-sized carriers have tumbled one after the other into bankruptcy. Aloha Airlines commenced bankruptcy proceedings in Hawaii in March and later ceased operations. ATA Airlines Inc. ceased operations and filed for chapter 11 protection on April 2, and Skybus Airlines Inc. tumbled into bankruptcy on April 5. Frontier Airlines went belly up and filed for chapter 11 on April 14. EOS Airlines filed a chapter 11 petition on April 26. About JetBlue Airways Based in Forest Hills, New York, JetBlue Airways Corporation (Nasdaq: JBLU) -- http://www.jetblue.com/-- is a passenger airline that provides customer service primarily on point-to-point routes. As of Dec. 31, 2007, the company served 53 destinations in 21 states, Puerto Rico, Mexico and the Caribbean. At Dec. 31, 2007, the company's consolidated balance sheeet showed $5.598 billion in total assets, $4.562 billion in total liabilities, and $1.036 billion in total stockholders' equity. * * * As reported in the Troubled Company Reporter on May 21, 2008, Moody's Investors Service downgraded the corporate family rating of JetBlue Airways Corporation to Caa1 from B3, well as the ratings of its outstanding corporate debt instruments and selected classes of JetBlue's Enhanced Equipment Trust Certificates. The rating outlook is negative. JETBLUE AIRWAYS: Moody's Junks CF Rating on Weak Fin'l Performance ------------------------------------------------------------------ Moody's Investors Service downgraded the Corporate Family Rating of JetBlue Airways Corporation to Caa1 from B3, as well as the ratings of its outstanding corporate debt instruments and selected classes of JetBlue's Enhanced Equipment Trust Certificates. The rating outlook is negative. The rating downgrade reflect the weakening financial performance of JetBlue, which despite its historic low cost business model has reported successive quarterly net losses and deteriorating financial metrics. The prospects for weakening operating profits, driven in part by elevated fuel costs, are likely to erode the company's liquidity profile at a time when JetBlue faces sizeable calls on cash for scheduled aircraft deliveries as well as upcoming debt maturities. Although the company's efforts to slow capacity growth, are viewed favorably in the current challenging operating environment, profitability has declined and the company recorded a net loss for the 4th quarter of 2007 and the 1st quarter of 2008. The company has a fuel hedging program that is more extensive than that of some other airlines, yet profitability has still been adversely impacted by high fuel costs. Moody's notes that JetBlue's unit costs, which have historically been meaningfully lower than other airlines, have risen. This in part relates to the company's slower growth rate, the increased complexity of operating a larger network with multiple aircraft types, and the loss of maintenance holidays on some of JetBlue's older A320 aircraft. JetBlue has several planned initiatives to increase ancillary revenues to improve performance, including incremental fees for preferred seating assignments and baggage check fees. The company is also constraining further capacity growth and has made plans to sell surplus aircraft. While these actions may be helpful, the company's ability to restore adequate levels of profitability and cash flow generation will be challenged in the current high fuel cost environment. Debt to EBITDA of 7.5x and EBIT to interest expense of 1.1x for the 12 months to March 31, 2008 (both using Moody's standard adjustments) weakened from the prior year and in light of potential for negative free cash flow are no longer consistent with a rating in the B range. JetBlue's liquidity is currently adequate, but in light of cash needs for scheduled aircraft deliveries and debt maturities could weaken over the course of the coming year. The company received an infusion of approximately $300 million earlier in 2008 through an equity investment made by Deutsche Lufthansa AG in the company. However, the company has a portion of its funds (approximately $313 million at March 31, 2008) invested in auction rate securities which it may not be able to readily monetize in the current credit market environment. Excluding these securities, the company's available liquidity is approximately $840 million. The company faces approximately $620 million in planned capital expenditures, including $150 million in non-aircraft spending, for the remainder of 2008. JetBlue has received committed financing for all 2008 aircraft deliveries. It also faces approximately $430 million in near term debt requirements. The company does not have a committed bank credit facility available for cash drawings, and thus is not subject to compliance with any specific financial covenants. However, the company's credit card processing banks have the right to increase the credit card holdback under certain circumstances, which would increase JetBlue's cash requirements. A material portion of JetBlue's assets are encumbered. The rating actions on the EETCs consider the rating downgrade of the underlying Corporate Family rating of JetBlue, the continuing availability of liquidity facilities to meet interest payments for 18 months in the event of a JetBlue default, and the asset values of specific aircraft which secure the various EETCs. The junior classes of any EETC are generally more vulnerable to uncertainty in recovery as they hold a first loss position. Yet because of continued favorable valuation trends for A320 aircraft, Moody's has not changed its view of relative recovery for JetBlue's EETCs and the principal driver of the EETC rating changes is the downgrade of JetBlue's corporate family rating. The ratings on the senior tranches of the Series 2004-1 and 2004-2 Pass Through Certificates reflect that they are supported by policies issued by a Aaa rated monoline insurance company. The negative outlook reflects the continued business pressures facing JetBlue, primarily due to the impact of higher fuel costs and a weak domestic demand environment. Despite continued strong yield performance, competitive pressures are likely to challenge JetBlue's efforts to implement fare increases and fuel surcharges to offset the increase in fuel costs. Consequently, unless fuel costs decline, earnings are likely to deteriorate meaningfully and the company would likely sustain negative cash flow from operations that would erode its liquidity. JetBlue's rating could be lowered further if it is unable to stem operating losses, if cash and short term investments falls below $500 million, the company is unable to generate positive cash flow from operations, or if the risk of credit card processors imposing meaningful incremental holdback requirements increases. JetBlue's rating outlook could be stabilized with sustained increases to revenues or reduced non-fuel costs, or if a material decline in fuel costs increases cash from operations and requires less meaningful draws on cash reserves or incremental borrowing to satisfy maturing debt and capital spending requirements. Downgrades: Issuer: JetBlue Airways Corp. -- Probability of Default Rating, Downgraded to Caa1 from B3 -- Corporate Family Rating, Downgraded to Caa1 from B3 -- Senior Secured Enhanced Equipment Trust, Downgraded to B2 from B1 -- Senior Unsecured Conv./Exch. Bond/Debenture, Downgraded to Caa3 from Caa2 Issuer: New York City Industrial Development Agcy, NY -- Senior Unsecured Revenue Bonds, Downgraded to Caa3 from Caa2 JetBlue Airways Corp., based in Forest Hills, New York, operates a low-cost, point-to-point airline from a hub in New York. JOHN TOLFREE: S&P Lowers Rating to BB from BBB- on $12.8MM Bonds ---------------------------------------------------------------- Standard & Poor's Rating Services lowered its standard long-term rating to 'BB' from 'BBB-' on the $12.8 million series 1999 bonds issued by John Tolfree Health System Corp., Michigan for West Branch Regional Medical Center. The downgrade reflects increasingly weak operating results that are well below historical levels, during a period of positive general credit trends. Additional factors contributing to the downgrade are persistent operating losses that have worsened through fiscal 2008 contrary to previously stated goals to reach the breakeven mark, producing thin coverage of 1.1x; decreasing liquidity, though it remains adequate for the lower rating with cash on hand of 77 days through March 31, 2008, and possibly slightly weaker upon finalization of the fiscal 2008 audit, as the current calculation for the fiscal 2008 period does not include bad debts expense; and flat admissions and weak revenue growth. "The stable outlook reflects the trend of continued operating losses despite earlier expectations for operational improvement based on physician recruitment and cost controls," said Standard & Poor's credit analyst Charlene Butterfield. "We expect that management will increase revenue through volume growth and improved reimbursement, while curbing costs to minimize operating losses and we expect that liquidity will remain at or near current levels upon greater operational cash flows," said Charlene Butterfield. West Branch has some flexibility to resolve its operating pressures while maintaining the current 'BB' rating and stable outlook. However, should the balance sheet deteriorate further and operating losses increase within the next two years, a negative outlook or rating change may be warranted. Factors precluding a lower rating at this time are a sound market position as sole community provider, characterized by market share of 53% in fiscal 2008; increasing outpatient volumes, particularly emergency room visits; and recently implemented cost controls that management expects to help diminish operating losses in fiscal 2009. Additional credit concerns remain regarding the small admissions base, an ongoing need for additional medical staff, and a concentrated payer mix, with roughly 76% of revenue derived from governmental payers, limiting the rate of revenue growth. KANSAS CITY SOUTHERN: Moody's Lifts Ratings on Good Profitability ----------------------------------------------------------------- Moody's Investors Service raised the corporate family ratings of Kansas City Southern and Kansas City Southern de Mexico S.A. de C.V., formerly TFM, S.A. de C.V., to B1 from B2. At the same time, Moody's has raised the ratings for KCS' subsidiary Kansas City Southern Railroad's senior notes to B2 from B3, and has raised the ratings of KCSM's senior notes to B1 from B2. The ratings of KCSR's senior secured credit facilities have been affirmed at Ba2. The rating outlook remains stable for all issuers. "KCS' debt ratings were upgraded primarily in recognition of the company's demonstrated ability to improve profitability and service metrics, while managing strong sales growth", according to David Berge, Vice President at Moody's Investors Service. Moody's expects that KCS' domestic and Mexican operations will continue to grow and improve over the near term, allowing credit metrics to improve to levels appropriate for B1 rated companies through 2008, although debt will likely increase coincidental with a heavy equipment purchase schedule. KCSM and KCSR's operating performance have improved substantially over recent years, as company management has undertaken successful programs to upgrade locomotives and improve the railway networks' fluidity. As a result, the company has experienced impressive improvement in operating ratios (profitability) while growing its revenue base, resulting in lower leverage and higher interest coverage despite increased debt levels. However, KSC operates under considerably higher financial leverage when compared to other railroad competitors, with credit metrics of EBIT to Interest and Funds From Operations to debt that remain consistent with a speculative grade rating. KCSM is highly sensitive to conditions in the Mexican economy and to Mexican regulation. Nonetheless, the company operates a geographically attractive concession in northeast Mexico with good growth prospects, and has shown strong recent improvement in operating performance. KCSM has significant ongoing capital spending requirements, particularly for locomotives and line expansion, which will likely increase debt and slow further improvements in credit metrics. KCSR's north to south oriented railroad in the central US, provides a good connections to Mexico and an alternative to other large railroads to avoid the highly congested rail yards. Neither KCSR nor KCSM guarantees the other's debt, nor are the obligations of KCSR and KCSM cross defaulted to each other. The Ba2 rating of KCSR's senior secured credit facilities, two notches above the corporate family rating, reflects the substantial level of unsecured debt and other liabilities that are junior in priority to the secured class of debt, per Moody's Loss Given Default methodology. Recently, the proportion of senior secured debt has grown in the company's debt structure, mostly relating to increased equipment financing, and Moody's believes this trend will continue gradually over the near term. This implies a moderation of expected recovery that this class of debt might achieve in the event of default. As such, the senior secured debt no longer merits a three notch ratings lift per the LGD methodology, and KCSR's senior secured facilities were not upgraded along with the rest of the debt in the group. The ratings on KCSR's senior unsecured notes were raised to B2 from B3, still one notch below the corporate family rating, reflecting the junior priority of this class of debt to approximately $437 million of senior secured debt obligations. KCSM's senior notes have been upgraded to B1 from B2, the same as the corporate family rating, as the senior unsecured obligations of KCSM comprise a substantial majority of that company's debt structure. The stable outlook reflects Moody's expectations that the company's sales growth will remain strong through 2008, despite weakness in the U.S. economy in general, and that the strong pricing environment will hold up through this period so that yields continue to improve. Moody's expects the company's operating ratio to remain at or below 80% for the near term. Also, although debt is expected to increase over this period, credit metrics are expected to improve somewhat as the result of improved operating profitability and growth. The rating could be raised following consistently strong free cash flow at both KCSR and KCSM, with a sustainable Operating Ratio below 80% and debt to EBITDA below 3.8 times at KCSR and KCSM. The ratings could be pressured down following any unexpected shock to the rail system in either the U.S. or in Mexico, or loss of fluidity determined by a significant decline in velocity to below 20 mph. Deterioration of credit metrics to levels such as debt to EBITDA of greater than 5 times or EBIT to interest coverage of less than 1.8 times would also warrant a lower rating. Upgrades: Issuer: Kansas City Southern -- Probability of Default Rating, Upgraded to B1 from B2 -- Corporate Family Rating, Upgraded to B1 from B2 -- Senior Unsecured Shelf, Upgraded to (P)B2 (LGD5, 73%) from (P)B3 -- Senior Subordinated Shelf, Upgraded to (P)B3 (LGD6, 97%) from (P)Caa1 -- Preferred Stock Preferred Stock, Upgraded to B3 (LGD6, 99%) from Caa1 Issuer: Kansas City Southern Railway Company (The) -- Senior Unsecured Regular Bond/Debenture, Upgraded to B2 (LGD5, 73%) from B3 -- Senior Unsecured Shelf, Upgraded to (P)B2 (LGD5, 73%) from (P)B3 -- Senior Subordinated Shelf, Upgraded to (P)B3 (LGD6, 97%) from (P)Caa1 Issuer: Kansas City Southern de Mexico, S.A. de C.V. -- Corporate Family Rating, Upgraded to B1 from B2 -- Senior Unsecured Regular Bond/Debenture, Upgraded to B1 from B2 Affirmed: Issuer: Kansas City Southern Railway Company (The) -- Senior Secured Bank Credit Facility, at Ba2 (LGD2, 23%) Kansas City Southern de Mexico, S.A. de C.V. owns the concession to operate Mexico's northeast railway. The Kansas City Southern Railway Company operates a Class I railroad in the south central U.S. Both Kansas City Southern de Mexico, S.A. de C.V. and The Kansas City Southern Railway are owned by Kansas City Southern. KING PHARMACEUTICALS: Moody's Affirms Ba3 Ratings ------------------------------------------------- Moody's Investors Service assigned a speculative grade liquidity rating of SGL-1 to King Pharmaceuticals, Inc. At the same time, Moody's affirmed King's existing ratings including the Ba3 Corporate Family Rating. The outlook for King's ratings remains stable. The SGL-1 rating reflects King's strong liquidity profile, characterized by good cash balances, strong internal cash flow generation, access to a $475 million 5-year revolver, which was undrawn at March 31, 2008, no short-term debt maturities, and ample cushion under financial covenants. These strengths are partially offset by the company's investment in debt securities, where auction rate failures have temporarily impaired value and have reduced the liquidity associated with these funds. King's Ba3 rating is primarily driven by slowing revenue growth rates, increased competitive threats, high product concentration risk, and relatively high exposure to patent challenges, partially offset by the company's solid pipeline of products, strong balance sheet metrics, and consistent internal cash flow generation. The Ba3 rating is also supported by the company's very strong liquidity profile and a litigation profile consistent with the company's rating. The rating outlook is currently stable. Moody's does not foresee upward rating pressure in the near-term due to the uncertainty following the recent loss of Altace exclusivity. Over the longer- term, the approval of King's pipeline products or the acquisition of new late-stage products could place upward pressure on the ratings. Conversely, King's ratings could face downward pressure if the company pursues any large, debt financed initiatives that deteriorate credit metrics materially. Under such a scenario, Moody's would consider benefits of the acquisition including diversity and cost synergies, offset by the effect on financial leverage. Ratings assigned: * Speculative grade liquidity rating of SGL-1 Ratings affirmed: * Ba3 Corporate Family Rating * Ba3 Probability of Default Rating * Ba3 (LGD4, 52%) senior secured revolving credit facility of $475 million due 2012 Moody's does not rate King's $400 million senior unsecured convertible notes due 2026. King Pharmaceuticals, Inc. (King), headquartered in Bristol, Tennessee, is a vertically integrated pharmaceutical company that develops, manufactures, markets and sells branded pharmaceutical products. The company targets specialty-driven pharmaceutical markets, with a focus on neuroscience, hospital and acute care medicines. During 2007, King reported total revenues of approximately $2.1 billion. MADILL EQUIPMENT: May Use Cash Collateral; Mulls Sale of Assets --------------------------------------------------------------- The Hon. Paul Snyder of the U.S. Bankruptcy Court for the District of Washington gave Madill Equipment Canada permission to use senior lenders' cash collateral under chapter 15 bankruptcy, Terry Brennan of The Deal reports. The cash collateral secures the Debtor's C$48.7 million obligation to senior creditors, The Deal says, citing court filings. According to the report, creditors General Electric Capital Corp., GE Canada Finance Holding Co. and Bank of Montreal consented to the Debtor's use of their cash collateral. The Debtor has been in default since November 2006. Debtor's counsel, Ragan L. Powers, Esq., at Davis Wright Tremaine LLP, said that his client wants to dispose of assets under chapter 15, The Deal relates. The assets to be sold include inventory amounting to $25.2 million -- $18.5 million in Canada and $6.7 million in the U.S., the report adds. A court document disclosed that the Debtor has "no reasonable prospect" of repaying its creditors and is missing payments to trade creditors, The Deal reveals. About Madill Equipment Manufactures Madill Equipment Manufactures -- http://www.madillequipment.com/ -- sells, and services logging equipment such as yarders, feller bunchers, and loaders. Madill produces heavy equipment exclusively for the logging industry. The company's forestry equipment has been synonymous with rugged reliability in the Pacific Northwest's coastal and interior logging industry since the early 1950's. The company's technologically advanced line of yarders, loaders, feller bunchers and harvester/processors, are engineered and manufactured at its 100,000 square foot facility in Nanaimo, British Columbia, and its 38,000 square foot plant in Kalama, Washington. Madill uses outside vendors to sell its goods in logging regions in New Zealand, Australia, Russia and Saskatchewan and Ontario. RSM Richter Inc. was appointed as receiver by the Supreme Court of British Columbia on April 1, 2008. On the same date, on behalf of the Debtor and seven-affiliates, RSM Richter filed chapter 15 petition with the U.S. Bankruptcy Court for the Western District of Washington. Prior to the bankruptcy filing, the Debtors were in default on their senior and junior debts. Ragan Powers, Esq., at David Wright Tremaine LLP represents the Debtor in the U.S. Bankruptcy Court. The Debtor listed assets of $10 million to $50 million and debts of $100 million to $500 million when it filed for chapter 15. MAJESTIC STAR: March 31 Balance Sheet Upside-Down by $175 Million ----------------------------------------------------------------- Majestic Star Casino LLC's consolidated balance sheet at March 31, 2008, showed $502.2 million in total assets and $677.3 million in total liabilities, resulting in a $175.1 million total members' deficit. At March 31, 2008, the company's consolidated balance sheet also showed strained liquidity with $42.1 million in total current assets available to pay $65.5 million in total current liabilities. The company reported a net loss of $7.4 million for the first quarter ended March 31, 2008, compared with a net loss of $4.7 million in the same period last year. For 2008, consolidated net operating revenues were $89.0 million compared to $91.5 million for 2007, a decrease of $2.5 million, or 2.8%. For 2008 compared to 2007, consolidated casino revenues, which comprised 88.6% of consolidated gross revenues, decreased $5.8 million, or 6.1%, to $89.4 million. Promotional allowances were $11.8 million compared to $13.9 million, a decrease of $2.1 million, or 14.9%. Operating expenses were unchanged at $81.1 million. Operating income was $7.9 million, a decrease of $2.5 million, or 24.4%, compared to $10.4 million for the prior year. Interest expense, net of interest income was $15.2 million compared to $15.1 million in 2007. Liquidity and Capital Resources The company has significant debt outstanding at March 31, 2008, including $52.3 million drawn on the company's Senior Secured Credit Facility ($27.7 million available to draw), $300.0 million of Senior Secured Notes, $200.0 million of Senior Notes and $200,000 of capital leases and other debt. The company had unrestricted cash and cash equivalents of $28.5 million at March 31, 2008. In the first quarter of 2008, the company spent $6.5 million on capital expenditures primarily continuing the Fitzgeralds Black Hawk expansion. Full-text copies of the company's consolidated financial statements for the quarter ended March 31, 2008, are available for free at http://researcharchives.com/t/s?2c58 About Majestic Star Headquartered in Las Vegas, Nevada, Majestic Star Casino LLC -- http://www.majesticstar.com/-- and its separate and distinct subsidiary limited liability companies and one corporation own and operate two riverboat gaming facilities and a dockside pavilion known as the Buffington Harbor complex located in Gary, Ind., and two Fitzgeralds brand casino-hotels located in Tunica County, Miss. and Black Hawk, Colo. (casino only). * * * As reported in the Troubled Company Reporter on May 1, 2008, Moody's Investors Service placed the ratings of Majestic Star Casino LLC on review for possible downgrade. Ratings placed on review for possible downgrade include Majestic Star Casino LLC's $300 million senior secured notes due 2010 currently rated at 'B2', and its $200 million senior secured notes due 2011 currently rated at 'Caa1'. MARCO CANTU: Case Summary & Two Largest Unsecured Creditors ----------------------------------------------------------- Debtors: Marco A. Cantu and Roxanne Cantu 3106 Lakeshore Drive Edinburg, TX 78539 Bankruptcy Case No.: 08-70260 Type of Business: The Debtors own Mar-Rox, Inc., which owns and operates a motel. Mar-Rox filed for chapter 11 on May 6, 2008 (Bankr. S.D. Tex. Case No. 08-70261)(J. Schmidt). Chapter 11 Petition Date: May 6, 2008 Court: Southern District of Texas (McAllen) Judge: Richard S. Schmidt Debtors' Counsel: Oscar Luis Cantu, Jr., Esq. Law Offices of Oscar Cantu 3740 Colony Drive, Suite 208 San Antonio, TX 78230 Tel: (210) 507-3573 Fax: (210) 447-2545 Estimated Assets: $10 million to $50 million Estimated Debts: $10 million to $50 million Debtor's Two Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Guerra & Moore Civil Litigation $161,000 4201 N. McColl McAllen, TX 78504 Romero, Gonzalez & Benavides Civil Litigation $96,000 612 Nolana 520 McAllen, TX 78504 MARK BARROW: Case Summary & Five Largest Unsecured Creditors ------------------------------------------------------------ Debtors: Mark Stevens Barrow and Jana Suzanne Barrow P.O. Box 63 Pebble Beach, CA 93953 Bankruptcy Case No.: 08-52378 Chapter 11 Petition Date: May 9, 2008 Court: Northern District of California (San Jose) Judge: Roger L. Efremsky Debtor's Counsel: Scott J. Sagaria, Esq. Sagaria Law, PC 333 W San Carlos Street, #1625 San Jose, CA 95110 Tel: (408) 279-2288 Fax: (408) 279-2299 Estimated Assets: $1 million to $10 million Estimated Debts: $1 million to $10 million Debtor's Five Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Texas Capital Bank $124,000 2100 McKinney Dallas, TX 75201 Central Meadows Partnership $72,500 Attn: Bob Brooks 2424 Bee's Cave Road Austin, TX 78705 American Express $40,000 World Financial Center 2005 Vesey Street New York, NY 10285 PG&E $2,300 One Market, Spears Tower San Francisco, CA 94105 Cal-Am Water $500 9610 Blue Larkspun Lane Monterey, CA 93940 MERITAGE HOMES: Stockholders Adopt Changes to 2006 Incentive Plan ----------------------------------------------------------------- At the annual meeting of stockholders of Meritage Homes Corporation, the company's stockholders adopted certain proposed amendments to the company's 2006 Stock Incentive Plan. The amendments were approved by the company's Board of Directors on Jan. 16, 2008, subject to receipt of the approval of the company's stockholders. As a result of the amendments: * The number of shares of common stock reserved for issuance under the Plan was increased from 700,000 shares of common stock (excluding shares of common stock remaining available for grant that were rolled into the Plan from the company's former stock option plan) to 1,600,000 shares of common stock; and * The maximum number of shares of common stock with respect to one or more awards that can be granted to any one person was changed from an aggregate of 100,000 shares of common stock per year to 250,000 shares of common stock per year. A full-text copy of the Amendments to the 2006 Stock Incentive Plan is available for free at http://ResearchArchives.com/t/s?2c61 Additionally, the company's definitive proxy statement for the 2008 annual meeting of stockholders, which was filed with the Securities and Exchange Commission on April 1, 2008, inadvertently stated that during the 2007 fiscal year, director Gerald W. Haddock did not attend one Executive Compensation Committee meeting and that he was member of the Audit Committee instead of director Richard Burke, who did not attend two Audit Committee meetings. Mr. Haddock attended all the committee meetings of which he was a member. About Meritage Homes Headquartered in Scottsdale, Ariz., Meritage Homes Corporation (NYSE: MTH) -- http://www.meritagehomes.com/-- builds primarily single-family homes across the southern and western United States under the Meritage, Monterey and Legacy brands. Meritage has active communities in Houston, Dallas/Ft. Worth, Austin, San Antonio, Phoenix/Scottsdale, Tucson, Las Vegas, the California East Bay/Central Valley and Inland Empire, Denver and Orlando. Meritage Homes is the 12th largest homebuilder in 2006, Builder Magazine says. Meritage had 10,487 U.S. home closings generating $3,461,000 in revenues, according to data compiled by Builder. Meritage Homes has reported four consecutive quarterly net losses beginning in the second quarter ended June 30, 2007. At March 31, 2008, the company's consolidated balance sheet showed $1.6 billion in total assets, $894.8 million in total liabilities, and $686.8 million in total stockholders' equity. * * * As reported in the Troubled Company Reporter on May 21, 2008, in a post at Seeking Alpha, Scott Weitz, the Chief Market Strategist for Courtroom Traders, a Wall Street investment newsletter, identified homebuilders that he thinks are close to bankruptcy. Tarragon Corp., WCI Communities, Inc., and Meritage Homes Corp. are publicly traded residential builders in the U.S. that are "most likely to file Chapter 11 sooner rather than later," according to him. Mr. Weitz considered Meritage Homes as the farthest from the brink of Chapter 11 among the three. But he said, it is "in the fast lane headed in that direction." "They have no diversification of business activities outside of residential development, and the regions they operate in are among the hardest hit by the Real Estate fall out," according to him. As reported in the TCR on Jan. 21, 2008, Moody's lowered the ratings of Meritage Homes Corporation, including its corporate family rating to B1 from Ba3, and its senior unsecured notes rating to B1 from Ba3. The ratings outlook is negative. MESA AIR: Warns of Bankruptcy if Delta Air Terminates Contract -------------------------------------------------------------- Mesa Air Group warned that it may have to seek protection under applicable U.S. reorganization laws if Delta Air Lines, Inc. successfully terminated their Connection Agreement. In the past few weeks the Company announced the resolution of its litigation with Hawaiian Airlines, an agreement to return certain aircraft to Raytheon Aircraft Company, shareholder approval of its proposal to issue shares of common stock to 2023 noteholders who may elect to put their notes to the Company in June 2008, and agreements with certain noteholders to defer their put right until January 2009. Notwithstanding such corporate events, the Company believes that if the Company's litigation with Delta Air Lines, Inc. does not result in a favorable ruling for the Company, such outcome would have a material adverse effect on the Company's operations. Purported Termination of Material Contract April 1, 2008, the Company announced that on March 28, 2008, Delta had notified the Company of its intent to terminate the Delta Connection Agreement among Delta, the Company, and its wholly- owned subsidiary, Freedom Airlines, Inc., dated as of May 3, 2005. The Connection Agreement includes, among other arrangements, the Company's agreement to operate 34 model ERJ-145 regional jets leased by the Company utilizing Delta's name. In fiscal 2007, the Connection Agreement accounted for approximately 20% of the Company's 2007 total revenues. Delta seeks to terminate the Connection Agreement as a result of Freedom's alleged failure to maintain a specified completion rate with respect to its ERJ-145 Delta Connection flights during three months of the six-month period ended February 2008. The Company vehemently denies there is any basis for terminating the Connection Agreement and is vigorously defending its rights thereunder. On April 7, 2008, the Company filed a lawsuit against Delta alleging breach of the Connection Agreement and seeking specific performance by Delta of its obligations thereunder. On May 9, 2008, the Company filed a motion for a preliminary injunction in the U.S. District Court for the Northern District of Georgia against Delta to prevent its wrongful termination of the Delta Connection Agreement. The hearing for this matter is scheduled to commence on May 27 and end on May 29, 2008. The Company anticipates a ruling to be issued by the Court upon completion of such proceedings. If Delta is successful in terminating the Connection Agreement, the Company believes it will be unable to redeploy the 34 ERJ-145 aircraft in a timely manner, or at the lease rates the Company receives under the Connection Agreement in the event of any redeployment of such aircraft. In addition to losing approximately $20 million per month in revenue (or approximately $960 million over the next four years), the Company estimates that leasing costs, labor and other costs totaling approximately $250 to $300 million over the next four years would be incurred by the Company. As a result, the Company's cash flows from operations and its available working capital would be insufficient to meet these cash requirements, including its obligations under the Lease Agreements, which will result in defaults thereunder. In the absence of obtaining additional capital through equity or debt financings, asset sales, consensual restructuring of debt and lease terms and/or similar measures, the Company will be unable to remedy such defaults and will experience additional defaults in the future. Any such defaults would then trigger other defaults under other existing agreements, which would be material to the operational cash flows of the Company. The Lease Agreements are subject to termination in the event of default, and the Company's obligations under such leases may be accelerated in the event of a continuing default. In such event, the Company's financial condition would require that the Company seek protection under applicable U.S. reorganization laws in order to avoid or delay actions by its lessors, creditors and code-share partners, which could materially adversely affect the Company's ability to continue as a going concern. About Mesa Air Mesa currently operates 182 aircraft with over 1,000 daily system departures to 157 cities, 42 states, the District of Columbia, Canada, the Bahamas and Mexico. Mesa operates as Delta Connection, US Airways Express and United Express under contractual agreements with Delta Air Lines, US Airways and United Airlines, and independently as Mesa Airlines and go!. In June 2006 Mesa launched inter-island Hawaiian service as go! This operation links Honolulu to the neighbor island airports of Hilo, Kahului, Kona and Lihue. The Company, founded by Larry and Janie Risley in New Mexico in 1982, has approximately 5,000 employees and was awarded Regional Airline of the Year by Air Transport World magazine in 1992 and 2005. Mesa is a member of the Regional Airline Association and Regional Aviation Partners. On May 14, 2008, Air Midwest, Inc., a wholly owned subsidiary of Mesa Air, unveiled plans to discontinue all operations by June 30 including its current scheduled services, citing record-high fuel prices, insufficient demand and a difficult operating environment as the main factors in its decision. MIRANT CORP: Completes Share Repurchase Program With JP Morgan -------------------------------------------------------------- Mirant Corporation announced the completion of an accelerated share repurchase program with JP Morgan that it announced on November 9, 2007. The ASR program is a component of Mirant's plan to return $4.6 billion of cash to its stockholders. Under the terms of the ASR agreement, Mirant delivered $1.0 billion to JP Morgan in return for 26,659,557 shares, based upon the closing price of the common stock on November 9, 2007 of $37.51 per share. The number of shares purchased by Mirant under the ASR agreement was subject to an adjustment based on the weighted average price of Mirant common stock during the term of the agreement minus a set discount. JP Morgan will deliver an additional 682,387 shares of common stock to Mirant resulting in a total of 27,341,944 shares purchased under the ASR program for an average price of $36.57 per share. Mirant previously announced it will return a total of $4.6 billion to its stockholders. The program consists of the ASR program plus open market purchases of $3.6 billion. "We are pleased with the final result of the accelerated share repurchase program," said Edward R. Muller, chairman and chief executive officer. "We are continuing to return cash through open market purchases which we think are an efficient method for returning the remaining cash to stockholders, but as we go forward we will continue to evaluate the efficiencies of all methods for returning the cash to stockholders." About Mirant Headquartered in Atlanta, Georgia, Mirant Corporation (NYSE: MIR) -- http://www.mirant.com/-- is an energy company that produces and sells electricity in North America, the Caribbean, and the Philippines. Mirant's investments in the Caribbean include three integrated utilities and assets in Jamaica, Grand Bahama, Trinidad and Tobago and Curacao. Mirant owns or leases more than 18,000 megawatts of electric generating capacity globally. Mirant Corporation filed for chapter 11 protection on July 14, 2003 (Bankr. N.D. Tex. 03-46590), and emerged under the terms of a confirmed Second Amended Plan on Jan. 3, 2006. thomas E. Lauria, Esq., at White & Case LLP, represented the Debtors in their successful restructuring. When the Debtors filed for protection from their creditors, they listed US$20,574,000,000 in assets and US$11,401,000,000 in debts. The Debtors emerged from bankruptcy on Jan. 3, 2006. On March 7, 2007, the Court entered a final decree closing 46 Mirant cases. Mirant NY-Gen LLC, Mirant Bowline LLC, Mirant Lovett LLC, Mirant New York Inc., and Hudson Valley Gas Corporation, were not included. On Feb. 15, 2007, Mirant NY-Gen filed its Chapter 11 Plan of Reorganization and on Feb. 22 filed a Disclosure Statement explaining that Plan. The Court approved the adequacy of Mirant NY-Gen's Disclosure Statement on March 22, 2007, and confirmed the Amended Plan on May 7, 2007. Mirant NY-Gen emerged from chapter 11 on May 7, 2007. On July 13, 2007, Mirant Lovett filed its Chapter 11 Plan of Reorganization. The Court confirmed Mirant Lovett's Plan on Sept. 19, 2007. Mirant Lovett emerged from bankruptcy on Oct. 2, 2007. (Mirant Bankruptcy News, Issue No. 138; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) * * * As reported in the Troubled Company Reporter on Dec. 26, 2007, Moody's Investors Service upgraded the ratings of Mirant Corporation (Mirant: Corporate Family Rating to B1 from B2) and its subsidiaries Mirant Mid-Atlantic, LLC (MIRMA: pass through trust certificates to Ba1 from Ba2), Mirant North America, LLC (MNA: senior unsecured to B1 from B2 and senior secured to Ba2 from Ba3) and Mirant Americas Generation, LLC (MAG: senior unsecured to B3 from Caa1). Additionally, Mirant's Speculative Grade Liquidity (SGL) rating was revised to SGL-1 from SGL-2. The rating outlook is stable for Mirant, MNA, MAG, and MIRMA. MOHEGAN TRIBAL: Moody's Chips Corp. Family Rating to Ba2 from Ba1 ----------------------------------------------------------------- Moody's Investors Service lowered Mohegan Tribal Gaming Authority's ratings based on the expectation that the company will not meet the leverage target necessary to maintain its previous ratings. This rating action concludes the formal review process that was initiated on Feb. 11, 2008. A stable rating outlook was assigned. Ratings affected: -- Corporate family rating to Ba2 from Ba1 -- Probability of default rating to Ba2 from Ba1 -- Senior notes lowered to Ba1 (LGD-3, 33%) from Baa3 (LGD-3, 33%) -- Senior subordinated notes lowered to Ba3 (LGD-5, 82%) from Ba2 (LGD-5, 82%) MTGA's lower-than-expected operating results caused by a slowing economy and increased competition in the Northeast US, along with the continuation of a significant amount of debt-financed development activity, will make it unlikely that the company will be able to reduce debt/EBITDA to at or near 4.0 times over the foreseeable future. Debt/EBITDA is currently at about 4.7 times, and expected to peak at well above 6 times immediately prior to the completion of its Project Horizon expansion, the final phase of which is scheduled to open in the second half of 2010. MTGA's stable outlook continue to acknowledge the favorable demographics and growth prospects of its primary and secondary market area as well as the good risk reward profile of its current development activities. It also reflects our longer term expectation that the company will eventually reduce leverage to a level more appropriate for the current rating. MTGA owns and operates a gaming and entertainment complex located near Uncasville, Connecticut, known as Mohegan Sun, and a gaming and entertainment facility offering slot machines and harness racing in Plains Township, Pennsylvania, known as Mohegan Sun at Pocono Downs. MTGA reported net revenues of $1.6 billion for the latest 12-month period ended March 31, 2008. MORRIS PUBLISHING: Revenue Decline Cues S&P to Cut Rating to B- --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on Augusta, Georgia-based Morris Publishing Group LLC. S&P lowered the corporate credit rating to 'B-' from 'B', and the rating outlook is negative. "The downgrade reflects continued significant declines in revenue and EBITDA in Morris' newspaper business segment," said Standard & Poor's credit analyst Liz Fairbanks, "and the likelihood for further declines over the intermediate term." The downgrade also reflects a shortening in the time horizon for a potential violation of the bank facility's financial maintenance covenants. As a result of the pace of EBITDA declines in the first quarter, the covenant cushion at March 2008 has narrowed further from December 2007, and S&P are concerned that the company could face a potential covenant violation as early as the September 2008 quarter. The total leverage covenant is currently 6.5x and tightens one turn to 5.5x on Dec. 31, 2008. To comply with these covenants, the company will have to significantly improve EBITDA generation or find a mechanism to meaningfully reduce debt, possibly through the sale of assets. "We are concerned about the company's ability to reduce leverage in the near term," said Ms. Fairbanks, "given that industry trends indicate that advertising revenues have continued to fall in 2008 despite more favorable comparisons." MOTHERS WORK: S&P Cuts Rating to B- from B on Merchandising Issues ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its corporate credit rating on Philadelphia-based Mothers Work Inc. to 'B-' from 'B'. At the same time, S&P lowered the rating on the $90 million senior secured term loan to 'B' from 'B+'. The outlook is negative. "The downgrade reflects ongoing merchandising issues, increased competitive pressures, concerns regarding covenant compliance, and overall weak performance," said Standard & Poor's credit analyst David Kuntz. MOVIE GALLERY: Names C.J. Gabriel, Jr. as President and CEO ----------------------------------------------------------- Movie Gallery Inc., on May 20, 2008, appointed C.J. Gabriel, Jr., as President and Chief Executive Officer of the company. Mr. Gabriel will succeed Joe Malugen, chairman, president, chief Executive Officer and founder of Movie Gallery. "Gabe is a highly-experienced and proven executive with the right qualities -- inspirational leadership, strategic insight and operational discipline -- to lead Movie Gallery forward," said Mr. Malugen. "Gabe knows what it takes to run a successful retail business and understands what actions can be taken in today's rapidly evolving video rental industry. Movie Gallery is emerging from bankruptcy with a talented new leader committed to meeting the needs of our customers, employees and other stakeholders. I am confident in Gabe's ability to return the Company to profitability." "This is a tremendous opportunity and it will be an honor for me to lead this Company's outstanding partners and associates," said Mr. Gabriel. "I believe that the primary function of a leader is to inspire hope and enthusiasm throughout the organization and I look forward to working closely with the Company's talented managers and employees. I plan to foster a winning culture across our nearly 3,300 retail locations through a strong focus on achieving outstanding results. I am fully committed to enhancing store operations, improving operating metrics, further reducing debt and better integrating this great Company's brands and businesses. While there is a lot of work ahead, I am excited about all that can be achieved and energized by the tremendous potential I see at Movie Gallery." Mr. Gabriel brings to the company over 25 years of experience as a senior executive in the consumer products and retail industries. He most recently served as executive vice president of Marketing, Merchandising and Supply Chain Management at Albertsons, Inc., a $50 billion retailer. In this role, Mr. Gabriel defined the vision, mission and operating goals of Albertsons' "Demand Chain" functions and developed and implemented strategic and operational business plans that restructured the organization. The plans implemented under Mr. Gabriel's leadership were industry leading in scope and significance, helped Albertsons realize millions in operating savings and positioned Albertsons to compete effectively in its industry. Prior to Albertsons, Mr. Gabriel served as chairman, president and chief executive officer of Newgistics, Inc. He also served as CEO & Division President of Corporate Express. Previously, during his eleven year career at Pepsi Cola North America, he held a number of positions including National Director Selling & Delivery Operations at Pepsi Cola North America. At Pepsi, Mr. Gabriel accelerated revenue growth and reduced operating costs to enhance profitability. He began his career at American Hospital Supply Corporation. Mr. Gabriel served as a U.S. Army Officer in the 101st Airborne Division and was a distinguished honor graduate from U.S. Army Ranger Training. Mr. Gabriel earned his Bachelor of Sciences degree in Human Resource Management from the University of Scranton in Pennsylvania. About Movie Gallery Based in Dothan, Alabama, Movie Gallery Inc. -- http://www.moviegallery.com/-- is a home entertainment specialty retailer. The company owns and operates 4,600 retail stores that rent and sell DVDs, videocassettes and video games. The company and its debtor-affiliates filed for Chapter 11 protection on Oct. 16, 2007 (Bankr. E.D. Va. Case Nos. 07-33849 to 07-33853). Anup Sathy, Esq., Marc J. Carmel, Esq., and Richard M. Cieri, Esq., at Kirkland & Ellis LLP, represent the Debtors. Michael A. Condyles, Esq., and Peter J. Barrett, Esq., at Kutak Rock LLP, is the Debtors' local counsel. The Debtors' claims & balloting agent is Kurtzman Carson Consultants LLC. When the Debtors' filed for protection from their creditors, they listed total assets of $891,993,000 and total liabilities of $1,419,215,000. The Official Committee of Unsecured Creditors has selected Robert J. Feinstein, Esq., James I. Stang, Esq., Robert B. Orgel, Esq., and Brad Godshall, Esq., at Pachulski Stang Ziehl & Jones LLP, as its lead counsel, and Brian F. Kenney, Esq., at Miles & Stockbridge PC, as its local counsel. The Court confirmed the Debtors' Second Amended Chapter 11 Plan of Reorganization on April 9, 2008. (Movie Gallery Bankruptcy News Issue No. 28; Bankruptcy Creditors' Service Inc.; http://bankrupt.com/newsstand/or 215/945-7000) MOVIE GALLERY: Can Sell MovieBeam Assets to Dar Capital for $2MM ---------------------------------------------------------------- The Honorable Douglas O. Tice of the U.S. Bankruptcy Court for the Eastern District of Virginia approved a purchase agreement between Movie Gallery Inc. affiliate M.G. Digital LLC and Dar Capital, regarding the sale of the Debtors' MovieBeam franchise. Pursuant to the terms of a purchase agreement, M.G. Digital will sell, among other things, tangible assets and all of M.G. Digital's ownership rights to and interest in the intellectual property used solely in connection with the MovieBeam service, to Dar Capital for $2,250,000. Dar Capital has deposited $250,000 with an escrow agent. A full-text copy of the Purchase Agreement is available for free at http://researcharchives.com/t/s?2c20 Judge Tice authorized the Debtors to sell MovieBeam's assets outside the ordinary course of business, pursuant to a purchase agreement. The Court also authorized the Debtors to sell the Purchased Assets to Dar Capital Limited, free and clear of all liens, claims, interests and encumbrances. The Liens attaching to the proceeds of the sale or transfer will be with the same validity, extent and priority as immediately prior to the Sale. Furthermore, the Court entitled Dar Capital to the protections afforded to "good-faith" purchasers. Judge Tice said that in the absence of a written agreement with Dotcast, Inc., Dar Capital is not authorized to use any Dotcast intellectual property, pursuant to the Dotcast Settlement Agreement. Dar Capital will notify Dotcast of any sale or transfer of certain items, including dNTSC modulators and receiverships, the Court ruled. In light of the Agreement, Dotcast, Inc. informed the Court and parties-in-interest that it has withdrawn its objection to the Debtors' request. About Movie Gallery Based in Dothan, Alabama, Movie Gallery Inc. -- http://www.moviegallery.com/-- is a home entertainment specialty retailer. The company owns and operates 4,600 retail stores that rent and sell DVDs, videocassettes and video games. The company and its debtor-affiliates filed for Chapter 11 protection on Oct. 16, 2007 (Bankr. E.D. Va. Case Nos. 07-33849 to 07-33853). Anup Sathy, Esq., Marc J. Carmel, Esq., and Richard M. Cieri, Esq., at Kirkland & Ellis LLP, represent the Debtors. Michael A. Condyles, Esq., and Peter J. Barrett, Esq., at Kutak Rock LLP, is the Debtors' local counsel. The Debtors' claims & balloting agent is Kurtzman Carson Consultants LLC. When the Debtors' filed for protection from their creditors, they listed total assets of $891,993,000 and total liabilities of $1,419,215,000. The Official Committee of Unsecured Creditors has selected Robert J. Feinstein, Esq., James I. Stang, Esq., Robert B. Orgel, Esq., and Brad Godshall, Esq., at Pachulski Stang Ziehl & Jones LLP, as its lead counsel, and Brian F. Kenney, Esq., at Miles & Stockbridge PC, as its local counsel. The Court confirmed the Debtors' Second Amended Chapter 11 Plan of Reorganization on April 9, 2008. (Movie Gallery Bankruptcy News Issue No. 28; Bankruptcy Creditors' Service Inc.; http://bankrupt.com/newsstand/or 215/945-7000) MTM LIFE: Fitch Withdraws 'Bq' Quantitative IFS Rating ------------------------------------------------------ Fitch Ratings has withdrawn its quantitative insurer financial strength ratings on three life insurance companies that no longer meet Fitch's criteria to be eligible to receive a Q-IFS rating. These ratings are withdrawn by Fitch: MTM Life Insurance Company (NAIC Code 66222) --Q-IFS 'Bq'. Farmers & Traders Life Insurance Company (NAIC Code 63193) --Q-IFS 'BBBq'. Benicorp Insurance Company (NAIC Code 69752) --Q-IFS 'Bq'. NATIONAL INDEPENDENT: A.M. Best Lifts IC Rating to bbb- from bb --------------------------------------------------------------- A.M. Best Co. has upgraded the financial strength rating to B+(Good) from B(Fair) and issuer credit rating to "bbb-" from "bb" for National Independent Truckers Insurance Company, A RRG. The outlook for both ratings is stable. The ratings reflect NITIC's improved capitalization, decreased operational leverage measures, strong management team with expertise in this niche market and its strict underwriting and risk management guidelines. Partially offsetting these positive rating factors is the company's limited business profile. An additional offsetting factor is NITIC's financial leverage position with a significant portion of the company's surplus in the form of a letter of credit. Additional rating factors are NITIC's fundamental business strategies, which include providing stable insurance coverage coupled with quality service for its members. These fundamentals are evidenced by high member retention and member loyalty. Each member makes an annual capital contribution based on the number of vehicles (power units) insured. NITIC has very strict loss control and underwriting guidelines in place. The company uses a scheduled driver program and visually inspects each vehicle prior to issuing a policy. Extensive interviews are conducted with the drivers and motor vehicle records are reviewed prior to accepting new members. A.M. Best remains the leading rating agency of captive insurers rating a wide variety of more than 200 captives in the United States and throughout the world. NOMURA HOME: Fitch Junks Ratings on Six Classes of NIM Notes ------------------------------------------------------------ Fitch Ratings has taken rating actions on 2 Nomura Home Equity Loan Net Interest Margin notes: Nomura Home Equity Loan NIM 2006-FM2 -- $7.7 million Class N-1 downgraded to 'C/DR6' from 'BBB'; -- $9.7 million Class N-2 downgraded to 'C/DR6' from 'B' and removed from Rating Watch Negative; -- $6.4 million Class N-3 revised to 'C/DR6' from 'C/DR5'; (underlying Transaction: Nomura Home Equity Loan Trust 2006-FM2) Nomura Home Equity Loan NIM 2006-HE3 -- $10.5 million Class N-1 downgraded to 'C/DR6' from 'BBB'; -- $4.3 million Class N-2 downgraded to 'C/DR6' from 'B'; -- $2.6 million Class N-3 downgraded to 'C/DR6' from 'B'; (Underlying Transaction: Nomura Home Equity Loan Trust 2006-HE3). The rating actions reflect actual pay-down performance of the NIM securities to date compared to initial projections, as well as, changes that Fitch previously made to its subprime loss forecasting assumptions for the underlying transactions. -- 'Fitch Places $139B U.S. Subprime RMBS On Watch Negative on Worsening Mortgage Performance' (Feb. 1, 2008); -- 'U.S. Subprime RMBS/HEL Upgrade/Downgrade Criteria' (June 12, 2007); -- 'Downgrade Criteria for Recent Vintage U.S. Subprime RMBS' (August 8, 2007) -- 'U.S. Rating Criteria for Net Interest Margin Securitizations: Updated' (February 6, 2007). NORTEL NETWORKS: S&P Holds 'B-' Rating; Revises Outlook to Pos. --------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on Toronto- based telecommunications equipment provider Nortel Networks Ltd. to positive from stable. At the same time, S&P affirmed the ratings, including the 'B-' long-term corporate credit rating, on the company. The ratings on NNL are based on the consolidation with parent Nortel Networks Corp. At March 31, Nortel had about US$4.6 billion of debt outstanding. At the same time, S&P assigned a 'B-' bank loan rating to NNL's proposed US$500 million 10.75% senior unsecured notes due 2016. The notes are being issued as an add-on to the existing US$450 million 10.75% senior unsecured notes due 2016, issued July 2006. S&P also assigned a recovery rating of '4' to the notes, indicating the expectation for average (30%-50%) recovery in the event of payment default. Nortel will use the net proceeds from the new debt issuance, together with cash balances, to repay Nortel Network Corp.'s US$675 million 4.25% convertible notes maturing Sept. 1. "The revised outlook primarily reflects the steady improvement in profitability in the past several quarters despite difficult market conditions," said Standard & Poor's credit analyst Madhav Hari. "We expect this operating momentum to continue in the near term, mostly driven by the net benefit derived from the company's fiscal 2008 and previous years' business transformation initiatives," Mr. Hari added. Nortel's exposure to legacy offerings remains significant and will likely pressure near-term revenue growth; however, the company's portfolio of growth products and services has shown good traction in recent quarters thereby mitigating the risk of large revenue losses. Furthermore, cash balances of more than US$3.2 billion have remained stable and should allow the company to execute its turnaround strategy in addition to providing healthy credit support. The positive outlook is based on Nortel's steady improvement in its profitability metrics and stabilized revenue erosion within its core operations despite difficult market conditions. Healthy liquidity should allow the company to execute its turnaround strategy while additionally providing near-term credit support. Consideration for a ratings upgrade will depend on the company's ability to meet 2008 guidance with respect to revenues and profitability (operating margins of about 6.7%), while maintaining cash balances in excess of US$3 billion. S&P could revise the outlook to stable (or even to negative) should its liquidity position weaken materially or the company fail to demonstrate additional operating margin improvement possibly owing to a meaningful deterioration of its revenues. NORTEL NETWORKS: Moody's Rates Add-On $500MM Debt Issue B3 ---------------------------------------------------------- Moody's Investors Service (Moody's) assigned a B3 rating to Nortel Networks Limited (NNL), US$500 million year senior unsecured "add- on" note issue (reference security is the company's existing $450 million 10.75% note issue due July 2016). NLL is Nortel Network Corporation's (Nortel) principal direct operating subsidiary. The note issue benefits from a system of guarantees that causes it to be ranked equally with Nortel's existing outstanding senior unsecured debts. Since the proceeds will be used to repay a portion of the US$675 million residual of an existing convertible note issue due September, 2008, the transaction is neutral to Nortel's credit profile. With there being no ratings' impact, the company's B3 corporate family rating (CFR) was affirmed along with ratings for existing debt securities, albeit, changes in the company's liability structure caused a very minor change to the related loss given default assessments while also causing preferred stock of subsidiary Nortel Networks Limited to be upgraded to Caa1 from Caa3 (see debt listing below). The primary rating influence continues to stem from uncertainty relating to the magnitude and long term sustainability of the company's cash flow stream. For much of the recent past, Nortel has been involved in a protracted asset portfolio and operational restructuring as it looks to solidify its position in the very crowded telecommunications infrastructure market. With reported gains continually being reinvested in new initiatives and additional restructuring programs, it is unclear whether the business model can be stabilized and what level of cash flow will prevail if it does. In the interim, the company's sizeable cash position manages downside ratings risk and allows the rating to be positioned at the B3 level while also allowing the outlook to be stable. This cash position also allows liquidity to be assessed as good, and an SGL-2 speculative grade liquidity rating has been maintained. Assignments: Issuer: Nortel Networks Limited * Senior Unsecured Regular Bond/Debenture, Assigned B3 (LGD4, 66) Upgrades: Issuer: Nortel Networks Capital Corporation * Senior Unsecured Regular Bond/Debenture, unchanged at B3 with LGD assessment changed to LGD4, 66% from LGD4, 67% Issuer: Nortel Networks Corporation * Senior Unsecured Conv./Exch. Bond/Debenture, unchanged at B3 with LGD assessment changed to LGD4, 66% from LGD4, 67% Issuer: Nortel Networks Limited * Senior Secured Regular Bond/Debenture, unchanged at B3 with LGD assessment changed to LGD4, 66% from LGD4, 67% * Senior Unsecured Regular Bond/Debenture, unchanged at B3 with LGD assessment changed to LGD4, 66% from LGD4, 67% * Preferred Stock Preferred Stock, Upgraded to Caa1 from Caa3 The company's solid liquidity position is quite important to the B3 CFR as it enhances near term default risk and facilitates use of a B2 probability of default rate (PDR). In the event of a default, a 35% recovery (i.e. a 65% loss given default (LGD)) assumption has been used. With the CFR being an expression of expected loss (EL), and a function of the relationship between the PDR and the LGD, the EL (i.e. the CFR) is assessed as B3. Therefore, were liquidity to deteriorate and, as a consequence, were near term default risk to increase, the CFR would likely be downgraded. For additional commentary, please refer to the associated Credit Opinion (available on Moodys.com within a day of this press release) and LGD Assessment Report (also to be made available on Moodys.com). Headquartered in Toronto, Ontario, Canada, Nortel Networks Corporation (Nortel) designs and supplies telecommunications networking hardware and software to a variety of business and governmental customers around the globe. 2007 sales were nearly $11 billion. NORTH AMERICAN TECH: March 30 Balance Sheet Upside-Down by $5.8MM ----------------------------------------------------------------- North American Technologies Group Inc.'s consolidated balance sheet at March 30, 2008, showed $18.6 million in total assets and $24.4 million in total liabilities, resulting in a $5.8 million total stockholders' deficit. At March 30, 2008, the company's consolidated balance sheet also showed strained liquidity with $8.5 million in total current assets available to pay $9.9 million in total current liabilities. The company reported net income of $173,481 for the second quarter ended March 30, 2008, compared with a net loss of $4.7 million in the same period ended April 1, 2007. Net sales for the three months ended March 30, 2008, and April 1, 2007, were $9.3 million and $5.4 million, respectively, and related solely to the sale of crossties. The increase in net sales primarily reflects a 30.0% increase in the number of ties sold and a 32.0% increase in the average sales price of ties sold during the three month period ended March 30, 2008, compared to the three month period ended April 1, 2007. The shift to net income in the current quarter is primarily due to the increase in net sales, a decrease in loss on conversion of debt to equity of $1.7 million, a decrease in interest expense of $31,640, and a decrease of $119,884 in depreciation and amortization expense offset by an increase in selling, general and administrative expenses of $741,701. Full-text copies of the company's consolidated financial statements for the quarter ended March 30, 2008, are available for free at http://researcharchives.com/t/s?2c5a Going Concern Doubt KBA Group LLP, in Dallas, expressed substantial doubt about North American Technologies Group Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the year ended Sept. 30, 2007. The auditing firm cited that the company has suffered recurring losses from operations, has used significant cash flows in operating activities and has liabilities significantly in excess of assets. About North American North American Technologies Group Inc. (OTC BB: NATK) -- http://www.natk.com/-- is principally engaged in the manufacturing and marketing of engineered composite railroad crossties through its 100% owned subsidiary TieTek LLC. The company's composite railroad crosstie is a direct substitute for wood crossties, but with a longer expected life and with several environmental advantages. NORTHWEST AIRLINES: JPMorgan Analyst Expects Airline Bankruptcies ----------------------------------------------------------------- Christopher Hinton at MarketWatch reports that Jamie Baker, an analyst at J.P. Morgan, on Monday said U.S. airline industry stands to post a collective $7,200,000,000 in operating losses in 2008. The results would be wider than an initial forecast of $4,600,000,000 loss, the analyst said. According to MarketWatch, Mr. Baker, in his research note, said though investors, management and analysts may talk about airlines acting collectively to reduce capacity to firm up revenue, the reality is that they are more likely to dig in and try to outlast each other. MarketWatch relates the JPMorgan analyst noted that capacity cuts have falled far short of what executives have said are necessary. Mr. Baker, MarketWatch says, indicated that another round of airline bankruptcy -- even among the legacy carriers -- is a question of when rather than if. According to the report, Mr. Baker said U.S. Airways has the highest risk of bankruptcy, followed by Northwest Airlines, United Air Lines' parent UAL Corp., AMR Corp., JetBlue, Continental Airlines, AirTran, Delta Air Lines, Alaska Air Lines and Southwest Airlines. Mr. Baker, the report adds, said credit card companies could pose more significant risk to airlines than debt. He explained the credit card companies could impose unilateral holdbacks, which will toll on a carrier's liquidity and cash balances. In the Red Except for Southwest, the major U.S. Airlines posted net losses for the period ended March 31, 2008: Net Income for Period Ended ----------------------------------- March 31, 2008 March 31, 2007 -------------- -------------- US Airways ($236,000,000) $66,000,000 Northwest ($4,139,000,000) ($292,000,000) UAL ($537,000,000) ($152,000,000) AMR ($328,000,000) $81,000,000 JetBlue ($8,000,000) ($22,000,000) Continental ($80,000,000) $22,000,000 AirTran ($34,813,000) $2,158,000 Delta ($6,261,000,000) $155,000,000 Alaska Air ($24,000,000) ($3,700,000) Southwest $34,000,000 $93,000,000 Balance Sheet at March 31, 2008 ----------------------------------- Total Assets Total Debts ------------ ----------- US Airways $8,013,000,000 $6,435,000,000 Northwest $21,032,000,000 $17,746,000,000 UAL $23,813,000,000 $21,647,000,000 AMR $28,766,000,000 $26,277,000,000 JetBlue $6,050,000,000 $4,721,000,000 Continental $12,542,000,000 $11,071,000,000 AirTran $2,198,009,000 $1,783,470,000 Delta $26,755,000,000 $22,804,000,000 Alaska Air $4,379,800,000 $3,520,600,000 Southwest $18,031,000,000 $10,846,000,000 On April 14, Northwest announced an agreement to merge with Delta. United and US Airways are also in talks for a possible merger. Continental was initially eyed as a top merger partner for United. Small and medium-sized carriers have tumbled one after the other into bankruptcy. Aloha Airlines commenced bankruptcy proceedings in Hawaii in March and later ceased operations. ATA Airlines Inc. ceased operations and filed for chapter 11 protection on April 2, and Skybus Airlines Inc. tumbled into bankruptcy on April 5. Frontier Airlines went belly up and filed for chapter 11 on April 14. EOS Airlines filed a chapter 11 petition on April 26. 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; 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. NOVASTAR FINANCIAL: March 31 Balance Sheet Upside-Down by $494MM ---------------------------------------------------------------- Novastar Financial Inc.'s consolidated balance sheet at March 31, 2008, showed $2.7 billion in total assets, $3.2 billion in total liabilities, and $494.5 million in total stockholders' deficit. The company posted a net loss of $282.7 million for the first quarter ended March 31, 2008, versus net income of $46.0 million in the comparable period of 2007. Novastar reported a net interest loss after provision for credit losses of $214.1 million for the three months ended March 31, 2008, as compared to net interest income after provision for credit losses of $14.0 million for the same period in 2007. T The main reason behind this significant decline was an increase in the provision for credit losses as a result of the continued credit deterioration of the company's mortgage loans - held-in- portfolio and an increase in the anticipated severity of the credit losses. The principal balance of loans delinquent greater than 60 days increased by 48.0%, or approximately $206.0 million from Dec. 31, 2007. Significant factors contributing to the increase in over 60-day delinquencies were: -- Continued decline in home prices; -- Continued weakness in the economy; -- Tighter underwriting standards within the mortgage industry making it difficult for borrowers to refinance; and -- As a result of the sale of the company's mortgage servicing rights, it no longer possesses the ability to identify and address potential or actual delinquencies and defaults. The company incurred a significant loss from continuing operations of $277.3 million during the three months ended March 31, 2008, as compared to income from continuing operations of $91.6 million for the same period in 2007. The following factors contributed to the current year loss: -- The company incurred income tax expense of $650,000 for the three months ended March 31, 2008, as compared to earning a benefit of $115.4 million for the same period of 2007. -- An increase in the provision for credit losses for the company's mortgage loans held-in-portfolio of $229.4 million. -- A net loss due to fair value adjustments of $12.7 million related to the company's trading securities and the asset- backed bonds issued in the company's CDO transaction. The trading securities had a negative fair value adjustment of approximately $51.6 million while the CDO asset-backed bonds had a positive fair value adjustment of $38.9 million. These adjustments were a result of significant spread widening in the subprime mortgage market for these types of asset-backed securities. -- Slower prepayment speeds contributed to an increase in impairments in the company's mortgage securities available- for-sale portfolio of $19.4 million from 2007. The company incurred a loss from discontinued operations of $5.4 million during the three months ended March 31, 2008, as compared to $45.6 million for the same period in 2007. The 2008 loss is much lower than 2007 because the shutdown of the company's mortgage lending and loan servicing operations in 2007 was substantially completed by the end of 2007. The current period loss was primarily driven by the additional lower of cost or market adjustment on the company's mortgage loans - held-for-sale to their estimated fair value and residual operating costs. The company had $12.5 million in unrestricted cash and cash equivalents at March 31, 2008, which was a decrease of $12.9 million from Dec. 31, 2007. Possible Bankruptcy The company's wholly owned subsidiary NovaStar Mortgage Inc. has outstanding junior subordinated debentures related to the outstanding trust preferred securities of NovaStar Capital Trust I and NovaStar Capital Trust II. The company has guaranteed NovaStar Mortgage's obligations under these debentures, including NovaStar Mortgage's obligations to make periodic interest payments thereon. To preserve short-term liquidity flexibility, NovaStar Mortgage did not make a quarterly interest payment of $1.3 million due on March 30, 2008, and did not make a quarterly interest payment of $400,000 on April 30, 2008. The trustees and security holders of NovaStar Capital Trust I and NovaStar Capital Trust II have agreed not to exercise any remedies as a result of these payment failures until May 30, 2008. The company intends to negotiate with the applicable parties to restructure the terms of the debentures and to make the deferred payments required on or before May 30, 2008. In the event that the company is unable to restructure the terms of the debentures or fail to timely pay the deferred or any subsequent interest owed on the notes, or otherwise breach any of its obligations relating to the debentures or trust preferred securities and fail to remedy the default within the applicable cure period, if any, the trustees or security holders may seek an acceleration of the obligations under the indentures. The company said that the foregoing would have a material adverse effect on the company's financial condition and liquidity and would be likely to cause it to seek the protection of applicable bankruptcy laws. Full-text copies of the company's consolidated financial statements for the quarter ended March 31, 2008, are available for free at http://researcharchives.com/t/s?2c53 Going Concern Disclaimer As reported in the Troubled Company Reporter on April 4, 2008, Deloitte & Touche LLP, in Kansas City, Missouri, expressed substantial doubt about Novastar Financial 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 pointed to the company's deficit in shareholders' equity, the disruption in the credit markets and related liquidity issues, the sale of its loan servicing operations and the decision to cease all of its mortgage lending operations. About NovaStar Headquartered in Kansas City, Missouri, NovaStar Financial Inc. (NYSE: NFI) -- http://www.novastarmortgage.com/ -- prior to significant changes in its business during 2007 and the first quarter of 2008, the company originated, purchased, securitized, sold, invested in and serviced residential nonconforming mortgage loans and mortgage backed securities. The company retained, through its mortgage securities investment portfolio, significant interests in the nonconforming loans it originated and purchased, and through its servicing platform, serviced all of the loans in which it retained interests. During 2007 and early 2008, the company discontinued its mortgage lending operations and sold its mortgage servicing rights which subsequently resulted in the abandonment of its servicing operations. Historically, the company had elected to be taxed as a REIT under the Code. During 2007, the company announced that it would not be able to pay a dividend on its common stock with respect to its 2006 taxable income, and as a result, its status as a REIT terminated retroactive to Jan. 1, 2006. O'CHARLEY'S INC: Weak Performance Cues Moody's to Revise Outlook ---------------------------------------------------------------- Moody's Investors Services today revised the rating outlook of O'Charley's Inc.'s (O'Charley's) to negative from stable. Concurrently, Moody's affirmed O'Charley's Corporate Family Rating of Ba3, Probability of Default rating of Ba3, senior secured facilities rating of Baa3 and senior subordinated notes at B1. The change of outlook to negative reflects the company's continued weak operating performance such as declining revenues and eroding margins which previously exhibited signs of acceleration in the recent past. The resulting weakening of cash flow and credit metrics put downward pressure on the ratings. In particular, the change in the outlook to negative reflects continued tightening of EBITA coverage of interest expense and Moody's expectation of approximately breakeven free cash flow during the near term. O'Charley's ratings could be downgraded if the company failed to stabilize and improve its credit metrics in the next 6-12 months, either due to continuous sub-par performance or a pursuit of more aggressive financial policy, or a combination of the two. The affirmation of the Ba3 Corporate Family Rating incorporates Moody's expectation that the company will maintain adequate liquidity in the next twelve months. The Ba3 Corporate Family Rating continues to reflect the company's relatively modest leverage, its significant real estate ownership and adequate liquidity position. The rating is constrained by the company's relatively small scale and limited geographic diversification as well as its lack of brand strength as a regional casual dining chain. The rating also incorporates O'Charley's weak operating performance, which primarily driven by its weak same store sales as guest traffic across all its three concepts continued to decline, and margin pressure arising from higher input cost. Moreover, Moody's views O'Charley's marginal return on assets as undermining the benefit of the company's capital expenditure program, which has been a primary driver of weak free cash flow. "Despite the recent cut back in its capital expenditure for 2008, we don't expect the company would generate meaningful free cash flow in the coming year," stated Moody's analyst, John Zhao, "although O'Charley's has for now avoided a proxy contest by reaching a settlement with an activist shareholder, its ratings could be downgraded if the company were to incur sizable debt to fund its shareholder friendly initiatives thus depress its already weak credit metrics." These ratings are affected: * Corporate Family Rating -- Ba3, affirmed * Probability of Default Rating -- Ba3, affirmed * $125 senior secured revolving credit facility -- Baa3 (LGD2, 13%), affirmed * $125 senior subordinated notes due 2013 -- B1(LGD5, 77%), affirmed Rating outlook -- revised to Negative O'Charley's, Inc., headquartered in Nashville Tennessee, is an owner, operator, and franchisor of casual dining concepts that include O'Charley's, Ninety-Nine Restaurant & Pub, and Stoney River Legendary Steaks. For the twelve months ending December 31, 2007, the company reported revenues of approximately $978 million. ONCO PETROLEUM: Gets Default Notice from OSC on Financials Filing ----------------------------------------------------------------- Onco Petroleum Inc. received a notice of default from the Ontario Securities Commission indicating a violation of the commission's financial statement filing requirement for the year ended Dec. 31, 2007, which were due to the CNQ by April 29, 2008, or 120 days after the fiscal year end. The default occurred as the company's auditors, KPMG, required the audit work to be completed out of its Calgary office, which was audited by the Montreal office of KPMG. This change over to the Calgary KPMG office caused some mutual timing delays in the audit field work. The annual financial statements will be completed & signed off by KPMG by May 30, 2008. The commission may impose an Issuer Cease Trade Order on June 30, 2008, or 2 months after the April 30, 2008, if the default is not remedied by that time. Onco intends to satisfy the provisions of the Alternate Information Guidelines so long as it remains in default of the Financial Statement Filing Requirement. As a result of the default, Onco will likely be in default of the Financial Statement Filing Requirement of the first quarter financial statements for the period ended March 31, 2008, which are due to the CNQ by May 15, 2008, or 45 days after the period end. About Onco Petroleum Inc. Headquartered in Ontario, Canada, Onco Petroleum Inc. (CNQ:ONCO)(FRANKFURT:3HX) is an energy company involved in the exploration, development and production of oil and gas deposits and related projects in southern Ontario and Michigan. PAPPAS TELECASTING: U.S. Trustee Selects 7-Member Creditors Panel ----------------------------------------------------------------- Roberta A. DeAngelis, the U.S. Trustee for Region 3, appointed seven creditors to serve on an Official Committee of Unsecured Creditors for the Chapter 11 bankruptcy proceedings of Pappas Telecasting Incorporated and its debtor-affiliates. The creditors committee members are: 1) Carsey-Warner Distribution, LLC Attn: Bret Sarnoff 12001 Ventura Place, 6th Floor, Studio City, California Tel: (818) 299-9625 Fax: (818) 299-9644 2) Fox Broadcasting Company Attn: Inae Joe 10201 W. Pico Boulevard Building 100, Room 2470 Tel: (310) 369-4092 Fax: (310) 369-4117 3) Gannaway Web Holdings, LLC Attn: George Fearon 747 Third Avenue New York, New York 10017 Tel: (212) 931-1263 Fax: (212) 931-1299 4) Harrington, Righter & Parsons, L.L.C. Attn: Robert J. Drury 1 Dag Hammarskjold Plaza New York, New York 10017 Tel: (212) 372-4328 Fax: (212) 486-0811 5) King World Productions, Inc. Attn: Jonathan Birkhahn 1700 Broadway New York, New York 10019 Tel: (212) 315-4000 Fax: (212) 586-7351 6) Telerep, L.L.C. Attn: James J. Monahan 1 Dag Hammarskjold Plaza New York, New York 10017 Tel: (212) 372-4359 Fax: (212) 486-0811 7) Warner Brothers Attn: Wayne M. Smith 4000 Warner Boulevard, B156 R5158 Burbank, California 91522 Tel: (818) 954-6007 Fax: (818) 954-5434 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 Pappas Telecasting Fresno, California-based Pappas Telecasting, Inc., aka KMPH, aka KMPH-TV, and aka KMPH Fox 26, -- http://www.pappastv.com/-- and its affiliates are broadcasting companies. Founded in 1971, their stations reach over 15% of all U.S. households and over 32% of Hispanic households. Pappas and 21 affiliates filed chapter 11 petition on May 10, 2008 (Bankr. D. Del. Case No. 08-10915 through 08-10936). Laura Davis Jones, Esq., at Pachulski Stang Ziehl & Jones, LLP represents the Debtors in their restructuring efforts. The Debtors listed $100 million to $500 million in assets and debts when they filed for bankruptcy. PASA FUNDING: Trustee's Notice Prompts S&P to Chip Six Rating ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on six classes from PASA Funding 2007 Ltd., a collateralized debt obligation of asset-backed securities transaction collateralized predominantly by senior tranches of residential mortgage-backed securities and other structured finance transactions. Three of the tranche ratings remain on CreditWatch negative following the downgrades. The rating actions follow notice from the trustee that the controlling noteholders for the transaction have elected to liquidate the portfolio assets. The rating actions reflect the likelihood of substantial losses to the noteholders if the transaction proceeds to liquidate, based on S&P's view of the current market value of the underlying collateral. Rating Actions Rating ------ Transaction Class To From ----------- ----- -- ---- PASA Funding 2007 Ltd. A-1A CCC/Watch Neg BB/B/Watch Neg PASA Funding 2007 Ltd. A-1B CCC/Watch Neg BB/Watch Neg PASA Funding 2007 Ltd. CP CCC//Watch Neg BB/B/Watch Neg PASA Funding 2007 Ltd. A-2 CC CCC-/Watch Neg PASA Funding 2007 Ltd. B CC CCC-/Watch Neg PASA Funding 2007 Ltd. X CC CCC-/Watch Neg Other Outstanding Ratings Transaction Class Rating ----------- ----- ------ PASA Funding 2007 Ltd. C CC PASA Funding 2007 Ltd. D CC PLAINS EXPLORATION: Moody's Rates Sr. Unsecured Note Offering B1 ---------------------------------------------------------------- Moody's Investors Service assigned a B1 rating (LGD 4; 69%) to Plains Exploration and Production's (PXP) $400 million offering of ten year senior unsecured notes. Moody's also affirmed PXP's Ba3 corporate family rating, Ba3 Probability of Default Rating, B1 senior unsecured note ratings, but changed the LGD statistics for the existing notes from LGD 5; 73% to LGD 4; 69%. Note proceeds will be used to repay borrowings under PXP's $1.9 billion secured borrowing base facility. The facility has an accordion feature to $2.3 billion under PXP's $2.4 billion borrowing base (pro-forma for the note offering). The rating outlook remains stable. While positive momentum is evident, the stable outlook reflects the potential for significant stock buybacks or leveraging acquisitions. A positive outlook or ratings action is likely by, or before, first quarter 2009 if favorable production, total cost (drillbit reserve replacement costs based on extensions and discoveries in particular), cash flow coverage of sustaining capital spending, and leverage trends continue. The ratings are supported by seasoned management; solid scale for a Ba3 rating, with a Ba production scale profile and a Baa reserve scale profile; a durable 13 year reserve life on proven developed (PD) reserve life; a more bondholder friendly asset profile after PXP's major portfolio transformation in recent years that included multiple acquisitions and divestitures of proportionately large scale; substantially reduced leverage; and strong production trends. PXP reduced leverage very substantially with divestitures since acquiring Pogo last year and production has been on a sound positive trend over the last five quarters. Visible substantial production growth is mounting this year from PXP's first two deep horizon discovery wells in the Flatrock area in the shallow waters of the Gulf of Mexico (GOM). In effect, PXP's durable (though high operating cost) oil properties in the Los Angeles and San Joaquin Basins onshore California and, secondarily its Santa Maria Basin properties offshore California, support (i) high risk high impact exploration and development drilling to ultra deep geological horizons beneath the shallow waters of the GOM Shelf and in ultra deep water regions of the outer GOM and (ii) the substantial front end and ongoing costs of drilling and developing PXP's early stage Piceance and Wind River unconventional resource plays in the Rocky Mountains. Further support comes from PXP's productive smaller Permian Basin, Mid-continent, and South Texas properties. The ratings are restrained by the unlikelihood of further leverage reductions, given PXP's shareholder buyback program; the inherent potential for leveraging acquisitions; by full leverage for the ratings; a very high 49% component of proven undeveloped reserves (PUD), and our expectation that organic reserve replacement costs will rise further as the firm funds drilling and development on its high proportion of PUD reserves. With approximately $700 million of buyback room under its existing buyback program, PXP intends to repurchase stock with cash flow proceeds remaining after capital spending. Since year-end 2006, PXP has executed $4.8 billion in acquisitions, principally a private acquisition of Rocky Mountain properties in first quarter 2007 $975 million and a fourth quarter 2007 corporate acquisition of Pogo Producing for $3.5 billion, and a $300 million acquisition of South Texas properties in second quarter 2008. This was principally funded with after tax net proceeds remaining from $1.550 billion in fourth quarter 2006 asset divestitures, $2 billion in PXP equity exchanged for Pogo shares, and net proceeds from $1.7 billion in divestitures so far this year. After settling underwater hedges for roughly $193 million, conducting $298 million in stock buybacks in 2006 and over $300 million so far this year, and capital spending in excess of cash flow, the shortfall was funded with debt. Pro-forma for 2008 divestitures to date and for the South Texas property acquisition, first quarter 2008 production approximates 90,200 barrels of oil-equivalent (boe) per day (approximately 33.0 million boe per year), up largely due to acquisitions from 22.6 million boe (mmboe) produced in 2006; pro-forma year-end 2007 PD reserves approximate 312 mmboe, up from 182 mmboe at year-end 2006; and pro-forma 2007 total proven reserve approximate 600 mmboe, up from 352 mmboe at year-end 2006. Under Moody's current metric ranges for its exploration and production rating methodology, leverage on PD reserves reflects a B rating profile but leverage on total reserves, fully loaded for FAS 69 capex, reflects a Caa profile, cash flow leverage after sustaining capex is in the B range, and leverage on production is in the B range. While PXP posted strong drillbit reserve replacement rates and costs in 2007, this was aided by very major positive reserve revisions in its California oil properties due to high oil prices, major positive revisions to its Piceance reserves on higher prices due to reduced price differentials on Rocky Mountain natural gas prices relative to benchmark prices, and positive Piceance revisions due to drilling and production results after acquiring the properties from Laramie. Without those revisions, drillbit reserve replacement costs have been very high. A positive outlook awaits demonstration of clearly strong underlying drillbit finding and development results. Plains Exploration & Production Company is headquartered in Houston, Texas. PETCO ANIMAL: Moody's Cuts Rating on $700MM Sr. Sec. Loan to B1 --------------------------------------------------------------- Moody's Investors Service changed the outlook for PETCO Animal Supplies Stores, Inc. (PETCO) to negative from stable. In addition, Moody's downgraded PETCO's $700 million senior secured term loan to B1 from Ba3 due to a modest shift over time in the company's liability structure. The change in outlook reflects the company's weaker than expected operating performance and debt protection metrics that are relatively weak for the current rating. The outlook also incorporates our expectation that weak economic conditions and increased competition will continue to pressure operating performance and margins over the intermediate term. Ratings affirmed are: * Corporate family rating at B2; * Probability-of-default rating at B2; Ratings downgraded are; * $700 million senior secured term loan, due October 26, 2013, downgraded to B1 (LGD 3, 36%) from Ba3 (LGD 3, 32%) The outlook was changed to negative from stable The B2 corporate family rating incorporates PETCO's relatively weak operating performance and high debt levels that have resulted in weak debt protection metrics with debt to EBITDA of about 6.7 times and EBIT coverage of interest of under 1.0 time for the fiscal year ending February 2, 2008. However, the ratings are supported by PETCO's market position as the second largest specialty retailer in the pet food and supplies sector as well as good liquidity. The downgrade of the $700 million term loan to B1 from Ba3 reflects a modest shift in the levels of certain liabilities. These include a higher assumed level of priority trade payables which are senior to the term loan, as well as a lower level of expected senior subordinated debt that reduces the amount of support for more senior claims. Both of these changes create loss given default estimates for the term loan which are modestly higher, but sufficient to cause a downgrade in the rating. PETCO Animal Supplies (PETCO), headquartered in San Diego, California, is a specialty retailer of premium supplies, food, and services for household pets. The company currently operates about 900 stores in 49 states. Revenue for the fiscal year ending February 2, 2008 was about $2.4 billion. PLASTECH ENGINEERED: Intends to Close Five Plants in Three States ----------------------------------------------------------------- According to various reports, Plastech Engineered Products Inc. and its debtor-affiliates will be closing five plants in Ohio, Indiana and Tennessee, as early as June 30. A report by The Detroit Free Press disclosed that Plastech sent a memo to employees that it is closing, beginning July 13, plants in Romulus, Moraine and Byesville, in Ohio; and Elwood, in Indiana, as part of plans to exit the exterior parts business. The Debtors' facility at Byesville is set for sale by June 30, according to unofficial sources of Daily-Jeff.com. The workers' union at the plant was notified of the sale deadline, said the report. The shutdown of Plastech's injection-molding plant in Elwood will cause 286 employees to lose their jobs, according to reports. According to Chicago Tribune, a letter Plastech released Thursday said the plant would close on July 13 or within 14 days after that date. Plastech is also set to close its Kenton, Tennessee plant by June 30, or at another date, says Kenton plant manager James Arnold, according to a report by NWTN Today. "June 30 is not the magic date. It just means that, by law, we have to give 60 days' notice. We have not received approval from any of our customers to move their product elsewhere. The longer it takes for customer approval, the longer it would take to shut the plant down," Mr. Arnold disclosed. The Kenton plant, which employs about 200 people, manufactures plastic interior trim for major customers including Nissan, Chrysler, General Motors and J.C. Inc. 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. 21; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/ or 215/945-7000) PLASTECH ENGINEERED: Eisenmann Pursues Breach of Contract Suit -------------------------------------------------------------- Eisenmann Corporation asks the U.S. Bankruptcy Court for the Eastern District of Michigan to allow a breach of contract lawsuit it filed against Plastech Engineered Products Inc. and its debtor- affiliates. On May 15, 2003, Eisenmann Corp. and LDM Technologies, Inc., entered into a written contract pursuant to which Eisenmann agreed to sell equipment designed to enhance the existing paint systems at LDM's Byesville, Ohio plant. LDM paints various auto parts including the bumpers of sports utility vehicles for General Motors Corporation, Ford Motor Company, and Toyota Motor Corporation. Eisenmann supplied surface finishing systems, material flow automation, environmental technology, and ceramics firing technology. In February 2004, the Debtors purchased LDM, pursuant to which LDM became a wholly owned subsidiary of the Debtors. "Eisenmann performed all of the work required of it, including extras, which ultimately enhanced the value of Plastech's Byesville, Ohio plant," Mimi D. Kalish, Esq., at Stillman Law Office, in West Bloomfield, Michigan, relates. The Debtors refused to pay the amounts due Eisenmann, for which Eisenmann filed Case No. 05 C 2400 for breach of contract, interference with economic advantage and promissory estoppel, in the District Court for the Northern District of Illinois, Eastern Division. Eisenmann asserted damages aggregating $3,500,000. The Debtors filed a counterclaim for breach of contract asserting damages from defective work aggregating $75,000. However, LDM has claimed damages between $5,300,000 and $8,700,000. During the Chapter 11 cases, the Debtors have represented to the court in the Illinois Litigation that they will continue prosecution of their counterclaim. In this light, pursuant to 28 U.S.C. Section 1334(c)(1), Eisenmann asks the Bankruptcy Court to abstain from hearing the Illinois Litigation, and to modify the automatic stay so that a judgment be entered in the Illinois Litigation. Section 1334(c)(1) provides that a bankruptcy judge may abstain "in the interest of justice, or comity with state courts or out of respect for state law." Ms. Kalish says 10 out of 12 factors for determining the appropriateness of permissive abstention weigh in favor of abstention. She adds that abstention would permit the adjudication of a claim based upon pure state law before a court that is more familiar with the issues. Once the amount of Eisenmann's claim against the estate is resolved in the Illinois Litigation, the Bankruptcy Court could decide on issues relating to the distribution to Eisenmann by virtue of its adjudicated claim, Ms. Kalish says. 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. 21; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/ or 215/945-7000) PLASTECH ENGINEERED: Court OKs Pact to Return Hyundai Tools to JCI ------------------------------------------------------------------ The Honorable Phillip J. Shefferly of the U.S. Bankruptcy Court for the Eastern District of Michigan approved a stipulation between Plastech Engineered Products Inc. and its debtor- affiliate, Johnson Controls Inc., that allows JCI to repossess its Hyundai tooling equipment from the Debtors. 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 claimed 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 stipulated 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. 21; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/ or 215/945-7000) POLAR MOLECULAR: Ch. 11 Case Junked; Patent Foreclosure Continues ----------------------------------------------------------------- The Hon. Elizabeth Brown of the U.S. Bankruptcy Court for the District of Colorado dismissed the chapter 11 case of Polar Molecular Holding Corp. on May 19, 2008, The Deal's Jamie Mason reports. A. Petroleum Enhancer's Case Dismissal Motion As reported in the Troubled Company Reporter on Feb. 21, 2008, secured creditor Petroleum Enhancer LLC has asked the Court to dismiss the chapter 11 case of the Debtor, saying that the bankruptcy petition was filed the day before a foreclosure date. Therefore, the chapter 11 filing was in bad faith. The secured creditor also said that Polar Molecular showed "no progress toward reorganization in over four months," The Deal relates. The case dismissal will allow Petroleum Enhancer to proceed with the foreclosure on the Debtor's patents worth $400 million, the report says, citing Petroleum's counsel, John Young, Esq., at Block Markus & Williams LLC. B. Polar Molecular's Response The Debtor had contested Petroleum Enhancer's case dismissal motion saying the creditor has "unclean hands" and pointing to some directors who transferred to Petroleum Enhancers even while they are currently members of Polar Molecular's board, The Deal says. The Debtor had said that a certain director engaged Affiliated Investments in sale talks involving the Debtor's defaulted notes to incite Petroleum Enhancer to foreclose on the patents, The Deal says. The Deal reports, based on court documents, that Petroleum Enhancer offered $2 million in exchange for the $1.1 million defaulted notes due to the value of the patents at risk. C. U.S. Trustee Supports Dismissal of Case In addition, U.S. Trustee Charles McVay moved the Court to dismiss the case saying: (i) the Debtor's counsel, Paul Quinn of Quinn & Coles PC backed out on May 9, 2008, and (ii) the Debtor missed trustee payments, The Deal quotes court documents as stating. About Polar Molecular Headquartered in Denver, Polar Molecular Corp. develops and sells fuel additives. The company also sells marketing rights to others to sell the same fuel additives. The company, faced with unpaid debts, filed for chapter 11 on Feb. 2, 1993, (Bankr. D. Mass.) and emerged in 1994. The company again filed for Chapter 11 protection on Jan. 11, 2008 (Bank. D. Colo. Case No. 08-10346). D. Bruce Coles, Esq., at Quinn & Coles, represents the Debtor in its restructuring efforts. The Debtor reported $400,001,522 in total assets, including $400,000,000 in patents and other intellectual properties, and $5,123,574 in total debts, in its schedules of assets and liabilities filed with the Court. POPE & TALBOT: Court OKs Sale Bidding Procedures for Halsey Assets ------------------------------------------------------------------ The United States Bankruptcy Court for the District of Delaware approved in its entirety, the proposed Bidding Procedures for the Halsey Assets Sale of Pope & Talbot Inc. and its debtor- affiliates. The proceedings relate to: i) the submission, consideration, qualification and acceptance of Qualified Bids submitted to the Debtors; ii) the Auction; and iii) the identification and determination of the Successful Bid and the Back-up Bid will be governed by and conducted in accordance with the Bidding Procedures. The failure of the Bid Procedures Order to include specific or reference to any particular provision, section or article of the Bidding Procedures will not diminish or impair the effectiveness of the Bidding Procedures, the Court held. The Debtors will conduct an auction for the Halsey Assets on June 3, 2008, or at a later time as the Debtors will notify all Qualifying Bidders and parties-in-interest. Judge Christopher Sontchi will convene a hearing to approve the proposed sale of the Halsey Assets to Ableco Finance LLC, the Stalking Horse Bidder, on June 9, 2008. Any objections to the proposed Approval Order must comply with the objection requirements and must be served on the Notice Parties no later than 4:00 p.m., on June 5, 2008. At the Sale Hearing, the Debtors may seek entry of an order authorizing and approving: i) in the event one Qualified Bid is received, the sale contemplated by the Qualified Bid to the Qualifying Bidder; or ii) in the event the Auction is held, the transaction contemplated by the Successful Bid. The Sale Hearing may be adjourned from time to time without further notice to creditors other than by an announcement in Court. Nothing in the Bid Procedures Order will constitute a waiver of the rights of any secured creditor to object to any proposed sale by the Debtors. Assumption and Assignment of Contracts The Debtors are authorized to serve the Cure Cost Notice on the assumption and assignment of the Assigned Contracts regarding the proposed sale of the Halsey Assets, no later than May 23, 2008, containing (i) the Debtors' determination of the Cure Cost to each Assigned Contract; (ii) the procedure governing the filing and serving of objections to the proposed Cure Costs; and (iii) the procedures governing the resolution of the Cure Costs disputes. A party that failed to object to an assignment and assumption of a contract on or before June 5, 2008, will be forever barred from objecting to the cure cost. In the event the Debtors and the Objecting Party cannot resolve the cure cost dispute within two days prior to the closing of the Sale, the Debtors will segregate cash in the amount equal to the aggregate amount of all disputed cure costs. The Debtors is permitted to delete any Assigned Contract from the Cure Cost Notice as otherwise required pursuant to the transaction contemplated by the Successful Bid. Additional Provisions No provision of the Bid Procedures Order will be deemed to constitute the consent of the Secured Lenders to any bid, and will not impair the ability of the Secured Lenders to act as Qualifying Bidders in accordance with the terms of the Bidding Procedures. George Miller, the Interim Chapter 7 Trustee of the Debtors' estates, is not subject to any stay in the implementation, enforcement or realization of the relief granted in the Halsey Asset Bid Procedures Order. Mr. Miller may, in his discretion, take any action and perform any act authorized under the Bid Procedures Order. About Pope & Talbot Based in Portland, Oregon, Pope & Talbot Inc. (Other OTC: PTBT.PK) -- http://www.poptal.com/-- is a pulp and wood products business. Pope & Talbot was founded in 1849 and produces market pulp and softwood lumber at mills in the US and Canada. Markets for the company's products include the US, Europe, Canada, South America and the Pacific Rim. The company and its U.S. and Canadian subsidiaries applied for protection under the Companies' Creditors Arrangement Act of Canada on Oct. 28, 2007. The Debtors' CCAA Stay expired on Jan. 16, 2008. The company and 14 of its debtor-affiliates filed for Chapter 11 protection on Nov. 19, 2007 (Bankr. D. Del. Lead Case No. 07- 11738). Shearman & Sterling LLP is the Debtor's bankruptcy counsel, while Laura Davis Jones, Esq. at Pachulski, Stang, Ziehl & Jones L.L.P. represents the Debtors as bankruptcy co-counsel. The Official Committee of Unsecured Creditors selected Fried, Frank, Harris, Shriver & Jacobson LLP as its bankruptcy counsel. When the Debtors filed for bankruptcy, they listed total assets of $681,960,000 and total debts of $601,090,000. Pope & Talbot Pulp Sales Europe, LLC, a subsidiary, on Nov. 21, 2007, filed an application for relief under Belgian bankruptcy laws in the commercial court in Brussels. If the Belgian court grants Pope & Talbot Europe's application, it is expected it will be liquidated through the bankruptcy proceeding. (Pope & Talbot Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * The Court extended the time within which the Debtors have the exclusive right to file a Chapter 11 plan, through and including June 2, 2008, as reported in the Troubled Company Reporter on March 17, 2008. POPE & TALBOT: Ch. 7 Trustee Can Continue Debtors' Operations ------------------------------------------------------------- George L. Miller, the Interim Trustee for the Chapter 7 proceedings of Pope & Talbot Inc. and its debtor-affiliates, obtained the permission of the United States Bankruptcy Court for the District of Delaware to continue the limited operation of the Debtors' businesses, through and including June 30, 2008. John T. Carroll, III, Esq., at Cozen O'Connor, in Wilmington, Delaware, proposed counsel for Mr. Miller, relates that Section 721 of the Bankruptcy Code provides that a court may authorize the trustee to operate the business of the debtor for a limited period, if the operation is in the best interest of the estate and consistent with the orderly liquidation of the estate. As previously reported, the U.S. Debtors have determined that the value of their estates will best be preserved through an orderly sale of the Halsey Assets, including the Halsey Pulp Mill located near Halsey, Oregon. The Debtors maintain that the Halsey Assets are their primary assets in the United States. Mr. Miller will continue the limited operation of the Debtors' businesses, while he attempts to market and sell some of the Debtors' related Halsey Assets, the Court held. In connection with the limited ongoing operations, the Debtors will continue to perform under their obligations in the ordinary course of business, including payment to their employees. Mr. Miller's continued operations of the Debtors' businesses is in the best interest of their estates because it ensures an orderly and safe shut-down of the Debtors' property, including their machinery and equipment, Mr. Carroll stated. "The maintenance and preservation of the Debtors' property is necessary to maximize the value of the Debtors' estates," he said. Roberta DeAngelis, the U.S. Trustee for Region 3, did not pose any objection to Mr. Miller's request. Can Use Debtors' Cash Management System The Bankruptcy Court previously authorized the Debtors to continue using their existing Cash Management System to minimize any disruption to their operations. The Debtors relate that their businesses operate in two countries, and the existing limited operation of their businesses necessitate a significant number of transactions. Notwithstanding the sale of certain of the Debtors' limited operations, there remains good cause to maintain the status quo as to all of the relief granted by the Cash Management Order, despite the conversion of the Debtors' Chapter 11 cases to a Chapter 7 liquidation proceeding, Mr. Miller asserts. To alter the Debtors' cash management system would significantly disrupt their limited operations, John T. Carroll, III, Esq., at Cozen O'Connor, in Wilmington, Delaware, proposed counsel for Mr. Miller, argued. Moreover, Mr. Carroll stated, it would distract the newly-appointed Chapter 7 Trustee while he is attempting to confer with PricewaterhouseCoopers Inc., the Canadian Court- appointed Receiver, regarding (i) the coordinated operation and winding down of the U.S. Debtors and the CCAA Applicants, and (ii) maximizing the value of the estates by marketing and selling the Debtors' Halsey Pulp Mill. Accordingly, Mr. Miller sought and obtained the Court's authority to continue the Debtors' existing Cash Management system through June 30, 2008. Can Maintain Debtors' Bank Accounts The Court authorizes Mr. Miller to make transfers on behalf of the Debtors' estates via wire transfers and make deposits to, among others, the Debtors' employees for wages and related payments. Mr. Miller obtained the Court's permission to maintain the Debtors' existing bank accounts through June 30, 2008. Requiring Mr. Miller to close the Debtors' existing bank accounts would significantly disrupt the Debtors' limited operations, and distract Mr. Miller while he is attempting to confer with PricewaterhouseCoopers Inc., the Canadian Court-appointed Receiver, regarding the coordinated operation and winding down of the U.S. Debtors and the Applicants and maximizing the value of the estates by marketing and selling the Debtors' Halsey Pulp Mill, John T. Carroll, III, Esq., at Cozen O'Connor, in Wilmington, Delaware, proposed counsel for Mr. Miller, said. About Pope & Talbot Based in Portland, Oregon, Pope & Talbot Inc. (Other OTC: PTBT.PK) -- http://www.poptal.com/-- is a pulp and wood products business. Pope & Talbot was founded in 1849 and produces market pulp and softwood lumber at mills in the US and Canada. Markets for the company's products include the US, Europe, Canada, South America and the Pacific Rim. The company and its U.S. and Canadian subsidiaries applied for protection under the Companies' Creditors Arrangement Act of Canada on Oct. 28, 2007. The Debtors' CCAA Stay expired on Jan. 16, 2008. The company and fourteen of its debtor-affiliates filed for Chapter 11 protection on Nov. 19, 2007 (Bankr. D. Del. Lead Case No. 07-11738). Shearman & Sterling LLP is the Debtor's bankruptcy counsel, while Laura Davis Jones, Esq. at Pachulski, Stang, Ziehl & Jones L.L.P. represents the Debtors as bankruptcy co-counsel. The Official Committee of Unsecured Creditors selected Fried, Frank, Harris, Shriver & Jacobson LLP as its bankruptcy counsel. When the Debtors filed for bankruptcy, they listed total assets of $681,960,000 and total debts of $601,090,000. Pope & Talbot Pulp Sales Europe, LLC, a subsidiary, on Nov. 21, 2007, filed an application for relief under Belgian bankruptcy laws in the commercial court in Brussels. If the Belgian court grants Pope & Talbot Europe's application, it is expected it will be liquidated through the bankruptcy proceeding. (Pope & Talbot Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * The Court extended the time within which the Debtors have the exclusive right to file a Chapter 11 plan, through and including June 2, 2008, as reported in the Troubled Company Reporter on March 17, 2008. POPE & TALBOT: Canadian Court Appoints PwC as Interim Receiver -------------------------------------------------------------- The British Columbia Supreme Court appointed PricewaterhouseCoopers Inc. as Interim Receiver and Receiver without security of certain assets of Pope & Talbot Ltd. and its subsidiaries under the Companies' Creditors Arrangement Act, pursuant to Section 47(1) of the Bankruptcy and Insolvency Act, RS.C. 1985, c. B-3. The Receiver is not authorized, the Canadian Court clarified, to take possession or control of either the Mackenzie or Harmac pulp mills before obtaining: (i) an indemnity agreement and release from the British Columbia Ministry of Environment; and (ii) agreements from the employees at the applicable pulp mills and the applicable unions in respect of the terms of employment of the employees. The Canadian Court empowered the Receiver to take the necessary steps to ensure an orderly and safe shut-down of the machinery and equipment constituting any part of the Applicants' remaining property, including its maintenance and preservation, provided that the steps are primarily for the purposes of making it available for, and maximizing the proceeds of, sale. The Receiver is not authorized to make any expenditure for the maintenance and preservation of the Applicants' Remaining Property in excess of C$2,000,000, without the consent of the Applicants' DIP Lenders or further Court order. All funds, monies, checks, instruments and other forms of payment received or collected by the Receiver from the sale or disposition of all or any of the Applicants' Property will be deposited into one or more accounts to be opened by the Receiver. A full-text copy of the Receivership Order is available for free at http://bankrupt.com/misc/POPE_ReceivershipOrder.pdf As reported in the Troubled Company Reporter on May 14, 2008, as Receiver, PwC will: (1) take possession and control of the Applicants' property under the CCAA proceedings -- on terms satisfactory to the Receiver -- and any and all proceeds, receipts and disbursements arising out of or from the Property; (2) receive, preserve, protect and maintain control of the Property, including, but not limited to, changing of locks and security codes, relocating of Property to safeguard it, engaging of independent security personnel, the taking of physical inventories and placement of insurance coverage as may be necessary or desirable; (3) receive and collect all monies and accounts now owed or hereafter owing to the Applicants, and to exercise all remedies of the Applicants in collecting the monies, including, without limitation, to enforce any security held by any of the Applicants; (4) settle, extend or compromise any indebtedness owing to or by any of the Applicants; (5) execute, assign, issue and endorse documents of whatever nature in respect of any of the Property, whether in the Receiver's name or in the name and on behalf of any of the Applicants; (6) market any or all the Property, including advertising and soliciting offers in respect of the Property, and negotiating the terms and conditions of sale as the Receiver in its discretion may deem appropriate; (7) sell, convey, transfer, lease, assign or otherwise dispose of the Property or any part or parts out of the ordinary course of business: * without the approval of the Canadian Court in respect of any transaction not exceeding $1,500,000, provided that the aggregate consideration for all the transactions does not exceed $10,000,000; and * with the approval of the Canadian Court in respect of any transaction in which the purchase price or the aggregate purchase price exceeds $1,5,000,000; (8) enter into agreements with any trustee in bankruptcy appointed in respect of any of the Petitioners, whether in Canada or the United Sates, including, without limitation, the ability to enter into occupation agreements for any real property owned or leased by any of the Applicants in Canada or the United States; and (9) exercise any shareholder, partnership, joint venture or other rights which any of the Applicants may have. The Receiver will not be authorized to take possession or control of either the Mackenzie or Harmac pulp mills before obtaining (i) an indemnity agreement and release from the British Columbia Ministry of Environment, and (ii) agreements from the employees at the applicable pulp mills and the applicable unions in respect of the terms of employment of the employees. PwC also proposes that the Receiver will not take possession or control of any of the Property that is located in the United States, until the Receiver has: (a) entered into an agreement with any Chapter 11 Trustee; (b) obtained a Chapter 15 recognition of the receivership proceedings as "foreign main" proceedings granting the Receiver the authority to realize on any Property in the U.S.; and (c) in the case of the Halsey pulp mill, entered into agreements with the mill's employees and any appropriate governmental bodies. Mike Vermette of PwC has confirmed to The Vancouver Sun that he will be administering the business of Pope & Talbot as interim receiver. "We will try to sell the remaining mills, and see if we can fund a buyer in short order," the newspaper quoted Mr. Vermette. Mr. Vermette added that the MacKenzie and Harmac mills will be shut down until a buyer can be found, The Vancouver Sun relates. As Receiver, PwC contemplates terminating the employment of all persons employed by the Applicants in Canada. However, the Receiver will be authorized to engage the former employees of the Applicants -- on a term and task basis -- who have entered into letter agreements with the Receiver and, in the case of union employees, in respect of whom the applicable union has entered into an agreement with the Receiver. The Receiver will not make any payments or contribution to any pension plan maintained or formerly maintained by any of the Petitioners. A full-text copy of PwC's Receivership Request is available for free at http://ResearchArchives.com/t/s?2bd8 About Pope & Talbot Based in Portland, Oregon, Pope & Talbot Inc. (Other OTC: PTBT.PK) -- http://www.poptal.com/-- is a pulp and wood products business. Pope & Talbot was founded in 1849 and produces market pulp and softwood lumber at mills in the US and Canada. Markets for the company's products include the US, Europe, Canada, South America and the Pacific Rim. The company and its U.S. and Canadian subsidiaries applied for protection under the Companies' Creditors Arrangement Act of Canada on Oct. 28, 2007. The Debtors' CCAA Stay expired on Jan. 16, 2008. The company and fourteen of its debtor-affiliates filed for Chapter 11 protection on Nov. 19, 2007 (Bankr. D. Del. Lead Case No. 07-11738). Shearman & Sterling LLP is the Debtor's bankruptcy counsel, while Laura Davis Jones, Esq. at Pachulski, Stang, Ziehl & Jones L.L.P. represents the Debtors as bankruptcy co-counsel. The Official Committee of Unsecured Creditors selected Fried, Frank, Harris, Shriver & Jacobson LLP as its bankruptcy counsel. When the Debtors filed for bankruptcy, they listed total assets of $681,960,000 and total debts of $601,090,000. Pope & Talbot Pulp Sales Europe, LLC, a subsidiary, on Nov. 21, 2007, filed an application for relief under Belgian bankruptcy laws in the commercial court in Brussels. If the Belgian court grants Pope & Talbot Europe's application, it is expected it will be liquidated through the bankruptcy proceeding. (Pope & Talbot Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * The Court extended the time within which the Debtors have the exclusive right to file a Chapter 11 plan, through and including June 2, 2008, as reported in the Troubled Company Reporter on March 17, 2008. POPE & TALBOT: Ch. 7 Trustee Taps Miller Coffey as Accountant ------------------------------------------------------------- George L. Miller, the Interim Trustee for the Chapter 7 proceedings of Pope & Talbot Inc. and its debtor-affiliates, seeks the authority of the United States Bankruptcy Court for the District of Delaware to retain Miller Coffey Tate LLP, as accountant, nunc pro tunc May 16, 2008. As the Chapter 7 Trustee's accountants, Miller Coffey will: * assist in reporting to the U.S. Trustee regarding the financial status of the Debtors; * assist the Chapter 7 Trustee in pursuing causes of action for the benefit of the Debtors' estates; * attend meetings and Court hearings with the Chapter 7 Trustee as required; * prepare and file necessary tax returns; * assist the Chapter 7 Trustee in identifying and securing the assets and records of the estate and provide forensic and valuation services concerning the Debtors' estate, if required; * assist with preparation of budgets and related items; * interact and analyze cross-border issues and transactions with the Canadian Receiver; * prepare information requested by the secured lenders; and * provide all other accounting services as may be required by Mr. Miller when necessary. Upon the Court's approval, Miller Coffey will be directed to commence work on certain issues requiring immediate attention, including, but not limited to: * meetings with the Debtors' representatives at their place of business in Portland, Oregon; * review of the Debtors' financial data; and * the preparation of budgets and reviewing and analyzing operations in connection with the Chapter 7 Trustee's limited operations of the Debtors' businesses. The Chapter 7 Trustee, George L. Miller, is a partner at Miller Coffey. The Miller Coffey professionals contemplated to provide services to the Debtors will be paid according to their hourly rates: Professional Hourly Rate ------------ ----------- Partners & Principals $300 to $490 Managers $235 to $295 Senior Accountants $170 to $230 Staff Accountants/Paraprofessionals $90 to $165 Mr. Miller maintains that Miller Coffey is a "disinterested person" as the term is defined under Section 101(14) of the Bankruptcy Code. About Pope & Talbot Based in Portland, Oregon, Pope & Talbot Inc. (Other OTC: PTBT.PK) -- http://www.poptal.com/-- is a pulp and wood products business. Pope & Talbot was founded in 1849 and produces market pulp and softwood lumber at mills in the US and Canada. Markets for the company's products include the US, Europe, Canada, South America and the Pacific Rim. The company and its U.S. and Canadian subsidiaries applied for protection under the Companies' Creditors Arrangement Act of Canada on Oct. 28, 2007. The Debtors' CCAA Stay expired on Jan. 16, 2008. The company and fourteen of its debtor-affiliates filed for Chapter 11 protection on Nov. 19, 2007 (Bankr. D. Del. Lead Case No. 07-11738). Shearman & Sterling LLP is the Debtor's bankruptcy counsel, while Laura Davis Jones, Esq. at Pachulski, Stang, Ziehl & Jones L.L.P. represents the Debtors as bankruptcy co-counsel. The Official Committee of Unsecured Creditors selected Fried, Frank, Harris, Shriver & Jacobson LLP as its bankruptcy counsel. When the Debtors filed for bankruptcy, they listed total assets of $681,960,000 and total debts of $601,090,000. Pope & Talbot Pulp Sales Europe, LLC, a subsidiary, on Nov. 21, 2007, filed an application for relief under Belgian bankruptcy laws in the commercial court in Brussels. If the Belgian court grants Pope & Talbot Europe's application, it is expected it will be liquidated through the bankruptcy proceeding. (Pope & Talbot Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * The Court extended the time within which the Debtors have the exclusive right to file a Chapter 11 plan, through and including June 2, 2008, as reported in the Troubled Company Reporter on March 17, 2008. PRO-FIT HOLDINGS: Files for Chapter 15; Wants Civil Actions Stayed ------------------------------------------------------------------ Pro-Fit Holdings, Ltd., Pro-Fit International, Ltd. and Genesis Bradford, Ltd. filed separate Chapter 15 petitions with the United States Bankruptcy Court for the Central District of California on May 21, 2008. Pro-fit and its affiliates are currently under insolvency proceedings before the U.K. High Court. Under the English Insolvency Act of 1986, the U.K. Court appointed J.N.R. Pitts and M.E.G. Saville as joint administrators of the Debtors on April 4 and 7, 2008, respectively. The Debtors are also parties to three federal civil actions before the bankruptcy court. Those actions are: Libra Securities, LLC v. Pro-Fit International, Ltd., et al., No. 2:07-cv-02520-SVW-JWJ; Tag-It Pacific, Inc. v. Pro-Fit Holdings, Ltd., No. 2:04-cv-02694- AHM-RC; and Tag-It Pacific Inc. v. Pro-Fit Holdings, Ltd., et al., No. 2:07-cv-01484-AHM-RC. In the Libra Securities action, a hearing on a summary judgment motion by Libra Securities was set for May 19, 2008. With the filing of the petitions, the administrators are seeking provisional relief in order to stay all the civil actions against the Debtors. Chapter 15 of the United States Bankruptcy Code codifies a comprehensive framework through which representatives in corporate insolvency proceedings outside the U.S. can obtain access to the United States courts. Effective October 17, 2005, Chapter 15 replaces Bankruptcy Code Section 304. Chapter 15 is much broader and more detailed than Section 304. Chapter 15 is based on the Model Law on Cross-Border Insolvency promulgated by the United Nations Commission for International Trade Law. Legislation based on the UNCITRAL Model Law on Cross- Border Insolvency has also been adopted in Eritrea, Japan (2000), Mexico (2000), Poland, Romania (2003), South Africa (2000), and within Serbia and Montenegro, Montenegro (2002). Headquartered in Leeds, U.K., Pro-Fit Holdings, Ltd.-- http://www.pro-fit-int.com/--manufactures automotive and apparel trimmings. Joel K. Belway, Esq. represented the Debtors' administrators in their restructuring efforts. When it filed for Chapter 15 bankruptcy, the Debtor listed its estimated assets and debts both to be between $100,000 to $500,000. PRO-FIT HOLDINGS: Chapter 15 Petition Summary --------------------------------------------- Chapter 15 Petitioner: J.N.R. Pitts M.E.G. Saville Lead Chapter 15 Debtor: Pro-Fit Holdings, Ltd. Unit 36 Albion Mills, Albion Road Greengates, Bradford, BD10 9TF Tel: 01274-610590 Attn: Begbies Traynor Glendevon House, Hawthorn Park, Coal Road Leeds, UK LS14 1PQ Chapter 15 Case No.: 08-17049 Debtor-affiliate filing separate a Chapter 15 petition: Entity Case No. ------ -------- Pro-Fit International, Ltd. 08-17049 Genesis Bradford, Ltd. 08-17054 Type of Business: The Debtors make automotive and apparel trimmings. See http://www.pro-fit-int.com/ Chapter 15 Petition Date: May 21, 2008 Court: Central District Of California (Los Angeles) Judge: Samuel L. Bufford Chapter 15 Petitioner's Counsel: Joel K. Belway, Esq. 235 Montgomery St. Ste. 668 San Francisco, CA 94104 Tel: (415) 788-1702 Fax: (415) 788-1517 Email: belwaypc@pacbell.net Estimated Assets Estimated Debts ---------------- --------------- Pro-Fit Holdings $100,000 to $100,000 to $500,000 $500,000 Pro-Fit International, Ltd. $100,000 to $1 million to $500,000 $10 million Genesis Bradford, Ltd. $100,000 to $100,000 to $500,000 $500,000 QUAKER FABRIC: Files Disclosure Statement and Chapter 11 Plan ------------------------------------------------------------- Quaker Fabric Corporation, its debtor-affiliates, and the Official Committee of Unsecured Creditors, as co-proponent, delivered to the United States Bankruptcy Court for the District of Delaware a proposed Disclosure Statement dated May 21, 2008, explaining a Joint Chapter 11 Plan of Liquidation. Overview of the Plan The Plan contemplates the liquidation of assets of the Debtors for the benefit of their creditors and the appointment of a liquidating agent. The Debtors remind the Court that they have sold some or all assets to certain purchasers including: -- Gordon Brother Group LLC acquired substantially all of the Debtors' assets for $27 million; -- Atlantis Charter School bought 66 acres of undeveloped land (Bleachery Pond Property)located in Fall River, Massachusetts for $2.6 million; and -- E & E Co. Ltd. got the Tupelo Lee Industrial Park in Verona, Mississippi for at $175,000. The proceeds of the sale were used to pay indebtedness owed to lenders headed by Bank of America N.A. under a revolving credit agreement entered into by the Debtors and bank in 2006. Liquidation of Assets The Debtors estimate they will have at least $452,000 in cash and a book value of $4.3 million in uncollected accounts receivable by the plan's effective date. A liquidating agent will reduce non-cash assets of the Debtors to cash to make distributions and consummate the plan. The liquidating trustee is expected to sell, assign, transfer and, to the possible extent, dispose of the Debtors' respective assets at public auction after the plan's effective date. RAS Management Advisors LLC will serve as liquidating agent for the Debtors. Equity of Non-Debtor Subsidiaries The Debtors conducted certain foreign operations through their non-debtor subsidiaries comprised of (i) Quaker Fabric Mexico S.A. de C.V., (ii) Quaker Textil do Brasil Ltda., and Quaker Textile Corporation. As of the Debtors' bankruptcy filing, the operations and affairs of each of the non-debtor subsidiaries have been liquidated. The Debtors have received at least $1.1 million as dividend from one of their non-debtor subsidiaries. Initial Distribution On the plan's effective date, the liquidating agent, on behalf of the Debtors, will pay in cash in full all (i) administrative expense claims, (ii) priority tax claims, and (iii) secured claims. Holders of unsecured claims will receive their pro rata share of available cash, if any. Treatment of Claims and Interests Types of Estimated Estimated Class Claims Treatment Amount Recovery ----- -------- --------- ---------- --------- unclassified administrative $1,000,000 100% claims unclassified priority tax $200,000 100% claims 1 priority unimpaired $155,386 100% claims 2 secured unimpaired $0 N/A claims 3 unsecured impaired $25,000,000 0%-10% claims 4 equity impaired Not Estimated 0% interest A full-text copy of the Proposed Disclosure Statement is available for free at http://ResearchArchives.com/t/s?2c5e A full-text copy of the Proposed Chapter 11 Plan of Liquidation is available for free at http://ResearchArchives.com/t/s?2c5f About Quaker Fabric Based in Fall River, Mass., Quaker Fabric Corp. (NASDAQ: QFAB) -- http://www.quakerfabric.com/-- designs, manufactures, and markets woven upholstery fabrics primarily for residential furniture manufacturers and jobbers. It also develops and manufactures specialty yarns, including chenille, taslan, and spun products for use in the production of its fabrics, as well as for sale to distributors of craft yarns, and manufacturers of homefurnishings and other products. The company is one of the largest producers of Jacquard upholstery fabrics. Quaker Fabric sells its products through sales representatives andindependent commissioned sales agents in the United States, Canada, Mexico, and internationally. The company and its affiliate, Quaker Fabric Corporation of Fall River, filed for chapter 11 protection on Aug. 16, 2007 (Bankr. D. Del. Case No. 07-11146). John D. Sigel, Esq. at Wilmer Cutler Pickering Hale and Dorr LLP and Joel A. Waite, Esq. at Young Conaway Stargatt & Taylor LLP are co-counsels to the Debtors. Epiq Bankruptcy Solutions is the Debtors' claims agent. The Official Committee of Unsecured Creditors has selected Shumaker, Loop & Kendrick, LLP, as its bankruptcy counsel and Benesch, Friedlander, Coplan & Aronoff, LLP, as co-counsel. The Debtors' schedules reflect total assets of $41,375,191 and total liabilities of $54,435,354. QUAKER FABRIC: Wants Plan Filing Period Extended to June 18 ----------------------------------------------------------- Quaker Fabric Corporation and its debtor-affiliates ask the United States Bankruptcy Court for the District of Delaware to further extend the exclusive periods to: i) file a Chapter 11 plan until June 18, 2008, and ii) solicit acceptances of that plan until Aug. 18, 2008. Joseph M. Barry, Esq., at Young, Conaway, Stargatt & Taylor, LLP, in Wilmington, Delaware, say the Debtors together with the Official Committee of Unsecured Creditors is working out the final issues of a proposed joint Chapter 11 liquidating plan. The extension of the exclusive plan filing period, which expired on May 19, 2008, proves to short to allow both parties to craft and document a plan, Mr. Barry asserts. For the benefit of their creditors, the Debtors need more time to put the last touches of the proposed plan and resolve a few remaining issues in these cases, Mr. Barry says. A hearing is set for June 13, 2008, at 2:00 p.m., to consider the Debtors' request. Objections, if any, are due June 6, 2008, at 4:00 p.m. About Quaker Fabric Based in Fall River, Mass., Quaker Fabric Corp. (NASDAQ: QFAB) -- http://www.quakerfabric.com/-- designs, manufactures, and markets woven upholstery fabrics primarily for residential furniture manufacturers and jobbers. It also develops and manufactures specialty yarns, including chenille, taslan, and spun products for use in the production of its fabrics, as well as for sale to distributors of craft yarns, and manufacturers of homefurnishings and other products. The company is one of the largest producers of Jacquard upholstery fabrics. Quaker Fabric sells its products through sales representatives andindependent commissioned sales agents in the United States, Canada, Mexico, and internationally. The company and its affiliate, Quaker Fabric Corporation of Fall River, filed for chapter 11 protection on Aug. 16, 2007 (Bankr. D. Del. Case No. 07-11146). John D. Sigel, Esq. at Wilmer Cutler Pickering Hale and Dorr LLP and Joel A. Waite, Esq. at Young Conaway Stargatt & Taylor LLP are co-counsels to the Debtors. Epiq Bankruptcy Solutions is the Debtors' claims agent. The Official Committee of Unsecured Creditors has selected Shumaker, Loop & Kendrick, LLP, as its bankruptcy counsel and Benesch, Friedlander, Coplan & Aronoff, LLP, as co-counsel. The Debtors' schedules reflect total assets of $41,375,191 and total liabilities of $54,435,354. RCS-CHANDLER: Unsecured Creditors Unwilling to Serve on Committee ----------------------------------------------------------------- Ilene Lashinsky, the United States Trustee for Region 14, said she cannot form an official committee of unsecured creditors to serve in the bankruptcy case of RCS-Chandler LLC, Carolyn Okomo of The Deal says. The U.S. Trustee told the U.S. Bankruptcy Court for the District of Arizona that creditors holding about $1.5 million unsecured claims against the Debtor must engage and pay for their own counsel and professionals, The Deal relates. The U.S. Trustee added that no unsecured creditor stepped in for the appointment, according to the report. The Deal relates that among the Debtor's largest unsecured creditors are DMJMH+N Inc., which is owed $851,472; Gould Evans Associates LLC, which is owed $606,717; QuaesTel Inc., which is owed $79,240; and Spark Design LLC, which is owed $125,000. The Debtor's secured creditors are Point Center Financial Inc., which is owed $25.4 million, and affiliate Chandler RCS Hotel Associates, which is owed $957,881, The Deal adds. 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. As reported in the Troubled Company Reporter, the U.S. Trustee will convene a meeting of creditors of RCS-Chandler at 4:30 p.m., on May 27, 2008. About RCS-Chandler Headquartered in Phoenix, Arizona, RCS-Chandler LLC, owned by Jeff Cline, constructs and develops hotels. The company filed for Chapter 11 protection on April 11, 2008 (Bankr. D. Ariz. Case No.08-04021). Michael R. Walker, Esq., at Schian Walker P.L.C. represents the Debtor in its restructuring efforts. When the Debtor filed for protection against its creditors, it listed assets and debts between $50 million and $100 million. The Deal reported that the Debtor had $40 million in assets and $61.6 million in debts. Prior to the bankruptcy filing, owner Jeffrey Cline had been marketing RCS-Chandler, The Deal quotes McClatchy-Tribune Regional News as reporting. RESIDENTIAL CAPITAL: Noteholders Tender $8.6 Billion in Old Notes ------------------------------------------------------------- Residential Capital, LLC, released the interim results of its private exchange offers and cash tender offers for U.S. dollar equivalent $14.0 billion in aggregate principal amount of its outstanding debt. As of 5:00 p.m., New York City time, on Wednesday, May 21, 2008, approximately $2.6 billion aggregate principal amount (or 80%) of old notes that mature in 2008-2009 had been validly tendered and approximately U.S. dollar equivalent $6.0 billion aggregate principal amount (or 63%) of old notes that mature in 2010-2015 had been validly tendered. As of the early delivery time, the outstanding principal amount of each series of old notes and the principal amount of old notes of each series tendered in the offers (including as a percentage of the outstanding principal amount). Outstanding Principal Principal Amount Title of Old Notes Amount Tendered ------------------ ----------- ---------------- Old 2008-2009 Notes Floating Rate Notes due 2008 $398,848,000 $287,171,000 72.0% 8.125% Notes due 2008 $684,014,000 $521,045,000 76.2% Floating Rate Notes due April 2009 $714,000,000 $651,422,000 91.2% Floating Rate Notes due May 2009 $949,000,000 $816,505,000 86.0% Floating Rate Subordinated Notes due 2009 $576,961,000 $371,513,000 64.4% -------------- -------------- Total $3,322,823,000 $2,647,656,000 79.7% Old 2010-2015 Notes 8.375% Notes due 2010 $2,154,500,000 $901,597,000 41.8% Floating Rate Notes due 2010 EUR542,800,000 EUR181,815,000 33.5% 8.000% Notes due 2011 $1,243,500,000 $1,025,694,000 82.5% 7.125% Notes due 2012 EUR550,000,000 EUR438,702,000 79.8% 8.500% Notes due 2012 $928,500,000 $833,527,000 89.8% 8.500% Notes due 2013 $1,604,500,000 $724,667,000 45.2% 8.375% Notes due 2013 GBP348,920,000 GBP307,839,000 88.2% 9.875% Notes due 2014 GBP363,000,000 GBP297,730,000 82.0% 8.875% Notes due 2015 $486,500,000 $335,025,000 68.9% -------------- -------------- Total U.S. Dollar Equivalent $9,537,274,896 $5,987,350,936 62.8% In addition, approximately $853.4 million aggregate principal amount of Floating Rate Notes due June 9, 2008 were tendered for cash as of the early delivery time. As previously announced, ResCap has received requisite consents as described in the informational documents relating to the offers and has entered into supplemental indentures adopting the proposed amendments to the indentures under which the old notes were issued. The amendments to the old notes release the subsidiary guarantees of ResCap's obligations under the old notes and eliminate certain of the restrictive covenants and events of default in the indentures. Accordingly, claims with respect to all new notes issued in the exchange offers will be effectively senior to claims with respect to unexchanged old notes to the extent of the value of all assets of the subsidiary guarantors as well as the collateral securing the new notes. Based upon tenders to date and subject to consummation of the offers, approximately $5.7 billion aggregate principal amount of new notes would be issued in exchange for old notes. 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. Old notes tendered pursuant to the offers may no longer be withdrawn. The early delivery time (as defined in the informational documents relating to the offers) has passed. Old notes tendered after the early delivery time are not entitled to the early delivery payment described in the informational documents relating to the offers. The offers are subject to significant conditions that are further described in the informational documents. 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 new notes will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), or any other applicable securities laws and, unless so registered, the new notes may not be offered, sold, pledged or otherwise transferred within the United States or to or for the account of any U.S. person, except pursuant to an exemption from the registration requirements thereof. Accordingly, the new notes are being offered and issued only (i) in the United States to "qualified institutional buyers" (as defined in Rule 144A under the Securities Act), or QIBs, and (ii) outside the United States to non-U.S. persons (as defined in Regulation S under the Securities Act) who are "qualified investors" within the meaning of Article 2.1(e) of the Prospectus Directive as adopted within each relevant member state of the European Economic Area, in a private transaction in reliance upon an exemption from the registration requirements of the Securities Act. ResCap will enter into a registration rights agreement pursuant to which, under certain circumstances, it will agree to file an exchange offer registration statement or a shelf registration statement with respect to the new notes. The complete terms and conditions of the offers are set forth in ResCap's Offering Memorandum and Consent Solicitation Statement dated May 5, 2008, as supplemented on May 14, 2008 (the "offering memorandum"), and the related letter of transmittal and consent. 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). 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. * * * As reported in the Troubled Company Reporter on May 6, 2008, 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. All ratings remain under review for downgrade. 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. Fitch Ratings downgraded Residential Capital LLC's Issuer Default Rating to 'C' from 'BB-' following the company's debt exchange offer announcement. 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. SABINE PASS: Moody's Cuts Rating on Parent's Liquidity Position --------------------------------------------------------------- Moody's Investors Service downgraded Sabine Pass LNG, LP's senior secured notes due 2013 and 2016 to B2 from Ba3. The rating outlook is negative. "The downgrade takes into account Moody's expectation that Sabine's parent, Cheniere Energy Inc., will likely face a stressed liquidity position starting in 2009 unless Cheniere is able to generate sizeable cash flow through execution of a strategic transaction or through a major shift in the global LNG business", said Clifford Kim, Analyst at Moody's. He also added, "Cheniere's 90.6% ownership position in Sabine and extensive contractual arrangements serve to link Cheniere's and Sabine's credit quality". In Moody's view, Cheniere is likely to face significant pressure on its liquidity position by early 2009 since Cheniere's LNG marketing activities are anticipated to generate substantially lower than expected cash flows. Moody's expects continued high international demand for LNG, growth in US regasification capacity and construction delays in natural gas liquefaction will lead to limited prospects for Cheniere's merchant LNG marketing business over the next several years. Additionally, Cheniere's constrained access to capital markets further contributes to its dwindling liquidity position. While Cheniere's recently executed $95 million credit facility provides incremental cash, the credit facility's high cost and short eighteen-month tenor provide only marginal credit support. Moody's expects Cheniere will utilize a substantial portion of its unrestricted cash to pay for capital expenditures, debt service, and corporate overhead in 2008. Cheniere had unrestricted cash totaling approximately $142 million at March 31, 2008 and $297 million at Dec. 31, 2007. Moody's observes that Sabine represents most of Cheniere's consolidated cash flows and operating assets. Additionally, Sabine has extensive contractual arrangements with Cheniere and its affiliates including the terminal use and operations and maintenance agreements. These factors serve as strong incentives to bring Sabine into a possible bankruptcy of Cheniere in order for Cheniere to better control its estate. That being said, Moody's also recognizes certain legal ring fencing provisions at Sabine including an independent director and separateness requirements. These ring fencing provisions constitute layers of protection that could insulate Sabine from a potential Cheniere bankruptcy; however, Moody's does not consider these provisions sufficient to fully insulate Sabine and Cheniere's credit quality will continue to have implications to Sabine's rating. The negative outlook will consider Cheniere's ability to improve its liquidity position and cash flow within the next six months. Sabine's rating could come under additional negative pressure if Cheniere utilizes its unrestricted cash faster than expected or is unable to improve it's liquidity position during this period to meet expected cash uses in 2009 and onward. Additionally, Moody's will continue to evaluate implications of Cheniere's financial situation on Sabine's operational performance and Sabine's ability to complete Phase 2 construction, which is scheduled to be finished toward the middle of 2009. A rating upgrade is unlikely; however, a positive credit event could include an improvement in Cheniere's liquidity such that Cheniere is able to comfortably meet all its obligations over the next several years without significant reliance on merchant LNG related cash flows or external sources of cash. Additionally, Sabine's rating could stabilize or improve if Sabine is able to replace Cheniere with a creditworthy third party both in terms of ownership and contractual arrangements. Sabine Pass LNG L.P. was formed in 2004 to construct, own and operate a liquefied natural gas receiving terminal with an aggregate regasification capacity of 4 Bcf/d. Sabine has signed three 20-year Terminal Use Agreements for 100% of its regasification capacity on a "take or pay" basis. Sabine is 90.6%, indirectly-owned by Cheniere Energy, Inc (not rated). SENTRY SELECT: Unitholders Approve Resolution to Dissolve Fund -------------------------------------------------------------- C.A. Bancorp Inc., as manager of the Sentry Select Total Strategy Fund, disclosed that the unitholders of the fund did not approve the proposed amendments to the fund's trust agreement by the required two-thirds majority but did approve a resolution authorizing the termination of the fund. The special meeting of Total Strategy unitholders was held on May 20, 2008. As required by the fund's trust agreement, the manager will provide at least 90 days written notice to the fund's Trustee of the termination date of the fund. The manager intends to send this termination notice forthwith. The Trustee is obligated to send to the fund's unitholders written notice of the commencement of the winding-up of the fund and the termination date at least 30 days prior to the termination date. The manager and the Trustee intend to instruct Sentry Select Capital Corp., as investment manager, to sell and convert to cash, to the extent possible and in an orderly manner, the property of the fund in an attempt to complete the conversion to cash immediately prior to the termination date. The manager believes that at least 70% of the fund's assets are reasonably liquid in nature and intends to complete the liquidation of this portion of the fund's assets prior to the termination date. In addition, the manager intends to begin the process of liquidating the less liquid portion of the fund's assets including the fund's private portfolio of investments. The manager expects that the process of liquidating the private portfolio will extend beyond the termination date. The manager may, in its discretion, upon not less than 30 days prior written notice to unitholders, extend the termination date by a maximum of 180 days if the manager would be unable to convert all of the assets of the fund to cash and the manager determines that it would be in the best interest of unitholders to do so. The manager intends to provide unitholders with a further update on the status of the liquidation of the fund's assets and termination of the fund by mid-June 2008. About C.A. Bancorp Inc. C.A. Bancorp (TSX:BKP) is a publicly traded Canadian merchant bank and alternative asset manager that provides investors with access to a range of private equity and other alternative asset class investment opportunities. C.A. Bancorp is focused on investments in small- and middle-capitalization public and private companies, with emphasis on the industrials, real estate, infrastructure and financial services sectors. About Sentry Select Total Strategy Fund Sentry Select Total Strategy Fund's units trade on the TSX under the symbol: TSF.UN. The fund's units closed at a market price of $8.41 per unit on May 20, 2008, which represents a 19% discount to the recently reported net asset value per unit as of May 15, 2008. SOUTH DAKOTA: A.M. Best Chips FS Rating to B(Fair) from B+(Good) ---------------------------------------------------------------- A.M. Best Co. has downgraded the financial strength rating to B(Fair) from B+(Good) and issuer credit rating to "bb+" from "bbb-"of South Dakota State Medical Holding Co., Inc dba DAKOTACARE. The outlook for both ratings is stable. The ratings of DAKOTACARE reflect decreased capitalization and declining group membership. The offsetting rating factors are good underwriting performance, new lines of business growth and strong network throughout South Dakota. DAKOTACARE has experienced a sharp increase in revenue from the Medicare Advantage Specialty Needs business, which is expected to significantly reduce the level of risk-based capitalization. In addition, the profitability of the Medicare Advantage business is lower compared to traditional DAKOTACARE operations, which may further challenge capital growth. In addition, the competitive pressure and willingness of other carriers to sacrifice profitability for growth led to DAKOTACARE's commercial membership losses for the last three years; however, the company expects the growth in individual product to offset the losses in group enrollment. DAKOTACARE has posted underwriting gains in commercial lines of business for the last five years. The company remains committed to rationale pricing and stable profit margins. Furthermore, DAKOTACARE significantly expanded the reach of its third party administrator operations, leading to greater revenue diversification and growth. SPECTRUM BRANDS: $692.5MM Salton Deal Cues Fitch to Hold Ratings ---------------------------------------------------------------- Following the announcement that Spectrum Brands has signed a definitive agreement with Salton, Inc. for the sale of its Global Pet Business for approximately $692.5 million in cash and an aggregate principal amount of Spectrum's subordinated debt securities equal to $222.5 million, Fitch affirms Spectrum Brands, Inc. ratings as: -- Issuer Default Rating at 'CCC'; -- $1 billion term loan B at 'B/RR1'; -- $225 million ABL at 'B/RR1'; -- EUR350 million term loan at 'B/RR1'; -- $700 million 7.4% senior sub note at 'CCC-/RR5'; -- $2.9 million 8.5% senior sub note at 'CCC-/RR5'; -- $347 million 11.25% variable rate toggle senior sub note at 'CCC-/RR5' The Rating Outlook is Negative. The ratings reflect SPC's high leverage and thin coverage metrics on a pro-forma basis despite the significant decline in debt levels expected upon the transaction close. On a pro-forma last 12-month basis adjusting for the Lawn & Garden segment which is now being recorded as part of continuing operations, leverage would improve modestly to 8.4 times from approximately 8.9x at March 31, 2008 and interest coverage on an EBITDA basis will remain basically flat at 1.25x. Overall, the change in credit metrics shows marginal improvement. Further, Pet represents approximately a third of EBITDA before corporate overhead and is a steady year-round performer which improves the company's earnings quality. While the remaining businesses have offsetting seasonality, the company's business profile is not as strong with the sale of the Pet segment, in Fitch's view. The rating takes into account Spectrum's adequate liquidity, more financial flexibility within its indenture covenants, and an expectation that operations in the remaining businesses will be sustained. The Negative Outlook encompasses the deterioration in financial and credit protection measures since 2005, a modest increase in business risk with this transaction, and the potential that other actions may take place as the company executes its plans to improve its capital structure, which may include other asset sales. Fitch will be reviewing Spectrum's performance over the summer and holiday season to gain a better understanding of the company's profitability and cash flow going forward. Spectrum is a global branded consumer products company with operations in seven product categories: consumer batteries; lawn and garden; pet supplies; electric shaving and grooming; household insect control; electric personal care products; and portable lighting. SPECTRUM BRANDS: Salton Deal Cues S&P to Put Ratings Under Watch ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on Atlanta- based Spectrum Brands Inc., including the 'CCC+' long-term corporate credit rating, on CreditWatch with positive implications. The CreditWatch status indicates that S&P could either raise or affirm the ratings following the completion of its review. Approximately $2.6 billion of debt was outstanding as of March 30, 2008. "The rating action follows the company's announcement that it has signed a definitive agreement with Salton Inc. and its wholly owned subsidiary, Applica Pet Products LLC, to sell Spectrum's global pet business for $915 million in total or a 10x EBITDA multiple," said Standard & Poor's credit analyst Patrick Jeffrey. S&P expect the transaction to improve the company's leverage to about 8x from the mid-8x area and enhance financial flexibility. In addition, the company has demonstrated operating and liquidity improvement over the past several quarters. However, the sale of Spectrum's pet business will result in a less diversified business portfolio. Spectrum Brands is a leading global branded consumer products company with brands that include Rayovac and Remington. Standard & Poor's will meet with management to discuss the impact of this transaction on the company's business profile, capital structure, and liquidity. S&P are unlikely to raise the corporate credit rating more than one notch as a result of this review. STEVEN CARROLL: Voluntary Chapter 11 Case Summary ------------------------------------------------- Debtor: Steven W. Carroll 3459 Hill Forest Trail Acworth, GA 30101 Bankruptcy Case No.: 08-68657 Chapter 11 Petition Date: May 6, 2008 Court: Northern District of Georgia (Atlanta) Judge: Mary Grace Diehl Debtor's Counsel: Edward F. Danowitz, Jr., Esq. Danowitz & Associates, PC 300 Galleria Parkway, NW, Suite 960 Atlanta, GA 30339 Tel: (770) 933-0960 Total Assets: $10 million to $50 million Total Debts: $1 million to $10 million The Debtor did not file a list of his 20 largest unsecured creditors. SYMBION INC: Moody's Rates Unsecured Notes Caa1; Outlook Negative ----------------------------------------------------------------- Moody's Investors Service assigned a Caa1 rating to Symbion Inc.'s offering of approximately $180 million of senior unsecured PIK toggle notes. The proceeds of the senior unsecured notes are expected to be used to refinance the $175 million bridge loan facility that was put in place in conjunction with the acquisition of the company by Crestview Partners, L.P. on August 23, 2007. Moody's also changed the rating outlook to negative from stable and affirmed the company's existing ratings, including the B2 Corporate Family Rating and Probability of Default Rating and the Ba3 rating on Symbion's senior secured credit facility. Concurrently, Moody's downgraded the company's Speculative Grade Liquidity Rating to SGL-3 from SGL-2. The change in the rating outlook reflects the reduction in the pace of expected improvement in the credit metrics of the company. Recent challenges in the form of weak volume trends and out-of- network issues with payors in a number of the company's key markets have prevented the company from meeting expected levels of revenue and EBITDA growth. Moody's anticipates that these issues could continue into 2008 resulting in increased pressure on profitability and limiting improvements in key metrics, such as interest coverage, adjusted leverage and cash flow coverage of debt. Moody's also expects that the company will continue to elect the PIK option on the new notes in order to fund investments in development and acquisitions in excess of operating cash flow. Therefore, Moody's does not expect the company to repay a meaningful amount of debt in the near term. The downgrade of Symbion's Speculative Grade Liquidity Rating to SGL-3 from SGL-2 reflects the weakening of the company's liquidity position, characterized by the deterioration of headroom in the compliance with the financial covenant included in the credit agreement. Moody's believes the covenant requirement could limit availability to undrawn amounts of the revolver over the next four quarters. Moody's also anticipates that the company could invest in excess of available cash flow over the next year. The affirmation of the B2 Corporate Family Rating reflects our expectation that as one of the larger operators of ambulatory surgery centers, the company is well positioned to benefit from the continued movement of services to the outpatient setting. Further, despite recent challenges, the ratings consider the company's attractive margin and cash flow characteristics. Ratings assigned: * $179.84 million senior unsecured PIK toggle notes due 2015, Caa1 (LGD5, 84%) Ratings affirmed/LGD assessments revised: * $100 million senior secured revolving credit facility, to Ba3 (LGD3, 30%) from Ba3 (LGD2, 29%) * $125 million senior secured term loan A, to Ba3 (LGD3, 30%) from Ba3 (LGD2, 29%) * $125 million senior secured term loan B, to Ba3 (LGD3, 30%) from Ba3 (LGD2, 29%) * Corporate Family Rating, B2 * Probability of Default Rating B2 Ratings downgraded: * Speculative Grade Liquidity Rating, to SGL-3 from SGL-2 The ratings outlook was changed to negative from stable. Symbion, headquartered in Nashville, Tennessee, owns and operates a network of short-stay surgical facilities providing non- emergency surgical procedures in various specialties, including orthopedics, pain management, gastroenterology and ophthalmology. As of March 31, 2008, Symbion owned and operated 56 ambulatory surgery centers and three surgical hospitals. The company also managed eight additional surgery centers and two physician networks. For the twelve months ended March 31, 2008, the company recognized revenues of approximately $306 million. TIME WARNER: Fitch Holds BB+ Rating on Redeemable Preferred Stock ----------------------------------------------------------------- Fitch Ratings has affirmed the 'BBB' Issuer Default Rating assigned to Time Warner Cable, Inc. and its indirect wholly owned subsidiary Time Warner Entertainment Co., L.P. Fitch has also affirmed the individual issuer ratings of TWC and its subsidiaries as outlined below. The Rating Outlook is Stable. Approximately $13.5 billion of debt and preferred equity outstanding as of March 31, 2008 is affected. Fitch's action follows Time Warner, Inc.'s announcement that the company intends to distribute TWX's remaining ownership interest in TWC to TWX shareholders in a tax- efficient spin-off, split-off or a combination of both, as discussed in a separate press release ('Fitch Affirms Time Warner's IDR at 'BBB' on Cable Split; Outlook Stable'). In conjunction with TWC's separation from TWX, TWC is expected to pay its shareholders a $10.85 billion special dividend. The closing of the separation transaction is subject to, among other things, receipt of regulatory approvals and a tax opinion from the IRS. The separation transaction along with the payment of the special dividend is expected to occur during fourth quarter-2008. TWC expects to fund the special dividend with the proceeds from a $1.9 billion draw from its existing revolver and a new one year (with a one year extension upon TWC's request) $9 billion bridge loan. Fitch expects the bridge loan will be refinanced with the net proceeds from senior unsecured debt offerings during the course of 2008 and 2009. In the event that TWC is unable to refinance the bridge facility with permanent financing, TWX has committed to provide TWC a senior unsecured supplemental loan facility of up to $3.5 billion for two years for the repayment of the bridge. The supplemental loan facility, if utilized, along with the bridge loan will rank pari passu with TWC's existing senior unsecured debt. The bridge facility and the supplemental loan facility are expected to contain the same financial covenants that exist within TWC's $6 billion revolving credit facility, principally the 5.0 times maximum leverage covenant. With the announcement, Fitch will rate TWC on a stand-alone basis. After considering the additional debt TWC expects to incur to fund the special dividend, TWC's credit protection metrics will be relatively weak within the rating category when the separation transaction closes later in 2008. TWC's leverage metric as of the end of the first quarter was 2.3x; however, Fitch anticipates TWC's leverage will increase to approximately 3.75x by year-end 2008. Fitch expects that TWC will use a substantial amount of its free cash flow generation to reduce leverage to a level more reflective of the current rating. Fitch believes that TWC is positioned to generate material amounts of free cash flow during the ratings horizon and that by YE 2009, TWC's leverage metric will improve to within the company's longer term target of approximately 3.25x. Overall, Fitch's ratings for TWC reflect: -- Its size as the second-largest cable multiple systems operator (fourth-largest multi- channel video program distributor) in the United States; -- Strong subscriber clustering profile; and -- The company's growing revenue diversity owing to the success of TWC's 'Triple Play' service offering. Within the context of escalating competitive pressures, the ratings incorporate Fitch's expectation that the company will continue to generate solid operating metrics, sustainable EBITDA and free cash flow growth over Fitch's rating horizon. The expected turnaround of TWC's Los Angeles and Dallas cable systems will contribute to the company's solid operating performance. >From Fitch's perspective, TWC's scale and system clustering provide the company with competitive advantages in terms of driving higher operating efficiencies through its cable plant, taking cost out of customer premise equipment, lowering programming costs, and positioning TWC to develop and enhance its product offerings that can differentiate the company's offering from competition. Rating concerns center on: -- TWC's ability to maintain its relative competitive position given the changing competitive and economic environment; -- Growing retail revenues beyond its core 'Triple Play' service offering; -- Expanding into the commercial services market; -- Efficiently managing its cable plant bandwidth to maximize desirable high-definition content; and -- Continuing to balance investing in its business with improving its overall credit profile. During 1Q'08, TWC's free cash flow generation increased 19% to approximately $340 million. TWC expects 2008 free cash flow to grow 40% relative to 2007 results. TWC's liquidity position is supported by expected free cash flow generation as well as available borrowings from the company's $6 billion revolver. After considering the funding for the special dividend, Fitch anticipates that TWC will have in excess of $2 billion of capacity under its revolver as of YE 2008, increasing thereafter. The company has approximately $600 million of debt scheduled to mature during 2008. Fitch expects TWC to retire the scheduled maturity with free cash flow and proceeds from its revolver. Once the $9 billion bridge loan is refinanced, the company's refinancing risk is minimal as the next material maturity is 2011 when the term loan matures. The Stable Outlook reflects Fitch's expectation that the company's credit protection metrics will strengthen following the closing of the separation transaction, and that TWC's financial policy will continue to reflect a 'BBB' rating. Additionally, the Stable Outlook also incorporates Fitch's expectation that TWC's operating profile will not materially decline during the near term in the face of competition and slowing economic conditions. Fitch has affirmed these ratings: Time Warner Cable, Inc. -- IDR at 'BBB'; -- Senior unsecured debt at 'BBB'; -- Short Term at 'F2'. Time Warner Entertainment, LP -- IDR at 'BBB'; -- Senior unsecured debt at 'BBB'. Time Warner NY Cable, LLC -- Mandatory redeemable preferred stock at 'BB+'. TRIAD FINANCIAL: S&P Changes B Rating's Outlook to Negative ----------------------------------------------------------- Standard & Poor's Ratings Services changed the outlook on its 'B' long-term counterparty credit rating on Triad Financial Corp. to negative from stable. "The outlook change reflects the company's weak earnings and difficulty in obtaining stable, long-term funding for new automobile receivables," said Standard & Poor's credit analyst Jeffrey Zaun. The recent amendment to the company's warehouse lending agreement with Citigroup Inc. will eliminate Triad's ability to fund new originations from that facility after June 30, 2008. The company has not attempted to borrow under its remaining $500 million warehouse facility with Barclays Bank. If that long-term financing is unavailable, or if its terms and pricing undercut the interest margin Triad can earn on loans, the company could stop originating new loans after June 30, 2008. S&P's rating on Triad is driven by the firm's concentration in the cyclical auto market, its significant leverage, and the high credit-risk profile of its subprime lending business. Offsetting factors include its market position and geographic diversity. The current funding difficulties occurred against the backdrop of efforts by the company to turn around asset quality and earnings metrics that had weakened in 2007. The turnaround efforts, which centered on tightened lending standards, drove improved asset quality and a return to profitability during first-quarter 2008. The shrinking portfolio and positive cash flow from operations have also buttressed the company's liquidity. Management's response to funding difficulties has been prudent. Even if the firm stops new originations, we believe that its cash flow from operations and the cash available from its residual facilities will preclude severe funding pressure through 2008. S&P could downgrade Triad if asset quality deteriorates (in excess of seasonal patterns), if the firm is unable to obtain a new residual facility, or if profits from the firm's shrinking portfolio call into question its ability to service its debt or pay off its senior notes due in 2013. S&P could revise the outlook to stable under two scenarios. First, if Triad can obtain stable funding for its new originations, S&P would revise the outlook to stable. In this case, S&P would expect management to grow the business as economic conditions permit. Second, even if funding difficulties persist S&P could revise the outlook to stable if management can sustain recent improvements in asset quality and maintain profitability through 2008. UAL CORP: JPMorgan Analyst Anticipates Airline Bankruptcies ----------------------------------------------------------- Christopher Hinton at MarketWatch reports that Jamie Baker, an analyst at J.P. Morgan, on Monday said U.S. airline industry stands to post a collective $7,200,000,000 in operating losses in 2008. The results would be wider than an initial forecast of $4,600,000,000 loss, the analyst said. According to MarketWatch, Mr. Baker, in his research note, said though investors, management and analysts may talk about airlines acting collectively to reduce capacity to firm up revenue, the reality is that they are more likely to dig in and try to outlast each other. MarketWatch relates the JPMorgan analyst noted that capacity cuts have falled far short of what executives have said are necessary. Mr. Baker, MarketWatch says, indicated that another round of airline bankruptcy -- even among the legacy carriers -- is a question of when rather than if. According to the report, Mr. Baker said U.S. Airways has the highest risk of bankruptcy, followed by Northwest Airlines, United Air Lines' parent UAL Corp., AMR Corp., JetBlue, Continental Airlines, AirTran, Delta Air Lines, Alaska Air Lines and Southwest Airlines. Mr. Baker, the report adds, said credit card companies could pose more significant risk to airlines than debt. He explained the credit card companies could impose unilateral holdbacks, which will toll on a carrier's liquidity and cash balances. Bloomberg News on Wednesday reported that analysts at Soleil Securities Corp. say there's a potential Chapter 11 filing by AMR by 2009, and UAL some time after that. In the Red Except for Southwest, the major U.S. Airlines posted net losses for the period ended March 31, 2008: Net Income for Period Ended ----------------------------------- March 31, 2008 March 31, 2007 -------------- -------------- US Airways ($236,000,000) $66,000,000 Northwest ($4,139,000,000) ($292,000,000) UAL ($537,000,000) ($152,000,000) AMR ($328,000,000) $81,000,000 JetBlue ($8,000,000) ($22,000,000) Continental ($80,000,000) $22,000,000 AirTran ($34,813,000) $2,158,000 Delta ($6,261,000,000) $155,000,000 Alaska Air ($24,000,000) ($3,700,000) Southwest $34,000,000 $93,000,000 Balance Sheet at March 31, 2008 ----------------------------------- Total Assets Total Debts ------------ ----------- US Airways $8,013,000,000 $6,435,000,000 Northwest $21,032,000,000 $17,746,000,000 UAL $23,813,000,000 $21,647,000,000 AMR $28,766,000,000 $26,277,000,000 JetBlue $6,050,000,000 $4,721,000,000 Continental $12,542,000,000 $11,071,000,000 AirTran $2,198,009,000 $1,783,470,000 Delta $26,755,000,000 $22,804,000,000 Alaska Air $4,379,800,000 $3,520,600,000 Southwest $18,031,000,000 $10,846,000,000 On April 14, Northwest announced an agreement to merge with Delta. United and US Airways are also in talks for a possible merger. Continental was initially eyed as a top merger partner for United. Small and medium-sized carriers have tumbled one after the other into bankruptcy. Aloha Airlines commenced bankruptcy proceedings in Hawaii in March and later ceased operations. ATA Airlines Inc. ceased operations and filed for chapter 11 protection on April 2, and Skybus Airlines Inc. tumbled into bankruptcy on April 5. Frontier Airlines went belly up and filed for chapter 11 on April 14. EOS Airlines filed a chapter 11 petition on April 26. 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 Eugene R. 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; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) US AIRWAYS: JPMorgan Analyst Anticipates Airline Bankruptcies ------------------------------------------------------------- Christopher Hinton at MarketWatch reports that Jamie Baker, an analyst at J.P. Morgan, on Monday said U.S. airline industry stands to post a collective $7,200,000,000 in operating losses in 2008. The results would be wider than an initial forecast of $4,600,000,000 loss, the analyst said. According to MarketWatch, Mr. Baker, in his research note, said though investors, management and analysts may talk about airlines acting collectively to reduce capacity to firm up revenue, the reality is that they are more likely to dig in and try to outlast each other. MarketWatch relates the JPMorgan analyst noted that capacity cuts have falled far short of what executives have said are necessary. Mr. Baker, MarketWatch says, indicated that another round of airline bankruptcy -- even among the legacy carriers -- is a question of when rather than if. According to the report, Mr. Baker said U.S. Airways has the highest risk of bankruptcy, followed by Northwest Airlines, United Air Lines' parent UAL Corp., AMR Corp., JetBlue, Continental Airlines, AirTran, Delta Air Lines, Alaska Air Lines and Southwest Airlines. Mr. Baker, the report adds, said credit card companies could pose more significant risk to airlines than debt. He explained the credit card companies could impose unilateral holdbacks, which will toll on a carrier's liquidity and cash balances. In the Red Except for Southwest, the major U.S. Airlines posted net losses for the period ended March 31, 2008: Net Income for Period Ended ----------------------------------- March 31, 2008 March 31, 2007 -------------- -------------- US Airways ($236,000,000) $66,000,000 Northwest ($4,139,000,000) ($292,000,000) UAL ($537,000,000) ($152,000,000) AMR ($328,000,000) $81,000,000 JetBlue ($8,000,000) ($22,000,000) Continental ($80,000,000) $22,000,000 AirTran ($34,813,000) $2,158,000 Delta ($6,261,000,000) $155,000,000 Alaska Air ($24,000,000) ($3,700,000) Southwest $34,000,000 $93,000,000 Balance Sheet at March 31, 2008 ----------------------------------- Total Assets Total Debts ------------ ----------- US Airways $8,013,000,000 $6,435,000,000 Northwest $21,032,000,000 $17,746,000,000 UAL $23,813,000,000 $21,647,000,000 AMR $28,766,000,000 $26,277,000,000 JetBlue $6,050,000,000 $4,721,000,000 Continental $12,542,000,000 $11,071,000,000 AirTran $2,198,009,000 $1,783,470,000 Delta $26,755,000,000 $22,804,000,000 Alaska Air $4,379,800,000 $3,520,600,000 Southwest $18,031,000,000 $10,846,000,000 On April 14, Northwest announced an agreement to merge with Delta. United and US Airways are also in talks for a possible merger. Continental was initially eyed as a top merger partner for United. Small and medium-sized carriers have tumbled one after the other into bankruptcy. Aloha Airlines commenced bankruptcy proceedings in Hawaii in March and later ceased operations. ATA Airlines Inc. ceased operations and filed for chapter 11 protection on April 2, and Skybus Airlines Inc. tumbled into bankruptcy on April 5. Frontier Airlines went belly up and filed for chapter 11 on April 14. EOS Airlines filed a chapter 11 petition on April 26. VERENIUM CORP: Posts $23.3 Million Net Loss in 2008 First Quarter ----------------------------------------------------------------- Verenium Corporation reported a net loss of $23.3 million in the first quarter ended March 31, 2008, compared with a net loss of $10.3 million in the corresponding period in 2007. Revenues increased 35.0%, or $3.9 million, to $15.2 million for the three months ended March 31, 2008, from $11.3 million for the three months ended March 31, 2007, attributed primarily to an increase in product revenue, partially offset by a decrease in collaborative and grant revenue. The company said its revenue mix has shifted to a larger percentage of product revenue, consistent with its strategy to grow product sales and de-emphasize collaborations that are not core to the company's strategic market focus. Product revenue represented 73.0% of total revenues for the three months ended March 31, 2008, as compared to 47.0% for the three months ended March 31, 2007. Collaborative revenue decreased 27.0% to $3.5 million from $4.7 million and accounted for 23.0% and 42.0% of total revenue for the three months ended March 31, 2008, and 2007. Grant revenue decreased 54.0%, or $662,000, to $559,000 for the three months ended March 31, 2008, as compared to $1.2 million for the three months ended March 31, 2007. Product gross profit totaled $3.3 million, or 30.0% of product revenue, for the three months ended March 31, 2008, compared to $460,000, or 9.0% of product revenue, for the three months ended March 31, 2007. Research and development expenses increased $3.2 million, or 28.0%, to $14.8 million for the three months ended March 31, 2008, from $11.6 million the three months ended March 31, 2007. This increase was primarily due to incremental payroll and related expenses for biofuels technology development and engineering activities as a result of the company's merger with Celunol in June 2007. Selling, general and administrative expenses increased $4.4 million, or 83.0%, to $9.6 million for the three months ended March 31, 2008, from $5.2 million for the three months ended March 31, 2007. This increase is largely due to incremental personnel and overhead costs resulting from the merger, incremental litigation expenses and, to a lesser extent, increased personnel costs and professional services costs. Non-cash, stock-based compensation expense included in operating expenses, for the first quarter of 2008 was $3.5 million compared to $1.1 million for the first quarter of 2007. The increase in stock-based compensation is related primarily to additional options granted during 2007 in connection with the Celunol merger, together with equity awards to several senior-level hires since that time. Loss from operations for the first quarter of 2008 was $17.2 million, compared to $10.6 millionfor the first quarter last year. The increase in loss from operations was attributable primarily to incremental operating expenses related to the inclusion of Celunol's business from the June 2007 merger, offset in part by the increase in product revenue and related gross profit. Liquidity and Capital Resources As of March 31, 2008, the company had cash, cash equivalents, and short-term investments of approximately $60.0 million. Historically, the company has funded its capital equipment purchases through available cash, capital leases and equipment financing line of credit agreements. Since the company announced its merger with Celunol in February 2007, it has issued $172.5 million of convertible debt to fund its cellulosic ethanol pilot and demonstration-scale facilities and other working capital requirements. The company's total consolidated long-term debt as of April 1, 2008, which includes the 2007 Notes, the 2008 Notes and debt under its secured credit facility with Comerica Bank, was approximately $174.6 million and represented approximately 68.0%% of its total capitalization as of that date. Balance Sheet At March 31, 2008, the company's consolidated balance sheet showed $296.5 million in total assets, $203.4 million in total liabilities, and $93.1 milion in total stockholders' equity. Full-text copies of the company's consolidated financial statements for the quarter ended March 31, 2008, are available for free at http://researcharchives.com/t/s?2c59 Going Concern/Possible Bankruptcy As reported in the Troubled Company Reporter on April 1, 2008, Ernst & Young LLP, in San diego, expressed substantial doubt about Verenium Corporation's ability to continue as a going concern after auditing the company's consolidated financial statements for the year ended Dec. 31, 2007. The auditing firm pointed to the company's recurring operating losses and accumulated deficit of $437.1 million at Dec. 31, 2007. Based on the company's operating plan, its existing working capital is not sufficient to meet the cash requirements to fund the company's planned operating expenses, capital expenditures, and working capital requirements through Dec. 31, 2008, without additional sources of cash or the deferral, reduction or elimination of significant planned expenditures. The company's plan to address the expected shortfall of working capital is to generate additional financing through a combination of corporate partnerships and collaborations, federal and state grant funding, incremental product sales, selling or financing assets, and, if necessary and available, the sale of equity or debt securities. If the company is unsuccessful in raising additional capital from any of these sources, it will defer, reduce, or eliminate certain planned expenditures. The company said it will continue to consider other financing alternatives including but not limited to, a divesture of all or part of its business. If the company cannot obtain sufficient additional financing in the short-term, it may be forced to restructure or significantly curtail its operations, file for bankruptcy or cease operations. ut additional sources of cash. About Verenium Corp. Based in Cambridge, Mass., Verenium Corporation (Nasdaq: VRNM) -- http://www.verenium.com/-- is engaged in the development and commercialization of next-generation cellulosic ethanol, an environmentally-friendly and renewable transportation fuel, as well as high-performance specialty enzymes for applications within the alternative fuels, specialty industrial processes, and animal nutrition and health markets. VERTIS INC: March 31 Balance Sheet Upside-Down by $916.0 Million ---------------------------------------------------------------- Vertis Inc. reported on Wednesday financial results for the three months ended March 31, 2008. Vertis Inc.'s consolidated balance sheet at March 31, 2008, showed $499.6 million in total assets and $1.4 billion in total liabilities, resulting in a $916.0 million total stockholders' deficit. At March 31, 2008, the company's consolidated balance sheet also showed strained liquidity with $152.3 million in total current assets available to pay $395.0 million in total current liabilities. Net loss during the first quarter of 2008 was $41.0 million compared to a $25.2 million net loss in the first quarter of 2007. Increases in restructuring costs of $6.8 million and fees associated with the financial restructuring of the company of $4.3 million were primary drivers of the increased loss over the prior year. Expected volume declines in Advertising Inserts partially offset by improved pricing, which includes product, customer and equipment mix combined with the impact of reduced revenue in Direct Mail segment to contribute to the loss. Revenue for the first quarter of 2008 was $303.7 million versus $330.7 million in the first quarter of 2007, a decline of 8.2%. Revenue in the Advertising Inserts segment was lower as expected due to reduced volume and the impact of lower paper costs on prices paid by customers. The overall product mix in the segment was favorable for the quarter, which helped to offset some of the volume decline. Revenue in the Direct Mail segment was lower by 3.0% for the quarter but at slightly higher average pricing due to product mix. EBITDA in the first quarter of 2008 declined to $7.1 million from $21.3 million for the same period in 2007. This decrease relates primarily to the increases in restructuring related costs of $11.1 million. Adjusted EBITDA was $19.8 million in the first quarter of 2008, a decline of $4.8 million, or 19.0%, from Adjusted EBITDA of $24.6 million in 2007. This decline was primarily due to reduced volume, offset by improved pricing. Cash and Liquidity The company ended the quarter with $994,000 in cash and debt of $1.2 billion. In addition, the off-balance sheet accounts receivable facility stood at $106.3 million. The company ended the quarter with $26.6 million available under its $250.0 million senior credit facility. At March 31, 2008, the last 12-month Adjusted EBITDA calculated for covenant purposes was $127.1 million or $2.1 million above the minimum requirement. Management Comments Mike DuBose, chairman and chief executive officer commented, "Our financial results are consistent with our expectations as the company builds momentum from the operational turnaround plan we put in place last year. Although the environment remains difficult our initiatives are advancing positively and overall we continue to see significant progress including improvements in operational efficiency, quality, management processes and customer service." "As we enter the next phase of our turnaround which is focused on improving our capital structure, we are very comfortable with the strong foundation that has been established over the past year," DuBose said. Debt Exchange/Bankruptcy Option The company's management has engaged in discussions with holders of the company's 9 3/4% senior secured second lien notes, 10 7/8% senior notes and 13 1/2% senior subordinated notes on the terms of a debt exchange. As an option, the debt exchange may be accomplished on a negotiated basis with the company's lenders through a pre-packaged or pre-arranged bankruptcy restructuring plan. The company currently has no plans for asset sales other than excess real estate or in the normal course of business, nor does it foresee any potential discontinued operations. Forebearance Agreements As part of the company's strategy to preserve and enhance its near-term liquidity, on April 1, 2008, 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 these notes, the company had a thirty-day grace period in which to make the April 1, 2008, interest payment before it would be an event of default. The company entered into forbearance agreements dated April 3, 2008, with the lenders under the senior credit facility and the purchasers under the accounts receivable facility (the Parties) whereby the Parties agreed to forbear from exercising their right to not make any additional advances, purchase receivables or incur any additional letter of credit obligations under the credit facility and A/R facility until the earliest to occur of: (i) May 27, 2008, (ii) the company's failure to satisfy certain borrowing availability conditions under the credit agreement or (iii) the occurrence of an event of default under the credit facility or A/R facility, the acceleration of the obligations under the Second Lien Notes, or the commencement of a bankruptcy proceeding as described in the forbearance agreements. The Parties also agreed to forbear during the forbearance period from exercising certain of their other rights and remedies against the company that may exist as a result of the company's failure to make the interest payment on the Second Lien Notes. Additionally, pursuant to a forbearance agreement (the Second Lien Forbearance Agreement) dated April 30, 2008, and amended as of May 20, 2008, holders of more than 75.0% 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 such rights and remedies on the holders' behalf until the occurrence of any of the following events: (i) the failure of 67.0% of the note holders to have executed a restructuring and lock-up agreement on or before May 27, 2008, (ii) the termination of the restructuring and lock-up agreement in accordance with its terms, (iii) the occurrence of a forbearance termination event under the forbearance agreements dated April 3, 2008, as may be amended and (iv) the occurrence of a default as described in the Second Lien Forbearance Agreement (the Second Lien Forbearance Period). The holders of the Second Lien Notes that are parties to the Second Lien Forbearance Agreement also agreed that during the Second Lien Forbearance Period they will not sell, pledge or otherwise transfer any Second Lien Notes unless the transferee agrees to be bound by the Second Lien Forbearance Agreement. Full-text copies of the company's consolidated financial statements for the quarter ended March 31, 2008, are available for free at http://researcharchives.com/t/s?2c5c Going Concern Disclaimer 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. About Vertis Inc. 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. * * * As reported in the Troubled Company Reporter on May 5, 2008, Moody's Investors Service revised Vertis Inc.'s Probability of Default rating to Ca/LD from Ca, while affirming its Ca Corporate Family rating, following the company's April 30 announcement that its second lien noteholders agreed to forbear from exercising their rights and remedies under the indenture governing the second lien notes. The rating outlook is stable. VOTORANTIM CIMENTOS: S&P's 'BB+' Credit Rating Remains Unchanged ---------------------------------------------------------------- Standard & Poor's Ratings Services said its bank loan and recovery ratings on Votorantim Cimentos North America Inc.'s C$575 million credit facilities are unchanged. The 'BBB' bank loan rating (two notches above the 'BB+' long-term corporate credit rating), with a '1' recovery rating, reflects S&P's expectation that secured lenders would receive a very high (90%-100%) recovery in the event of a payment default. The credit facilities include a US$150 million revolver and a US$425 million senior secured facility, both due in 2011. The company is to pay the term facility in 20 consecutive quarterly installments over the life of the loan. Along with VCNA, the borrowers are St. Mary's Cement Inc., St. Mary's Cement Inc. (Canada), St. Mary's Cement Inc. (US), VCNA Nova Scotia ULC, VCNA Partnership, VCNA US Enterprises Inc., VCNA Prestige Gunite Holdings Inc., VCNA Prestige Materials Holdings Inc., and VCNA Prairie Illinois Inc. The obligations are guaranteed by VCNA and each existing and subsequent restricted subsidiary of VCNA. These subsidiaries account for about 100% of consolidated EBITDA and assets. The long-term corporate credit rating on VCNA is 'BB+'. The outlook is stable. Ratings List Votorantim Cimentos North America Inc. Corporate credit rating BB+/Stable/-- Senior secured debt BBB US$150 million revolver BBB (Recovery rating: 1) US$425 million term loan A BBB (Recovery rating: 1) WATERFORD GAMING: Moody's Trims Corp. Family Rating to B1 from Ba3 ------------------------------------------------------------------ Moody's Investors Service downgraded Waterford Gaming LLC's corporate family rating to B1 from Ba3. Additionally, the probability of default rating was downgraded to Ba3 from Ba2 and the rating on the senior unsecured notes due 2014, issued by Waterford and Waterford Gaming Finance Corp, was lowered to B1 from Ba3. The outlook is stable. The action, which concludes the review process initiated on February 11, 2008, is based on Mohegan Tribal Gaming Authority's current operating challenges and expected increase in leverage due to continuous debt-financed development activity, as well as the risk of lower cash distributions to Waterford. Waterford derives substantially all of its revenues from its partnership interest in Trading Cove Associates, which itself receives a revenue-based relinquishment fee equal to 5% of the gross revenues of the Mohegan Sun casino owned by MTGA. The rating downgrade considers a number of qualitative risk factors including MTGA's potentially weaker revenues for the existing portion of the Mohegan Sun casino operations submitted to the relinquishment fee payments, Waterford's indirect and unsecured access to cash flows, MTGA's ability to block all or part of the relinquishment payments in the event of a payment or nonpayment default, as well as the uncertainties with regards to the quantification and recovery rate of relinquishment payment claims in the event of MTGA's bankruptcy, reorganization or liquidation. As a result, Waterford's corporate family rating is one notch lower than MTGA's senior subordinated notes rating. The rating outlook is stable, reflecting Moody's expectation that Waterford will maintain solid leverage and interest coverage ratios, and adequate liquidity, partly offsetting the aforementioned structural risk factors. Ratings downgraded: -- Corporate family rating to B1 -- Probability of default rating to Ba3 -- Rating on Senior Unsecured Notes due 2014 to B1 (unchanged LGD 4/65%) Waterford is a special purpose company formed solely for the purpose of holding its 50% partnership interest, as a general partner, in TCA, a Connecticut general partnership and the manager (until January 1, 2000) and developer of the Mohegan Sun casino located in Uncasville, Connecticut. The Mohegan Sun casino is owned and operated by the Mohegan Tribal Gaming Authority. WCI COMMUNITIES: S&P Cuts Ratings on Possible Liquidity Shortfall ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on WCI Communities Inc. to 'CC' from 'CCC'. Concurrently, S&P lowered its ratings on $650 million of subordinated notes to 'C' from 'CC'. The outlook remains negative. The downgrades acknowledge that WCI is unlikely to have sufficient liquidity to repay $125 million of 4% contingent convertible senior subordinated notes due 2023 should noteholders exercise their option to redeem the notes on the Aug. 5, 2008, put date. If WCI is unable to satisfy its obligations under the terms of the convertible notes, the noteholders would have the right to accelerate the maturity of these notes, which could in turn trigger the acceleration of substantially all of the company's debt. Bonita Springs, Florida-based WCI is a midsize regional homebuilder offering luxury high-rise and single-family homes to affluent and active adult homebuyers, primarily in Florida (82% of closings). WCI reported an $84 million net loss for its first fiscal quarter (ended March 31, 2008) on a 67% drop in homebuilding revenues. Closings were down sharply, and WCI reversed $55 million of revenues previously recognized under the percentage-of -completion method of accounting because 52 tower unit contracts were cancelled. WCI's leverage is high (84% of capital), and its financial flexibility is limited. This undercapitalized company held just $49 million of cash on March 31, 2008, and had $62 million of availability on a borrowing-base-governed secured revolver. The company's borrowing capacity may be further constrained if appraisals, which are under way, indicate that the market value of borrowing-base collateral is lower than the stated book value. The company's contract backlog is now just $203 million, and future proceeds from the closing of tower units are earmarked for construction loans and can't be used for other purposes, such as the repayment of the convertible subordinated notes. In a recent call with investors, WCI's management acknowledged that the company has retained an advisor to assist in the possible restructuring of the convertible notes. S&P would lower its rating on the convertible notes to 'D' if noteholders were to receive less than full and timely payment in an exchange offer, and S&P would lower the corporate credit rating to 'SD', for selective default. S&P would lower the corporate credit rating to 'D' if the company fails to make required payments on other recourse obligations. Ratings Lowered; Outlook Remains Negative WCI Communities Inc. Rating ------ To From -- ---- Corporate credit CC/Negative/-- CCC/Negative/-- Senior subordinated C CC WELLMAN INC: Creditors' Panel Demands Review of Final DIP Order --------------------------------------------------------------- The Official Committee of Unsecured Creditors of Wellman Inc. and its debtor-affiliates filed an appeal, asking the U.S. District Court for the Southern District of New York to review whether or not the Bankruptcy Court erred in its final order approving the DIP financing, by granting adequate protection to the lenders under the First and Second Lien Senior Credit Agreements. As previously reported, the Creditors Committee sought, but failed to convince the U.S. Bankruptcy Court for the Southern District of New York, to deny final approval of the proposed $225 million in DIP financing of the Debtors. The Creditors Committee argued that the DIP Facility does not provide true benefit to the unsecured creditors because it grants the secured lenders under the First and Second Lien Senior Credit Agreements dated Feb. 10, 2004: (i) new liens on the prepetition and postpetition property of the Debtors' estates, in which those same secured lenders did not enjoy perfected prepetition liens; and (ii) new liens as adequate protection even though those secured lenders lack any legal entitlement to adequate protection. Headquartered in Fort Mill, South Carolina, Wellman Inc. ([OTC]: WMANQ.OB) -- http://www.wellmaninc.com/-- manufactures and markets packaging and engineering resins used in food and beverage packaging, apparel, home furnishings and automobiles. They manufacture resins and polyester staple fiber a three major production facilities. The company and its debtor-affiliates filed for Chapter 11 protection on Feb. 22, 2008 (Bankr. S.D. N.Y. Case No. 08-10595). Jonathan S. Henes, Esq., at Kirkland & Ellis, LLP, in New York City, represents the Debtors. Wellman Inc., in its bankruptcy petition, listed total assets of $124,277,177 and total liabilities of $600,084,885, as of Dec. 31, 2007, on a stand-alone basis. Debtor-affiliate ALG, Inc., listed assets between $500 million and $1 billion on a stand-alone basis at the time of the bankruptcy filing. Debtor-affiliates Fiber Industries Inc., Prince Inc., and Wellman of Mississippi Inc., listed assets between $100 million and $500 million at the time of their bankruptcy filings. On a consolidated basis, Wellman Inc., and its debtor-affiliates listed $498,867,323 in assets and $684,221,655 in liabilities as of Jan. 31, 2008. ZOOM TECHNOLOGIES: Gets Delisting Warning on Bid Price Deficiency ----------------------------------------------------------------- Zoom Technologies Inc. received a NASDAQ staff determination letter, stating that the company had failed to comply with the $1 minimum bid price requirement for continued listing set forth in Marketplace Rule 4310(c)(4) and that its common stock is therefore subject to delisting from the NASDAQ Capital Market. Zoom has been granted an appeal of this determination at a hearing before a NASDAQ Listing Qualifications Panel scheduled for July 10, 2008. NASDAQ stayed the delisting of Zoom's securities until the outcome of the hearing, and the delisting status will be determined typically within 30 days after the hearing. Zoom's plan to regain compliance with the NASDAQ continued listing requirements includes a reverse stock split. Authorization for Zoom's board of directors to approve this reverse stock split has been proposed to Zoom stockholders in the Proxy Statement which was filed with the SEC on April 28, 2008, in connection with the annual meeting of Zoom stockholders to be held on June 26, 2008. Zoom realtes that the NASDAQ Listing Qualifications Panels have generally viewed a reverse stock split as the only definitive plan acceptable to resolve a bid price deficiency. Zoom's common stock will continue to trade on the NASDAQ Capital Market pending the outcome of the hearing. About Zoom Technologies Inc. Headquartered in Boston, Massachusetts, Zoom Technologies Inc. (NASDAQ:ZOOM) -- http://www.zoomtel.com/-- designs, produces, markets, sells, and supports broadband and dial-up modems, voice over Internet protocol products and services, Bluetooth wireless products, and other communication-related products. The majority of the company's products facilitate communication of data through the Internet. The company's European sales and support center is in the United Kingdom. * Fitch Says Despite Receptive Envi. ABCP Paper Market Stays Tough ------------------------------------------------------------------ Navigating the U.S. asset-backed commercial paper market continues to prove difficult, although recent developments indicate a more receptive environment for issuers as investors re-examine the ABCP landscape, according to Fitch Ratings in the latest edition of the 'ABCP Paper Trail'. Market participants remained saddled with many of the same issues plaguing the ABCP market since last summer, which contributed to a further 11% slide in U.S. ABCP outstandings ($722 billion) from year-end 2007. From a credit perspective, however, several positive trends are emerging in the ABCP market, according to Managing Director and group head Michael Dean. 'Over the past several months, many of the surviving ABCP conduit administrators have taken proactive measures to both improve the credit quality of their portfolios and to enhance the structural protections afforded investors,' said Dean. 'Some of the actions taken include cleansing portfolios of troubled exposures and eliminating certain asset classes altogether, along with tightening covenants and triggers with sellers.' Despite continued troubles such as an uncertain U.S. economy and heightened concerns surrounding recessionary fears, Fitch does not anticipate that these macro issues will directly affect the ratings of traditional multiseller ABCP conduits. However, 'global bank rating pressures could translate into ABCP sponsor, liquidity provider, and counterparty rating action that could affect ABCP ratings,' said Dean. * Fitch Says Higher Life Expectancy Could Raise Firm's Obligations ------------------------------------------------------------------ Fitch Ratings has said in a special report that if current improvements in life expectancy continue, significant increases in the amount companies are required to pay to settle their defined benefit pension scheme obligations are likely. However, because regulatory regimes differ by country, the effect of such developments on reported pension deficits and on the short-to- medium-term cash cost of pensions will vary greatly. "If life expectancy improvements continue at the rate seen in recent years, current estimates of pension liability are likely to fall far short of what is needed to satisfy company obligations," says Alex Griffiths, Senior Director in Fitch's European Corporate Group. "However, the impact over the short-to-medium-term will vary greatly between countries with different regulatory regimes. Of the countries reviewed, companies with pensions in the UK are most likely to see their contributions rise due to stricter mortality assumptions. This reflects real regulatory pressure in this area and a relatively wide divergence in assumptions used." The UK is unusual in allowing companies significant choice in determining the mortality assumptions to use for both accounting and regulatory purposes. This, combined with better disclosure of mortality assumptions than in other jurisdictions, has led to increased scrutiny of these assumptions by industry commentators and The Pensions Regulator. As a result, many companies have tightened their mortality assumptions, and Fitch expects this trend to continue. The effects of assuming increased longevity can materially increase a company's reported pension deficit and the amount it will have to contribute to the scheme in the short- to-medium-term. In the US and Germany, two other economies where significant defined benefit liabilities are common, mortality assumptions are either laid down by law or are based on a single industry standard set of tables. In neither of these jurisdictions is there any evidence of moves to tighten mortality assumptions, suggesting little need for increased contributions in the medium-term. Fitch recognises that the pace at which mortality improvements will continue into the future is far from certain, but equally recognises that improvements above those assumed remain a significant risk to scheme funding. This is especially the case when the regulatory climate in a territory may prompt companies to account for such potential increases before they have happened, leading to higher cash outflows in the short-to-medium-term. Fitch will therefore scrutinise mortality assumptions used for companies with UK schemes particularly closely. It will increase the risk weighting in its analysis for companies with mortality assumptions that are less conservative than average, and potentially increase the cash contributions it expects to be made to pension schemes in the medium-term in its forecasts. This could place downward pressure on some ratings, though it is unlikely it will in itself lead directly to downgrades. * Fitch Puts Certain Notes Across 59 CDOs Under Watch Negative -------------------------------------------------------------- Fitch Ratings has placed certain notes issued across 59 collateralized debt obligations on Rating Watch Negative. The rating actions relate to CDOs backed all or in part by trust preferred securities or subordinated debt primarily issued by banks, with particular focus on those transactions with underlying defaulted or deferring collateral. Further supporting Fitch's rating analysis, certain transactions also have exposure to deferring, defaulted or underperforming TruPS or subordinated debt issued by insurance companies, real estate investment trusts, homebuilders or financial institutions specializing in residential mortgage lending. The rating actions primarily affect junior classes of notes rated in the 'BB', 'BBB' and 'A' categories. No securities rated 'AAA' affected by this rating action and only 5.4% of securities rated in the 'AA' category affected by this rating action. As detailed in its May 2 special report ('Emerging Credit Concerns Facing U.S. Bank TruPS CDOs'), Fitch revised its ratings and asset performance Outlook with respect to U.S. bank TruPS CDOs to Negative from Stable, citing a significant increase in observed TruPS defaults and deferrals as well as overall deterioration in the credit quality of banks underlying TruPS CDOs. Since the publication of the report, Fitch has been notified of five additional bank TruPS deferrals, with $468.8 million in aggregate TruPS financed through TruPS CDOs. Observed deferrals continue to be driven by factors similar to those outlined in Fitch's special report - namely residential construction loan exposure, residential mortgage production and lack of a core deposit franchise. Taking into account these additional deferrals, the aggregate amount of bank TruPS defaults and deferrals observed by Fitch since September 2007 is $1.1 billion. This is in comparison to $268.5 million of bank TruPS deferrals observed by Fitch over the seven years prior to September 2007. Fitch believes further bank default and deferral activity is likely, as banks face liquidity pressures and potential deterioration of residential construction loan portfolios over the near term, as well as broader based economic pressures over the intermediate term. Many large banks are having success raising additional capital, and Fitch is aware of certain banks which have issued TruPS through CDOs that are pursuing similar capital raising efforts. That said, the timing will likely be slower and the success rate will likely be lower for such banks than what has been observed with respect to large, publicly traded banks. In identifying transactions and individual classes of notes to be placed on Rating Watch Negative, observed default and deferral activity was evaluated in the context of transactions-specific characteristics such as available credit enhancement, prepayments and credit risk sales observed to date, obligor concentration, cash flow redirection mechanisms, and other structural enhancements. Consistent with the expectations outlined in Fitch's special report, the rating actions are largely focused on classes rated in the 'A' category or below. The instances of securities rated in the 'AA' category being placed on Rating Watch Negative are limited to those transactions with outsized obligor concentration or other high risk exposure such as TruPS or subordinated debt issued by REITs, homebuilders or financial institutions specializing in residential mortgage lending. In focusing on deferrals as well as defaults, Fitch recognizes that the ability to defer payments for up to five years is core feature of TruPS. Nonetheless, Fitch views deferrals as indicator of increased risk of default and recognizes there may also be certain terms and conditions of the TruPS financing which, if breached, result in a technical default prior to the conclusion of the five-year deferral period. These may include failure by such entity to provide on-going financial statements, the regulatory seizure of such entity, or the filing for bankruptcy protection by the holding company of such entity, among others. As a result of the occurrence of such technical defaults, $59 million of TruPS previously classified as deferring are now deemed by Fitch to be in default. Fitch's TruPS CDO rating criteria assumes a level of deferral and default activity as a function of the rating assigned to a given liability, and is designed to address the repayment of the notes pursuant to their stated terms. In taking these rating actions, Fitch's primary concern is not of an imminent risk of principal loss to rated noteholders, but rather, an adverse change in the credit risk profile of the notes, particularly in light of current pressures facing U.S. banks, and the significant remaining risk horizons of the transactions (ranging from 22-to-30 years, absent collateral prepayments). As evidenced by Fitch's rating actions, these concerns are more pronounced with respect to junior classes of notes. Fitch is in the process of updating its analysis of the credit quality of performing bank collateral underlying TruPS CDOs, based on the release of fourth-quarter 2007 and 1Q'08 financial statements. This analysis is expected to result in additional default probability adjustments for certain banks. Upon the conclusion of this collateral analysis, transactions not included as part of this rating action commentary may be exposed to negative rating actions including placement on Rating Watch Negative or downgrade. Additional classes of transactions included as part of this rating action commentary may also be exposed to negative rating actions including placement on Rating Watch Negative or downgrade. Fitch does not expect to resolve the status of transactions placed on Rating Watch Negative until its bank-specific credit analysis is completed. With respect to defaulted or deferring collateral, Fitch will seek to undertake an issuer-specific analysis in order to determine the likelihood of resumption of payment and the potential recovery prospects in the event of default. Given that Fitch's analysis of performing and non-performing bank collateral remains ongoing, the magnitude of potential rating changes on bank TruPS CDOs cannot yet be quantified. * S&P Revises the Outlook on Seven of Fund of Funds to Neg. ----------------------------------------------------------- Standard & Poor's Ratings Services revised the outlook on seven of its fund of funds to negative from stable, based on the shrinking size of the Canadian income fund sector. At the same time, Standard & Poor's revised the outlook on Sentry Select Diversified Income Trust to stable from positive. Standard & Poor's also affirmed the Canadian stability ratings on the funds, including the 'SR-3' stability rating on Sentry Select and the 'SR-1' stability ratings on the other trusts. Brompton Stable Income Fund remains on StabilityWatch with negative implications, where it was placed April 18, 2008, following the fund's announcement of the proposed merger of Brompton Stable Income Fund into the Brompton VIP Income Fund (unrated). The funds on negative outlook are Citadel S-1 Income Trust Fund; Citadel Stable S-1 Income Fund; diversiTrust Stable Income Fund; MACCs Sustainable Yield Trust; Select 50 S-1 Income Trust; Select 50 S-1 Income Trust II; and Series S-1 Income Fund. Stability ratings on fund of funds do not address the extent of capital recovery expected at the trust's termination, the potential fluctuations in the unit price, current or prospective yield, or tax. This rating action affects seven 'SR-1' rated funds. "In all cases, the underlying portfolios of income fund investments continue to perform in a manner that reflects the highest level of stability in their distributable cash generation," said Standard & Poor's stability analyst Ronald Charbon. These funds have well- diversified portfolios of income fund securities that support a low variability level in the portfolio's cash generation under various scenarios of distribution changes for each underlying security. "As a result, the concern is not so much distribution variability from existing underlying portfolios, but rather the trusts' sustainability given the shrinking universe of listed income funds," Mr. Charbon added. As the listed universe reduces, the fund of funds' ability to maintain a well-diversified portfolio of income fund securities will become more difficult. S&P could lower any of the stability ratings if a fund of fund says it intends not to maintain an investment strategy commensurate with the assigned stability rating, or if the underlying portfolio of invested securities materially deviates from acceptable rating parameters. A stability rating is not a credit rating but reflects Standard & Poor's current opinion on the prospective relative stability of distributable cash flow generation on a scale running from 'SR-1' to 'SR-7'. A stability rating is an opinion and is not a verifiable statement of fact. Stability ratings are based on information provided to Standard & Poor's by an issuer or its agents and Standard & Poor's relies on the issuer, its accountant, counsel and other experts for the accuracy, completeness and timeliness of the information submitted to it in connection with a stability rating. Standard & Poor's does not perform an audit in connection with a stability rating and undertakes no duty of due diligence or independent verification of any information used in the rating process. Standard & Poor's does not and cannot guarantee the accuracy, completeness or timeliness of the information relied on in connection with a stability rating or the results obtained from the use of such information. Standard & Poor's may raise, lower, suspend, place on StabilityWatch or withdraw a stability rating at any time, in Standard & Poor's sole discretion. A stability rating is not a "market" rating nor a recommendation to buy, hold, or sell any security. * NHB Names Charles Lewis as Senior Consultant in Delaware Office ----------------------------------------------------------------- NachmanHaysBrownstein, Inc. has appointed Charles Lewis, Esq. as a senior consultant in its Wilmington, Delaware office. Mr. Lewis has over 15 years of management experience in various industries. His previous responsibilities have included profit and loss management, strategic planning, budget and forecast development. His experience extends to the distribution, construction, industrial service and food service industries. Mr. Lewis supports NHB's Creditor Services Group in its bankruptcy and insolvency business segment, and provides experience in client research and acquisition as well as support to the various facets of bankruptcy work. He also provides financial statement analysis as it relates to the cash flow of various organizations. Prior to joining NHB, Mr. Lewis served as the Controller for QSL- Plus/CONAM, Inc., a multi-state, industrial inspection company specializing in non-destructive testing, and more recently, as the Controller for Pro-Tech Floors LLC, a commercial flooring contractor. He was also responsible for the operational restructuring of these organizations to meet a high rate of growth as well as evaluating infrastructural and personnel needs, and was responsible for the successful implementation of improved policy and procedures, with an emphasis on improving collections and financing ability. Mr. Lewis' prior bankruptcy and insolvency experience was obtained at Parente Randolph where he was an Accounting Specialist. About NachmanHaysBrownstein Based in Philadelphia, NachmanHaysBrownstein Inc. -- http://www.nhbteam.com/-- is one of the country's leading turnaround and crisis management firms, having been included among the "Outstanding Turnaround Firms" in Turnarounds & Workouts for the past twelve consecutive years. NHB demonstrates leadership in corporate renewal by creating value and preserving capital through turnaround and crisis management, financial advisory, investment banking and fiduciary services to financially challenged companies throughout America, as well as through their investors, lenders and trade creditors. NHB focuses on producing lasting performance improvement and maximizing the business' value to stakeholders by providing the leadership and credibility required to reconcile the client's objectives, economic reality and available alternatives to establish an achievable goal. * BOOK REVIEW: Business Wit & Wisdom ------------------------------------ Author: Richard S. Zera Publisher: Beard Books Paperback: 316 pages List Price: US$34.95 Order your personal copy at http://www.amazon.com/exec/obidos/ASIN/1587982560/internetbankrupt This book Business Wit & Wisdom, written by Richard S. Zera houses a masterful collection of sayings, anecdotes, and quotes to amuse. Thought provoking ideas and expressions can be found on every page, along with stories and quips to prompt a smile or a hearty chuckle. Conveniently grouped by subject, this gold mine can be easily panned by speakers for relevant nuggets, and readers can just enjoy the thoughts and meanings prompted by so many of the entries of this wonderful treasure chest. ********* 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, 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 ***