T R O U B L E D C O M P A N Y R E P O R T E R Thursday, June 5, 2008, Vol. 12, No. 133 Headlines ABACUS 2005-1: Moody's Cuts Notes Ratings, to Undertake Review [Erroneous story REDACTED Nov. 11, 2008] ADRASTEA SHG: Moody's to Review Notes Rating for Possible Cut AMP AA: Moody's Cuts Rating on $9MM Notes from Ca to C AMP AA: Moody's Cuts Rating on $16MM Notes from Ca to C AMR CORP: Could File for Bankruptcy This Year, Stockhouse Says ANI ASSOCIATES: Case Summary & 20 Largest Unsecured Creditors ARGENT NET: Fitch Cuts Ratings to 'C/DR6' on Four Note Classes ASARCO LLC: Environmental Watchdogs Warn Against Unsound Turnover ASARCO LLC: Shearman & Sterling Represents Sterlite in Buyout ATA AIRLINES: Wants to Reject 153 Contracts and Leases AVANTI FUNDING: Moody's to Review Notes Rating for Possible Cut BAYOU GROUP: Unsecured Creditors File $20.6MM Suit Against Unit BLUE HERON: Moody's Cuts Notes Ratings, to Undertake Review BLUE WATER: Seeks to Pay Sale-Based Incentives to Two Officers BLUE WATER: Court Moves Lease Decision Deadline to September 9 C&S FINANCE: Case Summary & 32 Largest Unsecured Creditors CAPITAL GROWTH: March 31 Balance Sheet Upside-Down by $11,838,000 CAT COMMS: Case Summary & 39 Largest Unsecured Creditors CENVEO CORP: S&P Assigns 'BB-' Rating on Proposed $175MM Sr. Notes CHRYSLER LLC: Cerberus Denies Reports on Sale of Equity Stake CHRYSLER LLC: Total May 2008 Sales Down 25% at 148,747 Units CHRYSLER LLC: May 2008 Sales in Canada Increase 7% at 27,325 Units CLARIENT INC: March 31 Balance Sheet Upside-Down by $2,550,000 CLASS V FUNDING: Moody's to Review Notes Rating for Possible Cut COHR HOLDINGS: S&P Trims Rating to B- with Outlook Remains Neg. COLLYBUS CDO: Moody's to Review Notes Rating for Possible Cut CREDITSIGHTS INC: Creditor Silver Birch Stake for Auction June 10 CROWN GREEN: Assets Auctioned by Secured Lenders DAVIS SQUARE: Moody's to Review Notes Rating for Possible Cut DBS COMMUNICATIONS: Auction of Assets Held Yesterday DELTA AIR: Can't Reject Mesa Termination For Now, Court Rules DELTA AIR: Balks at EOS Airlines' Plan to Sell Planes DELTA AIR: Amends Bylaws to Clarify Shareholder Voting Matters DEN-MARK CONSTRUCTION: Wants to Hire Two Real Estate Brokers DEN-MARK CONSTRUCTION: Wachovia Opposes Engagements of Brokers DEN-MARK CONSTRUCTION: Taps Warren Perry as Real Estate Counsel DIAMOND GLASS: Connecticut et al. Balk at Sale Bid Procedures DIAMOND GLASS: FTI Consulting Approved as Financial Advisor DIGITAL GAS: Voluntary Chapter 11 Petition DIOGENES CDO: Moody's to Review Notes Rating for Possible Cut DIOMED HOLDINGS: $8-Mil. Sale of Assets to AngioDynamics Approved DIOMED HOLDINGS: Faces Patent Infringement Claims from VNUS DISTRIBUTED ENERGY: Files for Bankruptcy, Gets $2MM Perseus Loan DISTRIBUTED ENERGY: Case Summary & 20 Largest Unsecured Creditors EDGEWOOD VILLAS: Case Summary & 20 Largest Unsecured Creditors EMISPHERE TECHNOLOGIES: Stock to Trade at Nasdaq Capital Market EOS AIRLINES: Plan to Sell Planes Faces Opposition from Delta EQUITY RESOURCE: Case Summary & 8 Largest Unsecured Creditors ESP FUNDING: Moody's Cuts Notes Ratings, to Undertake Review FALCON MOTORS: Voluntary Chapter 11 Case Summary FALCON RIDGE: March 31 Balance Sheet Upside-Down by $609,852 FEDDERS CORP: Wants Plan Filing Deadline Moved to June 14 FIRST FRANKLIN: Fitch Downgrades Ratings on Six Classes of Notes FORD MOTOR: Starts Making Flex, Adds 500 Jobs in Oakville Plant FORD MOTOR: Total May 2008 Sales Down 16% at 217,998 Units FORTIUS I: Moody's Cuts Notes Ratings, to Undertake Review FORWARD MOMENTUM: Voluntary Chapter 11 Case Summary FRANCINE PASSA: Case Summary & 18 Largest Unsecured Creditors FREMONT GENERAL: Unit Completes Sale of $12BB Loan Investment FRONTIER AIRLINES: Settles Trustee's Objection to Severance Plan FRONTIER AIRLINES: Court Okays Director & Officer Severance Plan GARZA RIVERA: Case Summary & 12 Largest Unsecured Creditors GENERAL MOTORS: May 2008 Sales Down 30% Due to American Axle Stike GENERAL MOTORS: Economic Challenges Spur Plans to Shutter 4 Plants GENERAL MOTORS: Truck Production Halt Won't Affect S&P's Rating GENITOPE CORP: Continues to Grapple With Liquidity Woes GLACIER FUNDING: Moody's Cuts Notes Ratings, to Undertake Review GLOBAL MOTORSPORT: Wants Plan Filing Deadline Extended Sept. 29 GLOBAL REALTY: Posts $780,519 Net Loss in 2008 First Quarter GMAC LLC: Subsidiary Outlines Initiatives to Stabilize Liquidity GMAC LLC: Cerberus Denies Reports on Sale of Equity Stake GMAC LLC: Increases Rescap Funding to $1,200,000,000 GRAMPA'S BARGAIN OUTLET: Halts Operations, Mulls Chapter 7 Filing GREEKTOWN CASINO: Bankruptcy Filing Done to Protect Tribe Assets GREEKTOWN CASINO: Wants to Use Cash Collateral of its Lenders GREEKTOWN CASINOS: Gets Permission to Access $51 Million in Loan GREEKTOWN CASINOS: Game Board Says Loan Impinges on Its Authority HIGH GRADE CDO 2007-1: Moody's Cuts Rating on Notes I/OMAGIC CORP: Posts $812,663 Net Loss in 2008 First Quarter IAC/INTERACTIVECORP: Sees Tax Benefit From $15 Million EPI Sale JAYHAWK ENERGY: Posts $210,897 Net Loss in Quarter Ended March 31 JED OIL: March 31 Balance Sheet Upside-Down by $14.4 Million JEFFERSON COUNTY: $47MM Debt Payment Deadline Extended to Aug. 1 JOHN REYNEN: Owes $973,000,000 in Personally Guaranteed Loans KENT FUNDING: Moody's to Review Notes Rating for Possible Cut KNESEBECK LLC: Case Summary & 11 Largest Unsecured Creditors LAKE MATHEWS: Case Summary & Nine Largest Unsecured Creditors LAUNCH COAST: Case Summary & 20 Largest Unsecured Creditors LEGACY CAPITAL: Seeks Bankruptcy Protection in Sherman, Texas LEGACY CAPITAL: Case Summary & 42 Largest Unsecured Creditors LEGACY COMMS: March 31 Balance Sheet Upside-Down by $3,565,115 LE-NATURE'S INC: Amended Plan Confirmation Hearing Set on June 12 LENNOX INT'L: $300MM Repurchase Program Won't Affect S&P's Rating LINENS N THINGS: Court Approves $700 Million DIP Financing LIZ CLAIBORNE: Weak Credit Measures Cue S&P to Lower Ratings LUBBOCK MEDICAL: Counsel Says Offer for Assets Seen This Week LUMINENT MORTGAGE: March 31 Balance Sheet Upside-Down by $223.2 MM MARILYN EPPERSON: Case Summary & 20 Largest Unsecured Creditors MARMION INDUSTRIES: March 31 Balance Sheet Upside-Down by $952,418 MARVIN ROBERTSON: Voluntary Chapter 11 Case Summary MBIA INC: Credit Profile Concerns Cue Moody's Rating Review MBIA INC: Disagrees with Moody's Move to Put Ratings Under Review MCWATTERS MINING: Uses Part of Share Issuance to Remedy Default MERITAGE HOMES: Remains Strong Amid Industry Crisis, Execs Insist MERRILL LYNCH: Fitch Cuts 'BBB-' NIM Notes Rating to 'CC/DR4' METROMEDIA COMPANY: Owner in Talks with GE to Avoid Bankruptcy MINNEAPOLIS STAR: Asks Forbearance from Creditors MISTRAL PHARMA: Receives Notice of Default from MMV Financial MKP CBO: Moody's Cuts Notes Ratings, to Undertake Review MOHAMMAD GHARBI: Case Summary & 14 Largest Unsecured Creditors MOSAIC CO: Fitch Upgrades Ratings to BBB from BB+ MOVIE GALLERY: Outlines Consummated Transactions Under Ch. 11 Plan MTI GLOBAL: Completes $7 Million Debt Financing with Wellington MUSICLAND HOLDING: District Court Rejects Trade Creditors Suit NEPTUNE INDUSTRIES: March 31 Balance Sheet Upside-Down by $1.8 MM NEW YORK CRANE: Bankruptcy an Option to Halt Suits, The Deal Says NIMAYA INC: Case Summary & 20 Largest Unsecured Creditors OGALLALA ENTERPRISES: Voluntary Chapter 11 Case Summary ONE HUNDRED: Case Summary & Largest Unsecured Creditors OPTION ONE: Faces Mass. Attorney General Suit for Loan Practice ORREX MEDICAL: Chapter 11 Plan Confirmed by Bankruptcy Judge PARK PLACE: S&P Lowers Ratings on Two Certs. from CCC to D PARK PLACE: Fitch Chips Ratings on Four Classes of Notes PERFORMANCE TRANS: Certain Lenders Want Cases Converted to Ch. 7 PERFORMANCE TRANS: Wants DIP Financing Increased to $17.5 Million PIERRE FOODS: S&P Junks Corp. Credit Rating on Covenant Violation PLASTECH ENGINEERED: Plan-Filing Period Extended to June 11 PLASTECH ENGINEERED: Wants Reclamation Claims Tagged as Unsecured PLASTECH ENGINEERED: Seeks to Sell Business and Misc. Assets PLAYA DEL RACING: Case Summary & 20 Largest Unsecured Creditors POWER GENERATION: Voluntary Chapter 11 Case Summary PRECISION HEATING: Case Summary & 18 Largest Unsecured Creditors PRIS-MM LLC: Case Summary & 32 Largest Unsecured Creditors QUANTUM CORP: S&P Changes Outlook to Stable After Weak 1Q Results RAIT CRE: Fitch Affirms 'BB' Rating on $35MM Class J Notes REBECCA ENGLE: Files for Chapter 11 in Arizona Amid Fraud Claims RELIANT ENERGY: S&P Lifts Ratings to BB- on Strong Fin'l Profile R.E. SHORT SALES: Case Summary & Three Largest Unsecured Creditors RESIDENTIAL CAPITAL: Outlines Initiatives to Stabilize Liquidity RESIDENTIAL CAPITAL: GMAC Raises Funding to $1,200,000,000 REYNEN & BARDIS: Co-Owner Guaranteed $973,000,000 in Loans ROCHESTER SERVICE: Ch. 7 Case Conversion OK'd; Faces Foreclosure SAGEMARK COMPANIES: March 31 Balance Sheet Upside-Down by $$4.2 MM SAKS INC: Fitch Lifts ID Rating to B+ from B on Strengthened Sales SEA CONTAINERS: SCL Committee Says Pension Pact Not Important SECURITY INTELLIGENCE: Case Summary & 18 Largest Unsec. Creditors SHARPER IMAGE: Hilco Brothers, GB Brands Buy Assets for $49MM SHARPER IMAGE: To Close 86 Stores, Offers Discount SILVER ELMS: Moody's to Review Notes Rating for Possible Cut SILVER ELMS: Moody's to Review Notes Rating for Possible Cut SOUTHERN PACIFIC: Fitch Retains 'C/DR6' Rating on Class B-1 Certs. SPECIALTY UNDERWRITING: S&P Lowers Rating on Certificate to B STAMOR CORPORATION: Case Summary & 20 Largest Unsecured Creditors STANLEY HERSHEY: Case Summary & 19 Largest Unsecured Creditors STEVE ROGAI: Case Summary & 13 Largest Unsecured Creditors SUNSHINE RENTALS: Files Voluntary Chapter 11 Case Summary SUPERIOR OFFSHORE: Wants to Sell Endeavor to Celebrity for $47MM SUPERIOR OFFSHORE: Porter & Hedges Approved as Counsel SUPERIOR OFFSHORE: Gets OK to Hire SCC as Financial Advisor TD ROWE: Lender's Right, Title and Interest for Auction on June 25 TERRA ENERGY: March 31 Balance Sheet Upside-Down by $743,756 TORRENT ENERGY: Files for Chapter 11, to Submit Plan Shortly TORRENT ENERGY: Case Summary & 22 Largest Unsecured Creditors TOWER 17: Foreclosure Sale of Properties Commenced Yesterday TROPICANA ENTERTAINMENT: Panel Balks at LandCo's Cash Collateral TROPICANA ENTERTAINMENT: Adequate Protection Package Is Sufficient TRUMP ENT: S&P's 'B-' Rating Unmoved by Coastal Marina Agreement VENTANA TAMPA: To Turn Over Condominium Units to Lender VISTEON CORP: Gets Requisite Tenders for $344MM Offer of Sr. Notes WACHOVIA CORP: Appoints Chairman Lanty Smith as Interim CEO WASHINGTON MUTUAL: Board of Directors Adopt New Governance Model WHERIFY WIRELESS: Inks Merger Agreement with Lightyear Network WILLIAM TRIBBLE: Voluntary Chapter 11 Case Summary WILTON PRODUCTS: S&P Holds All Ratings and Revises Outlook to Neg. WINDHAM MILLS: Taps Keen to Dispose of Former Textile Mill WMC MORTGAGE: Fitch Takes Rating Actions on 16 Certificates XERIUM TECHNOLOGIES: S&P Holds CCC+ Rating and Removes Neg. Watch ZAIS INVESTMENT: Moody's Cuts Notes Ratings, to Undertake Review ZIFF DAVIS: Files Supplements to Amended Joint Chapter 11 Plan * Bankruptcies Soar 30% in Latest 12-Month Period * IATA Projects US$2.3 Billion Loss in Airline Industry * Polsinelli Expands National Presence, Opens Delaware Office * Patton Boggs Laywer Authors New Book on Credit Crisis * Chapter 11 Cases with Assets & Liabilities Below $1,000,000 ********* ABACUS 2005-1: Moody's Cuts Notes Ratings, to Undertake Review -------------------------------------------------------------- Moody's Investors Service has downgraded and placed on review for possible further downgrade the ratings on these notes issued by ABACUS 2005-1, Ltd. Class Description: $55,000,000 Class A-2 Floating Rate Notes Due 2046 -- Prior Rating: Aaa -- Current Rating: A1, on review for possible downgrade Class Description: $20,000,000 Class B Floating Rate Notes Due 2046 -- Prior Rating: Aa2 -- Current Rating: Baa2, on review for possible downgrade Class Description: $15,000,000 Class C Floating Rate Notes Due 2046 -- Prior Rating: A3 -- Current Rating: Ba1, on review for possible downgrade Class Description: $10,000,000 Class D Floating Rate Notes Due 2046 -- Prior Rating: Baa2 -- Current Rating: Ba3, on review for possible downgrade According to Moody's, the rating actions are the result of deterioration in the credit quality of the transaction's underlying collateral pool, which consists primarily of structured finance securities. [Erroneous story REDACTED Nov. 11, 2008] ADRASTEA SHG: Moody's to Review Notes Rating for Possible Cut ------------------------------------------------------------- Moody's Investors Service has downgraded and placed on review for possible further downgrade the ratings on these notes issued by Adrastea SHG 2007-1, Ltd. Class Description: $1,600,000,000 Class A-1M Variable Funding Floating Rate Notes Due 2052 -- Prior Rating: Aaa -- Current Rating Baa3, on review for possible downgrade Class Description: $200,000,000 Class A-1Q Floating Rate Notes Due 2052 -- Prior Rating: Aaa -- Current Rating Ba2, on review for possible downgrade Class Description: $84,000,000 Class A-2 Floating Rate Notes Due 2052 -- Prior Rating: Aaa -- Current Rating Ba3, on review for possible downgrade Class Description: $50,000,000 Class A-3 Floating Rate Notes Due 2052 -- Prior Rating: Aaa -- Current Rating B1, on review for possible downgrade Class Description: $30,000,000 Class A-4 Floating Rate Notes Due 2052 -- Prior Rating: Aa2 -- Current Rating B3, on review for possible downgrade Additionally, Moody's downgraded this notes: Class Description: $20,000,000 Class B Deferrable Floating Rate Notes Due 2052 -- Prior Rating: Baa3 -- Current Rating C According to Moody's, the rating actions are the result of deterioration in the credit quality of the transaction's underlying collateral pool, which consists primarily of structured finance securities. AMP AA: Moody's Cuts Rating on $9MM Notes from Ca to C ------------------------------------------------------ Moody's Investors Service has downgraded these notes issued by AMP AA CDO 4.5-9.0 Notes $9,000,000 AMP AA CDO 4.5-9.0 Notes -- Prior Rating: Ca -- Current Rating: C According to Moody's, the rating action reflect increased deterioration in the credit quality of the underlying portfolio. AMP AA: Moody's Cuts Rating on $16MM Notes from Ca to C ------------------------------------------------------- Moody's Investors Service has downgraded this note issued by AMP AA CDO 2.5-4.5 Notes $16,000,000 AMP AA CDO 2.5-4.5 Notes -- Prior Rating: Ca -- Current Rating : C According to Moody's, the rating actions reflect increased deterioration in the credit quality of the underlying portfolio. AMR CORP: Could File for Bankruptcy This Year, Stockhouse Says -------------------------------------------------------------- AMR Corp., parent of American Airlines, is considered a possible chapter 11 candidate and could tumble over into chapter 11 bankruptcy this year, Stockhouse.com says, citing record prices in oil. AMR has said report of possible bankruptcy filing is unfounded, Bllomberg News relates. Stockhouse.com notes that although AMR is the world's largest airline, it is now a small cap stock, with a market value of only $1.8 billion. The report also notes that AMR has $9.3 billion in debt and may not have the money to cover its debt service as the year passes. As reported by the Troubled Company Reporter on May 26, 2008, Jamie Baker, an analyst at J.P. Morgan, said U.S. airline industry stands to post a collective US$7,200,000,000 in operating losses in 2008. The results would be wider than an initial forecast of US$4,600,000,000 loss, the analyst said. 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. 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. Analysts at Soleil Securities Corp. say there's a potential Chapter 11 filing by AMR by 2009, and UAL some time after that. 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 (US$236,000,000) US$66,000,000 Northwest (US$4,139,000,000) (US$292,000,000) UAL (US$537,000,000) (US$152,000,000) AMR (US$328,000,000) US$81,000,000 JetBlue (US$8,000,000) (US$22,000,000) Continental (US$80,000,000) US$22,000,000 AirTran (US$34,813,000) US$2,158,000 Delta (US$6,261,000,000) US$155,000,000 Alaska Air (US$24,000,000) (US$3,700,000) Southwest US$34,000,000 US$93,000,000 Balance Sheet at March 31, 2008 ----------------------------------- Total Assets Total Debts ------------ ----------- US Airways US$8,013,000,000 US$6,435,000,000 Northwest US$21,032,000,000 US$17,746,000,000 UAL US$23,813,000,000 US$21,647,000,000 AMR US$28,766,000,000 US$26,277,000,000 JetBlue US$6,050,000,000 US$4,721,000,000 Continental US$12,542,000,000 US$11,071,000,000 AirTran US$2,198,009,000 US$1,783,470,000 Delta US$26,755,000,000 US$22,804,000,000 Alaska Air US$4,379,800,000 US$3,520,600,000 Southwest US$18,031,000,000 US$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 AMR Corporation Headquartered in Forth Worth, Texas, AMR Corporation (NYSE: AMR) operates with its principal subsidiary, American Airlines Inc. -- http://www.aa.com/-- a worldwide scheduled passenger airline. At the end of 2006, American provided scheduled jet service to about 150 destinations throughout North America, the Caribbean, Latin America, including Brazil, Europe and Asia. American is also a scheduled airfreight carrier, providing freight and mail services to shippers throughout its system. Its wholly owned subsidiary, AMR Eagle Holding Corp., owns two regional airlines, American Eagle Airlines Inc. and Executive Airlines Inc., and does business as "American Eagle." American Beacon Advisors Inc., a wholly owned subsidiary of AMR, is responsible for the investment and oversight of assets of AMR's U.S. employee benefit plans, as well as AMR's short-term investments. * * * As reported in the Troubled Company Reporter-Latin America on March 26, 2008, Standard & Poor's Ratings Services revised its outlook on the long-term ratings on AMR Corp. (B/Negative/B-3) and subsidiary American Airlines Inc. (B/Negative/--) to negative from positive. S&P also lowered its short-term rating on AMR to 'B-3' from 'B-2' and affirmed all other ratings on AMR and American. ANI ASSOCIATES: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: ANI Associates, Inc. 7079 Black Horse Pike West Atlantic City, NJ 08232 Bankruptcy Case No.: 08-20264 Chapter 11 Petition Date: June 2, 2008 Court: District of New Jersey (Camden) Debtor's Counsel: David Kasen, Esq. Kasen & Kasen 1874 East Route 70, Suite 3 Cherry Hill, NJ 08003 Tel: (856) 424-4144 E-mail: Edkasen@kasenlaw.com Estimated Assets: Less than $50,000 Estimated Debts: $1 million to $10 million Debtor's list of its 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Commerce Bank $4,666,075 1701 Route 70 East Cherry Hill, NJ 08034 Fox Rothschild, LLP $90,084 2000 Market St., 10th Floor Philadelphia, PA 19103 Northwest Carpets, Inc. $50,312 3358 Carpet Capital Drive P.O. Box 1844 Dalton, GA 30722 HHotel Corporation $22,821 NJ Occupancy Fees $17,510 State of NJ, Division of Taxation $15,576 Duffy, Dolcy, McManus & Roesch $6,156 Adams, Rehmann & Heggan Disputed Associates $6,000 Sam's Club/Discover 44,167 Hohnston-Tombigbee $3,800 Sarkis H. Kazanjian $3,470 Casino Lightning & Sign $3,317 Labor Ready Northeast Inc. $2,812 Stockton Mechanical Contractors $2,408 Map Network $2,250 Duron $1,789 Idearc Media $1,011 Staples Credit Plan $550 Home Depot $546 Yellowpages.com $389 ARGENT NET: Fitch Cuts Ratings to 'C/DR6' on Four Note Classes -------------------------------------------------------------- Fitch Ratings has taken these rating actions on Argent Net Interest Margin 2006-M1. Argent NIM 2006-M1: -- $14.4 million class N1 downgraded to 'C/DR6' from 'BB'; -- $17.7 million class N2 downgraded to 'C/DR6' from 'B'; -- $14.1 million class N3 remains at 'C/DR6'; -- $9.1 million class N4 remains at 'C/DR6'. Underlying transaction: Argent Securities 2006-M1 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. ASARCO LLC: Environmental Watchdogs Warn Against Unsound Turnover ----------------------------------------------------------------- Environmental agencies Galveston Houston Association for Smog Prevention, Public Citizen - Texas Office, the Environmental Integrity Project, Sierra Club, and the Sustainable Energy and Economic Development Coalition asked the U.S. Department of Justice to exercise caution before allowing ASARCO LLC and its debtor-affiliates to be sold to a new parent with a checkered environmental record. In a joint letter to the U.S. Attorney General Michael Mukasy, the five agencies warned against ASARCO being turned over to "a new corporate parent with a track record of environmental and other abuses." "Given the leadership that will be needed to bring an end to ASARCO's legacy of pollution on what is a nearly unprecedented scale, we strongly recommend that the purchaser of ASARCO have a clean environmental record both in the U.S. and abroad. We are deeply disturbed by reports that ASARCO may be handed over to one of a number of companies that have pollution records that are so bad that they threaten to eclipse ASARCO's sorry example," the agencies also told Mr. Mukasy in the letter. A copy of the letter can be obtained at: http://researcharchives.com/t/s?2d49 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. ASARCO LLC: Shearman & Sterling Represents Sterlite in Buyout ------------------------------------------------------------- Shearman & Sterling LLP disclosed that it represents the India- based mining company Sterlite Industries (India) Ltd., a subsidiary of Vedanta Resources plc, in its $2.6 billion acquisition of ASARCO LLC and its debtor-affiliates' operating assets. The legal counsel that primarily represents Sterlite Industries include: * Bankruptcy & Reorganization -- Douglas Bartner, Esq. -- Solomon Noh, Esq. * Mergers & Acquisitions -- Christa D'Alimonte, Esq. -- Nora Pines, Esq. -- Gaurav Sud, Esq. As reported in the Troubled Company Reporter on June 2, 2008, the two companies signed a definitive agreement for the sale, which is subject to the approval of the U.S. Bankruptcy Court for the Southern District of Texas. The asset acquisition will be financed by Sterlite through a mix of debt and existing cash resources. The integrated assets to be acquired include three open-pit copper mines and a copper smelter in Arizona, US and a copper refinery, rod and cake plant and precious metals plant in Texas. The sale will conclude Asarco's Chapter 11 case. 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. ATA AIRLINES: Wants to Reject 153 Contracts and Leases ------------------------------------------------------ ATA Airlines Inc. seeks the authority of the U.S. Bankruptcy Court for the Southern District of Indiana's authority to reject 153 executory contracts or unexpired leases. Terry Hall, Esq., at Baker and Daniels, LLP, in Indianapolis, Indiana, says the Debtor is party to various unexpired leases and executory contracts related to its business operations. The Debtor has ceased scheduled service and is in the process of winding down operations. Accordingly, the Debtor seeks the Court's authority to reject the 153 leases and contracts, effective as of the proposed rejection date for each contract or lease. A schedule of the leases and contracts is available at no charge at http://bankrupt.com/misc/ATAAirlinesContracts Section 365(a) of the Bankruptcy Code provides that a debtor-in- possession "subject to the court's approval, may assume or reject any executory contract or unexpired lease of the debtor." The purpose for allowing a debtor to assume or reject an executory contract or unexpired lease is "to permit the trustee or debtor in possession to use valuable property of the estate and to 'renounce title to and abandon burdensome property.'" About ATA Airlines Headquartered in Indianapolis, Indiana, ATA Airlines Inc., is a diversified passenger airline operating in two principal business lines -- a low cost carrier providing scheduled passenger service that leverages a code share agreement with Southwest Airlines; and a charter operator that focused primarily on providing charter service to the U.S. government and military. ATA is a wholly owned subsidiary of New ATA Acquisition, Inc. -- a wholly owned subsidiary of New ATA Investment, Inc., which in turn, is a wholly owned subsidiary of Global Aero Logistics Inc. ATA Acquisition also owns another holding company subsidiary, World Air Holdings, Inc., which it acquired through merger on August 14, 2007. World Air Holdings owns and operates two other airlines, North American Airlines and World Airways. ATA Airlines and its affiliates filed for chapter 11 protection on Oct. 26, 2004 (Bankr. S.D. Ind. Case Nos. 04-19866, 04-19868 through 04-19874). The Honorable Basil H. Lorch III confirmed the Debtors' plan of reorganization on Jan. 31, 2006. The Debtors' emerged from bankruptcy on Feb. 28, 2006. Global Aero Logistics acquired certain of ATA's operations after its first bankruptcy. The remaining ATA affiliates that were not substantively consolidated in the company's first bankruptcy case were sold or otherwise liquidated. ATA Airlines filed for Chapter 22 on April 2 (Bankr. S.D. Ind. Case No. 08-03675), citing the unexpected cancellation of a key contract for ATA's military charter business, which made it impossible for ATA to obtain additional capital to sustain its operations or restructure the business. ATA discontinued all operations subsequent to the bankruptcy filing. ATA's Chapter 22 bankruptcy petition lists assets and liabilities each in the range of $100 million to $500 million. The Debtor is represented in its Chapter 22 case by Haynes and Boone, LLP, and Baker & Daniels, LLP, as bankruptcy counsel. The United States Trustee for Region 10 appointed five members to the Official Committee of Unsecured Creditors. Otterbourg, Steindler, Houston & Rosen, P.C., serves as bankruptcy counsel to the Committee. FTI Consulting, Inc., acts as the panel's financial advisors. (ATA Airlines Bankruptcy News, Issue No. 82; Bankruptcy Creditors' Services Inc. http://bankrupt.com/newsstand/or 215/945-7000). AVANTI FUNDING: Moody's to Review Notes Rating for Possible Cut --------------------------------------------------------------- Moody's Investors Service has downgraded and placed on review for possible further downgrade the ratings on these notes issued by AVANTI Funding 2006-1, Ltd. Class Description: $279,000,000 Class A-1 Floating Rate Senior Secured Notes due 2046 -- Prior Rating: A1, on review for possible downgrade -- Current Rating: Caa2, on review for possible downgrade Additionally, Moody's downgraded these notes: Class Description: $38,000,000 Class A-2 Floating Rate Senior Secured Notes due 2046 -- Prior Rating: Baa3, on review for possible downgrade -- Current Rating: Ca Class Description: $32,000,000 Class A-3 Floating Rate Senior Secured Notes due 2046 -- Prior Rating: Ba1, on review for possible downgrade -- Current Rating: Ca Class Description: $18,000,000 Class B Floating Rate Subordinate Secured Deferrable Notes due 2046 -- Prior Rating: B2, on review for possible downgrade -- Current Rating: C Class Description: $14,500,000 Class C Floating Rate Junior Subordinate Secured Deferrable Notes due 2046 -- Prior Rating: Caa2, on review for possible downgrade -- Current Rating: C According to Moody's, the rating actions reflect increased deterioration in the credit quality of the structured finance securities. BAYOU GROUP: Unsecured Creditors File $20.6MM Suit Against Unit --------------------------------------------------------------- Dow Jones reports that unsecured creditors of Bayou Group LLC made good on their request to file a $20.6 million lawsuit against a Goldman Sachs unit. As reported by the Troubled Company Reporter on Feb. 5, 2008, the U.S. Bankruptcy Court for the Southern District of New York has allowed the Official Creditors' Committee of Unsecured Creditors of Bayou Group LLC and its debtor-affiliates to investigate the Debtor's controversial hedge fund Goldman Sachs Execution & Clearing LP, previously known as Spear Leeds & Kellogg LP. On Jan. 9 2008, the Committee filed a request with the Court to issue an order pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure. The Committee said in its court filing that it has no other means for obtaining the required information other that pursuant to Bankruptcy Rule 2004, to which no other parties should have legitimate objection to the request. Goldman Sachs' and SLK's Relation with Debtor The Committee relates that SLK provided prime brokerage services to the financial industry, including certain of the Debtors. Goldman Sachs Group purchased SLK on Nov. 1, 2000. Following its acquisition by Goldman, SLK continued to offer prime brokerage services to the financial industry, and in early 2005 changed its name to Goldman Sachs Execution & Clearing LP. The Committee asserts that SLK, and later GSEC, served from 1999 through the cessation of the Debtors' trading activities as a prime broker for certain of the Debtors. Hence, the Committee seeks authorization to conduct an examination pursuant to Rule 2004 to enable the Committee to gather information concerning: (1) GSEC's relationship with the Debtors, including but not limited to its receipt of funds from the Debtors for trading purposes, its maintenance of any margin accounts on behalf of the Debtors, and its collection of any commissions or fees from the Debtors; (2) GSEC's knowledge of the Debtors' financial state; (3) whether GSEC obtained money or property of the Debtors under circumstances which would require its return under one or more provisions of the Bankruptcy Code; and (4) whether GSEC caused injury to the Debtors under circumstances that are actionable at law or in equity. The documents and testimony sought, the Committee explains, are essential to the evaluation of claims that might be asserted against GSEC on behalf of the Debtors' estate and its creditors. Dow Jones reports that the Bankruptcy Court has granted the unsecured creditors permission to sue on behalf of Bayou's bankruptcy estate. They are suing GSEC for allegedly not doing anything while the hedge fund defrauded investors. The $20.6 million is allegedly the funds the creditors said GSEC wrongly allowed Bayou to pay into margin accounts, according to the report. As reported by the TCR on April 16, 2008, Judge Colleen McMahon of the U.S. District Court for the Southern District of New York sentenced former Bayou Group executive Samuel Israel III to 20 years in prison. Mr. Israel, who was also ordered to pay restitution for $300 million, was primarily responsible for duping investors of more than $450 million through false misrepresentation of the company's financial condition. About Bayou Group Based in Chicago, Illinois, Bayou Group LLC operates and manages hedge funds. The company and its affiliates filed for chapter 11 protection on May 30, 2006 (Bankr. S.D.N.Y. Case No. 06-22306) in order to pursue recoveries for the benefit of defrauded investors. Bayou also filed lawsuits against former investors who allegedly received fictitious profits and an inequitably large return of their principal investments. Jeff J. Marwil at Jenner & Block was appointed on April 28, 2006 as the federal equity receiver. Elise Scherr Frejka, Esq., at Dechert LLP, represents the Debtors in their restructuring efforts. Joseph A. Gershman, Esq., and Robert M. Novick, Esq., at Kasowitz, Benson, Torres & Friedman, LLP, represents the Official Committee of Unsecured Creditors. Kasowitz, Benson, Torres & Friedman LLP is counsel to the Unofficial Committee of the Bayou Onshore Funds. Sonnenschein Nath & Rosenthal LLP represents the Sonnenschein Investors. When the Debtors filed for protection from their creditors, they estimated assets and debts of more than $100 million. BLUE HERON: Moody's Cuts Notes Ratings, to Undertake Review ----------------------------------------------------------- Moody's Investors Service has downgraded and left on review for possible downgrade the ratings on these notes issued by Blue Heron Funding II Ltd: Class Description: $890,000,000 Class A Blue Heron Funding II Notes, due December, 2041 -- Prior Rating: Aaa -- Current Rating: Baa3, on review for possible downgrade Class Description: $20,000,000 Class B Blue Heron Funding II Notes, due December, 2041 -- Prior Rating: Aaa -- Current Rating: Ba3, on review for possible downgrade Class Description: $40,000,000 Class C Blue Heron Funding II Notes, due December, 2041 -- Prior Rating: Aaa -- Current Rating: B1, on review for possible downgrade Class Description: $24,000,000 Class D Blue Heron funding II Notes, due December, 2041 -- Prior Rating: Aa3 -- Current Rating: B3, on review for possible downgrade Additional, Moody's also downgraded this notes: Class Description: $20,000,000 Class E Blue Heron Funding U Notes, due December, 2041 -- Prior Rating: Baa3, on review for possible downgrade -- Current Rating: C According to Moody's, the rating actions are the result of deterioration in the credit quality of the transaction's underlying collateral pool, which consists primarily of structured finance securities. BLUE WATER: Seeks to Pay Sale-Based Incentives to Two Officers -------------------------------------------------------------- Blue Water Automotive Systems, Inc., and its debtor affiliates seek authority from Judge Marci B. McIvor of the U.S. District Court for the Eastern District of Michigan to implement a sale- based incentive bonus plan for Michael Lord, their chief executive officer, James Sampson, their vice-president of sales and engineering. The salient terms of the Incentive Plan are: * The Officers will each receive $300,000 if a sale of the Debtors' assets is consummated. * To be eligible under the Incentive Plan, the Officers (i) must perform their duties in a manner that maximizes the value of the Debtors' estates as determined by the Debtors' board of directors; and (ii) must remain in the employ of the Debtors upon the successful consummation of the Sale; and * All payments will be in lieu of the Officers' existing performance bonus and rights to any other bonus under any other plan, program, agreement, applicable law or policy otherwise applicable to the Officers and the Debtors. The Officers' prepetition severance agreements will remain in place. Mr. Lord, as CEO, is responsible for setting the direction of the Debtors, ensuring execution. He is also responsible in keeping the sales process on track, maximizing the value of the Debtors' estates and ensuring uninterrupted flow of product for customers. Mr. Sampson is responsible for all customer relations matters. He heads all new product designs and is responsible for all project management. According to Nicole Y. Lamb-Hale, Esq., at Foley & Lardner LLP, in Detroit, Michigan, the Incentive Plan will play a critical role in the Debtors' ability to maximize the value of their businesses to achieve the most value in the proposed sale of their assets. The implementation of the Incentive Plan is necessary to (i) compensate the Officers given the enormous additional burdens placed on them by the Chapter 11 cases, and (ii) ensure that the Officers remain motivated to perform the important tasks necessary to maintain the value of the Debtors' businesses. Ms. Lamb-Hale adds that the Incentive Plan is designed to provide incentives to the Officers based on the need for their efforts and expertise to facilitate the entry into and consummation of a successful sale of the Debtors' businesses that maximizes the value of the Debtors' assets, and in turn, the net recovery for the Debtors' creditors. Alexander Tracy, director at Miller Buckfire & Co., LLC, the Debtors' financial advisor and investment banker, tells the Court that the Incentive Plan is appropriately tailored to mitigate against the risks from the non-performance of the Officers of their responsibilities. The eligibility factors and amounts to be paid under the Incentive Plan constitute an appropriate exercise of the Debtors' business judgment in that they will incentivize the Officers to achieve the highest sale price possible for their assets, he says. The Debtors propose that the Incentive Plan if approved by the Court and if authorized by the Debtors' Board, should be allowed as an administrative expense under Section 503(b) of the Bankruptcy Code. Payments under the Incentive Plan would only be available upon the successful achievement of the milestones in the Accommodation Agreements and the consummation of a Sale Transaction. The Incentive Plan is properly characterized as a performance based, sale-related management incentive plan, not a retention plan or severance plan, Ms. Lamb-Hale contends. About Blue Water Automotive Blue Water Automotive Systems, Inc. designs and manufactures engineered thermoplastic components and assemblies for the automotive industry. The company's product categories include airflow management, full interior trim/sub-systems, functional plastic components, and value-added assemblies. They are supported by full-service design, program management, manufacturing and tooling capabilities. With more than 1,400 employees, Blue Water operates eight manufacturing and product development facilities and has annual revenues of approximately US$200 million. The company's headquarters and technology center is located in Marysville, Mich. The company has operations in Mexico. In 2005, KPS Special Situations Fund II, L.P., and KPS Special Situations Fund II(A), L.P., acquired Blue Water Automotive through a stock purchase transaction. In 2006, the company acquired the automotive assets and operations of Injectronics, Inc., a manufacturer of thermoplastic injection molded components and assemblies. KPS then set about reorganizing the company. The company implemented a program to improve operating performance and address its liquidity issues. During 2007, the company replaced senior management, closed two facilities, and reduced overhead spending by one third. Blue Water Automotive and four affiliates filed for chapter 11 bankruptcy protection Feb. 12, 2008, before the United States Bankruptcy Court Eastern District of Michigan (Detroit) (Case No. 08-43196). Judy O'Neill, Esq., and Frank DiCastri, Esq., at Foley & Lardner, LLP, serves as the Debtors' bankruptcy counsel. Administar Services Group LLC acts as the Debtors' claims, noticing, and balloting agent. Blue Water's bankruptcy petition lists assets and liabilities each in the range of US$100 million to US$500 million. The Debtors filed their Liquidation Plan on May 9, 2008. The Plan contemplates a sale of substantially all of the Debtors' assets and equity interests, except for a piece of real property located at Yankee Road, in St. Clair, Michigan, on or before June 30, 2008. The Court will hold a hearing June 18, 2008, to consider confirmation of the Plan. (Blue Water Automotive Bankruptcy News, Issue No. 18, Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) BLUE WATER: Court Moves Lease Decision Deadline to September 9 -------------------------------------------------------------- Judge Marci B. McIvor of the U.S. District Court for the Eastern District of Michigan extended the time within which Blue Water Automotive Systems, Inc., and its debtor affiliates may assume or reject non-residential real property leases until the earlier of: (a) September 9, 2008; or (b) the Effective Date of the Debtors' Joint Plan of Liquidation. With respect to the time within which the Debtors may decide to assume or reject the lease of the real property lease located at 1045 Durant Drive, in Howell, Michigan, the deadline is extended until the earlier of (a) September 9, 2008; (b) the sale closing on June 30, 2008; or (b) the Effective Date of the Plan. Blue Water Automotive Systems, Inc. designs and manufactures engineered thermoplastic components and assemblies for the automotive industry. The company's product categories include airflow management, full interior trim/sub-systems, functional plastic components, and value-added assemblies. They are supported by full-service design, program management, manufacturing and tooling capabilities. With more than 1,400 employees, Blue Water operates eight manufacturing and product development facilities and has annual revenues of approximately US$200 million. The company's headquarters and technology center is located in Marysville, Mich. The company has operations in Mexico. In 2005, KPS Special Situations Fund II, L.P., and KPS Special Situations Fund II(A), L.P., acquired Blue Water Automotive through a stock purchase transaction. In 2006, the company acquired the automotive assets and operations of Injectronics, Inc., a manufacturer of thermoplastic injection molded components and assemblies. KPS then set about reorganizing the company. The company implemented a program to improve operating performance and address its liquidity issues. During 2007, the company replaced senior management, closed two facilities, and reduced overhead spending by one third. Blue Water Automotive and four affiliates filed for chapter 11 bankruptcy protection Feb. 12, 2008, before the United States Bankruptcy Court Eastern District of Michigan (Detroit) (Case No. 08-43196). Judy O'Neill, Esq., and Frank DiCastri, Esq., at Foley & Lardner, LLP, serves as the Debtors' bankruptcy counsel. Administar Services Group LLC acts as the Debtors' claims, noticing, and balloting agent. Blue Water's bankruptcy petition lists assets and liabilities each in the range of US$100 million to US$500 million. The Debtors filed their Liquidation Plan on May 9, 2008. The Plan contemplates a sale of substantially all of the Debtors' assets and equity interests, except for a piece of real property located at Yankee Road, in St. Clair, Michigan, on or before June 30, 2008. The Court will hold a hearing June 18, 2008, to consider confirmation of the Plan. (Blue Water Automotive Bankruptcy News, Issue No. 18, Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) C&S FINANCE: Case Summary & 32 Largest Unsecured Creditors ---------------------------------------------------------- Debtor: C&S Finance Orlando, Inc. 6363 East Colonial Drive Orlando, FL 32807 Bankruptcy Case No.: 08-04640 Debtor-affiliate filing separate Chapter 11 petition: Entity Case No. ------ -------- C&S Orlando, Inc. 08-04643 Type of Business: The Debtors are car dealers. Chapter 11 Petition Date: June 4, 2008 Court: Middle District of Florida (Orlando) Judge: Arthur B. Briskman Debtors' Counsel: Ryan E. Davis, Esq. (rdavis@whww.com) Winderweedle Haines Ward & Woodman P.A. P.O. Box 1391 Orlando, FL 32802 Tel: (407) 423-4246 Fax: (407) 423-7014 Estimated Assets: $10 million to $50 million Estimated Debts: $10 million to $50 million A. C&S Finance Orlando, Inc.'s list of its 12 largest unsecured creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Byrider Franchising Trade Debt $59,500 12802 Himalton Crossing Boulevard Carmel, IN 46032 American Express Trade Debt $58,405 P.O. Box 360001 Fort Lauderdale, FL 33336-0001 Davis Keller & Wiggins Trade Debt $7,338 12025 Craigshire, Suite 130 St. Louis, MO 63146 Killgore Pearlman Stamp Attorney $3,493 Office Source Trade Debt $1,889 AutoLock Specialist Trade Debt $785 Wells Fargo Trade Debt $725 Integrity Management Solutions Trade Debt $375 Vengroff Williams & Association Trade Debt $124 The Tow Pro Trade Debt $55 Collateral Recovery, LLC Trade Debt $0 Westfield Insurance Insurance $0 B. C&S Orlando, Inc.'s list of its 20 largest unsecured creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Byrider Franchising Trade Debt $126,153 12802 Himalton Crossing Boulevard Carmel, IN 46032 Genuine Parts Co. Trade Debt $46,287 P.O. Box 409043 Atlanta, GA 30384-9043 JD Byrider Advertising Trade Debt $18,000 12802 Hamilton Crossing Boulevard Carmel, IN 46032 Davis Keller & Wiggins LLC Trade Debt $5,543 Remanufactured Transmission Trade Debt $2,853 JD Byrider Legal Defense Trade Debt $2,500 Killgore Pearlman Stamp et al. Attorney Fees $1,616 Vavoline Trade Debt $1,561 Carquest Auto Parts Trade Debt $1,514 Courtesy Chevrolet Trade Debt $1,482 Nydia Brito Cleaning Trade Debt $1,459 Kimelle's Trucking Inc. Trade Debt $1,443 Marshall Auto Trade Debt $1,155 Painting & Collision East Orlando Kia Trade Debt $1,126 Keystone Trade Debt $1,126 LKQ Trade Debt $802 Unifirst Corporation Trade Debt $781 Firestone Trade Debt $708 Greenway Chrysler Trade Debt $679 Who's Calling Trade Debt $619 CAPITAL GROWTH: March 31 Balance Sheet Upside-Down by $11,838,000 ----------------------------------------------------------------- Capital Growth Systems Inc.'s consolidated balance sheet at March 31, 2008, showed $38,607,000 in total assets and $50,445,000 in total liabilities, resulting in a $11,838,000 total stockholders' deficit. The company reported a net loss of $3,345,000, on revenue of $9,523,000, in the first quarter ended March 31, 2008, compared with a net loss of $7,457,000, on revenue of $4,000,000 in the same period in 2007. The increase in revenue is primarily due to the recognition of revenue in the first quarter of 2008 in connection with a significant new contract in the company's Optimization Solutions line of business. 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?2d4b Going Concern Doubt Plante & Moran, PLLC, in Elgin, Ill., expressed substantial doubt about Capital Growth Systems Inc.'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 losses, negative cash flows from operations and net working capital deficiency. The company has incurred net losses from continuing operations of $3,653,000 and $6,965,000 for the three months ended March 31, 2008, and 2007, respectively. About Capital Growth Based in Chicago, Capital Growth Systems Inc. (OTC BB: CGSY) doing business as Global Capacity Group Inc., delivers telecom integration services to systems integrators, telecommunications companies, and enterprise customers worldwide. It provides an integrated supply chain management system that streamlines and accelerates the process of designing, building, and managing customized communications networks. The company also provides connectivity services for network integrators who bundle telecommunication solutions to enterprise customers; offers global pricing and quotation software and management services for data communications; and assists customers to reduce connectivity costs and attain understanding and control of their deployed communications network. In addition, the company manages data replication and business continuity environments for multinational corporations and health care institutions. CAT COMMS: Case Summary & 39 Largest Unsecured Creditors -------------------------------------------------------- Debtor: CAT Communications International, Inc. 2117 Williamson Road Roanoke, VA 24012 Bankruptcy Case No.: 08-71013 Debtor-affiliate filing separate Chapter 11 petition: Entity Case No. ------ -------- NationsLine New Jersey, Inc. 08-71014 Chapter 11 Petition Date: June 3, 2008 Court: Western District of Virginia (Roanoke) Judge: William F. Stone Jr. Debtors' Counsel: A. Carter Magee, Jr., Esq. (cmagee@mfgs.com) Magee Foster Goldstein & Sayers P.O. Box 404 Roanoke, VA 24003 Tel: (540) 343-9800 Total Assets Total Debts ------------ ----------- CAT Communications $2,246,504 $18,532,010 International, Inc. NationsLine New $500,000 $1,532,370 Jersey, Inc. A. CAT Communications International, Inc.'s list of its 20 largest unsecured creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Verizon Wholesale Markets FCC Lawsuit $17,536,514 Director Contract Perform. and Admin. 600 Hidden Ridge HQEWMNOTICES Irving, TX 75038 Embarq Trade Debt $627,897 Director, Local Carrier Markets 6480 Sprint Parkway KSOPHMO310-3A453 Overland Park, KS 66251 Windstream Trade Debt $130,059 1 Allied Drive Little Rock, AR 72202-2177 CenturyTel Trade Debt $67,184 UCN Trade Debt $53,624 Ameritech-AT&T Trade Debt $35,334 Qwest Com. International Inc. Trade Debt $15,731 CCH Trade Debt $14,303 Neustar Inc. Trade Debt $12,989 Cincinnati Bell - Ohio Trade Debt $9,481 Frontier Communications Trade Debt $6,706 North State Communications Trade Debt $3,826 Southwestern Bell Trade Debt $3,522 Comporium Communications Trade Debt $3,388 Ppacific Bell Trade Debt $2,861 Ikon Financial Services Trade Debt $1,748 Ikon Office Solutions Trade Debt $1,619 Technologies Management Inc. Trade Debt $1,404 Mebtel Communications Trade Debt $909 U.S. Cellular Trade Debt $471 B. NationsLine New Jersey, Inc.'s list of its 19 largest unsecured creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Verizon Wholesale Markets FCC Lawsuit $1,165,126 Director Contract Perform. and Admin. 600 Hidden Ridge HQEWMNOTICES Irving, TX 75038 Conversent Communications Trade Debt $80,063 313 Boston Post Road West Suite 140 Marlborough, MA 01752 MCI Metro Trade Debt $62,775 SEPT CH 14163 Palatine, IL 60055 AT&T Trade Debt $51,655 The TelX Group Inc. Trade Debt $49,816 Paetec Communications Trade Debt $35,127 Cavalier Telephone Trade Debt $17,303 IPC Network Services Inc. Trade Debt $16,800 RNK Telecom Trade Debt $10,550 Klein Law Group Legal Services $7,729 Comcast Trade Debt $7,200 CoVista Communications Trade Debt $5,674 A.C.N. Communications Trade Debt $3,791 Broad Comm. Technology Trade Debt $2,939 Bullseye Telecom Trade Debt $2,764 AT&T Local Services Trade Debt $2,661 City of Passaic Municipal Tax $2,445 Cooperative Communications Trade Debt $2,090 E.F.L.S. Answering & Mail Service Trade Debt $1,512 CENVEO CORP: S&P Assigns 'BB-' Rating on Proposed $175MM Sr. Notes ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its issue-level and recovery ratings to Cenveo Corp.'s proposed $175 million senior notes due 2016. The notes were rated 'BB-' with a recovery rating of '4', indicating that lenders can expect average (30% to 50%) recovery in the event of payment default. Proceeds will be used to remarket the company's existing $175 million senior unsecured loan that was issued for the purpose of financing the acquisition of Commercial Envelope on Aug. 30, 2007. Cenveo will not receive any of the proceeds from the sale of the notes. All other ratings on the company, including the 'BB-' corporate credit rating, were affirmed. The rating outlook is stable. "The 'BB-' corporate credit rating reflects Cenveo's high leverage and participation in highly competitive and fragmented markets," said Standard & Poor's credit analyst Mike Listner. "These factors are offset by strong improvements in recent years to the firm's profitability and cash flow generation, increased cash flow diversity as a result of acquisitions, and the company's success in integrating and realizing synergies from recent acquisitions." Although Cenveo has diversified revenue through successfully integrating acquisitions, the company is still susceptible to the volume and pricing pressures encountered by the printing industry in the current economic cycle. Consequently, Cenveo experienced slight year-over-year declines in operating margins in its printing and envelope businesses in the first quarter of 2008 due to higher material costs and restructuring charges. Despite the operating challenges posed by the current economic climate, the 'BB-' rating reflects the expectation that management will take prudent measures to effectively manage its cost structure and preserve profitability. CHRYSLER LLC: Cerberus Denies Reports on Sale of Equity Stake ------------------------------------------------------------- Mark Neporent, Cerberus Capital Management's senior managing director, chief operating officer, and general officer, responds to a report in the Financial Times disclosing that the firm had sold most of its holdings in Chrysler LLC and GMAC LLC amid the downturn in the U.S. economy and woes in the lending industry. "Cerberus has not reduced or made any changes to its equity stakes in GMAC or Chrysler since the closing of either transaction. Cerberus continues to have voting control over both investments. It is common knowledge, and has been widely reported, that Cerberus made these investments side-by-side with its co-investors at the time of closing. As a general rule, Cerberus does not commit more than 5% of the capital of any of its funds to any single investment." Cerberus has sold "significantly" more than half its equity to 90 investors, Henry Sender at The Financial Times reported on Monday, citing people familiar with the situation. Those who bought the stakes include some of Cerberus' own investors, the report said. Unnamed sources told FT that the buying group included Citigroup's private equity arm, Cerberus-controlled Aozora Bank of Japan, Avenue Capital, Cyrus Capital Partners, DB Zwirn, Franklin Templeton Investments, Oak Hill Advisors, Oak Hill Capital Partners, Satellite Capital, Seneca Capital and York Capital. Other investors including Golden Tree Asset Management and Oaktree Capital Management declined to participate, FT said. FT said investors paid as much as $1 billion for stakes in one or both companies. "By selling equity to others soon after winning control of the two companies, Cerberus reduced its risks and earned fees from investors," Mr. Sender reported. One investor who acquired a small stake in GMAC told FT there was no time for due diligence. "It was a 'trust me' kind of trade," he said. But investors believe it was a hot deal. "Everbody wanted in as part of the gang," that investor told FT. According to the Troubled Company Reporter on February 21, 2008, Cerberus said Chrysler was bound to surpass its recovery plan "on virtually all key metrics." Cerberus expressed confidence on its capital infusion in Chrysler and complimented on the leadership of chief executive Robert Nardelli and co-presidents Tom LaSorda and Jim Press. The hedge fund said Chrysler will "fare just fine" with its $8 billion cash but continue to warn investors of the risks. Cerberus also said that GMAC LLC has "strong long-term prospects." These compliments came amid the financial pressures that Chrysler and GMAC are facing due to the crisis in the U.S. economy. The Troubled Company Reporter related on Feb. 18, 2008, that Cerberus founder Stephen Feinberg warned investors of possible "substantial difficulty" in GMAC. GMAC struggled with the decline in the U.S. housing industry and financial markets and reported a $724 million loss during the last quarter of 2007. Mr. Feinberg wrote in a Jan. 22 letter to investors that while Cerberus has "detailed contingency plans in a continuing worsening environment . . . if the credit markets continue to decline and we find ourselves in a prolonged environment of capital market shutdown, GMAC could run into substantial difficulty." The letter outlines worst-case scenarios for investors, according to Cerberus partner Tim Price. About Cerberus Capital Cerberus Capital Management LP -- http://www.cerberuscapital.com/-- is a private investment firms that provides both financial resources and operational expertise to undervalued companies. Cerberus is headquartered in New York City with affiliates and advisory offices in Atlanta, Chicago, Los Angeles, London, Baarn, Frankfurt, Tokyo, Osaka and Taipei. Cerberus holds controlling or significant minority interests in companies around the world, including 80.1% stake in Chrysler LLC bought in 2007 from Daimler AG. Cerberus was also the lead investor of a group that acquired 51% of GMAC, the financing arm of General Motors. In aggregate, these companies currently generate over US$60 billion in annual revenues. About GMAC GMAC LLC -- http://www.gmacfs.com/-- formerly General Motors Acceptance Corporation, is a global, diversified financial services company that operates in approximately 40 countries in automotive finance, real estate finance, insurance and other commercial businesses. GMAC was established in 1919 and employs approximately 26,700 people worldwide. About Chrysler Headquartered in Auburn Hills, Michigan, Chrysler LLC -- http://www.chrysler.com/-- a unit of Cerberus Capital Management LP, produces Chrysler, Jeep(R), Dodge and Mopar(R) brand vehicles and products. The company has dealers worldwide, including Canada, Mexico, U.S., Germany, France, U.K., Argentina, Brazil, Venezuela, China, Japan and Australia. * * * As reported in the Troubled Company Reporter on May 9, 2008, Fitch Ratings downgraded the Issuer Default Rating of Chrysler LLC to 'B' from 'B+', with a Negative Rating Outlook. Fitch has also downgraded the senior secured bank facilities, including senior secured first-lien bank loan to 'BB/RR1' from 'BB+/RR1'; and senior secured second-lien bank loan to 'CCC+/RR6' from 'BB+/RR1'. The recovery rating on the second lien was also downgraded from 'BB+/RR1' to 'CCC+/RR6' based on lower asset value assumptions and associated recoveries in the event of a stress scenario. CHRYSLER LLC: Total May 2008 Sales Down 25% at 148,747 Units ------------------------------------------------------------ Chrysler LLC reported total May 2008 sales of 148,747 units, which is 25% below the same period last year. Total May sales reflect a combination of record sales of Chrysler's newest highly fuel- efficient vehicles, an unusually high 40% cut in monthly fleet vehicle sales and a continued industry wide slowdown in pickup truck and SUV sales. All sales figures are reported as unadjusted. "There is a new era emerging in the restructuring of the American economy," Vice Chairman and President Jim Press said. "There is an unprecedented shift in the industry that is challenging, but we are determined to provide consumers what they need and want. We are responding to consumers with innovative incentive choices and new vehicle offerings, five of which get 28 mpg highway driving for under $20,000. These actions have helped move our retail sales more in line with the overall industry and provided a lift for our dealers this month." May sales highlight the continued growth of Dodge brand cars and crossovers, such as the Dodge Caliber and Dodge Journey, both of which come with a standard four-cylinder engine delivering 28 mpg on the highway. The two vehicles reached new monthly sales records in May with the Dodge Caliber posting sales of 12,856 units, up 7% compared with May 2007 sales of 12,052 units, and the all-new Dodge Journey reaching 7,520 units in only its fourth month of sales. The fuel-efficient Jeep(R) Patriot posted record monthly sales as it continues to be one of Chrysler's fastest growing models. Jeep Patriot sales of 8,199 units represented an 82% increase in May 2008 versus the same period last year. Customers continue to take advantage of the luxury-value equation of the Chrysler Aspen, which posted sales of 2,037 units, an 18% increase from May 2007 sales of 1,724 units. With a base starting price of $33,225, the Aspen, offers an optional Multi-displacement System equipped HEMI(R) powertrain that achieves up to 20% fuel economy improvement. Consumer and dealer feedback has been very positive on Chrysler's lineup of the "New Day" packages. The wide-range of vehicles offering the company's most sought-after features at reduced prices will continue to be available in June. Despite slow industry sales, the Company finished the month with 412,009 units of inventory, or a 75-day supply. As part of a planned reduction, inventory is down 14 percent compared with May 2007 when it totaled 479,501 units. Let's Refuel America $2.99 Gas Guarantee Buyers were most likely to choose the gas guarantee incentive option versus cash back or 0% financing when purchasing the Dodge Journey, Dodge Caliber, Chrysler Sebring Sedan, Dodge Avenger and Chrysler Town & Country. "We are pleased with the consumer response to the Let's Refuel America $2.99 Gas Guarantee program," Mr. Press said. "Shoppers really appreciate the opportunity to stabilize their fuel costs and to increase their savings if gas prices continue to rise. The program gives consumers three incentive choices of similar current value to help them address their most pressing needs. With great high mileage product, creative incentive choices, a strong dealer network, and dedicated employees, we are ushering in new confidence for the month of June." About Chrysler Headquartered in Auburn Hills, Michigan, Chrysler LLC -- http://www.chrysler.com/-- a unit of Cerberus Capital Management LP, produces Chrysler, Jeep(R), Dodge and Mopar(R) brand vehicles and products. The company has dealers worldwide, including Canada, Mexico, U.S., Germany, France, U.K., Argentina, Brazil, Venezuela, China, Japan and Australia. * * * As reported in the Troubled Company Reporter on May 9, 2008, Fitch Ratings downgraded the Issuer Default Rating of Chrysler LLC to 'B' from 'B+', with a Negative Rating Outlook. Fitch has also downgraded the senior secured bank facilities, including senior secured first-lien bank loan to 'BB/RR1' from 'BB+/RR1'; and senior secured second-lien bank loan to 'CCC+/RR6' from 'BB+/RR1'. The recovery rating on the second lien was also downgraded from 'BB+/RR1' to 'CCC+/RR6' based on lower asset value assumptions and associated recoveries in the event of a stress scenario. CHRYSLER LLC: May 2008 Sales in Canada Increase 7% at 27,325 Units ------------------------------------------------------------------ Chrysler LLC Canada's sales grew 7% in May (27,325 units) and extended the unprecedented streak of year-over-year sales increases to 22 consecutive months. May 2008 sales were driven by Chrysler's one-two punch of their all-new minivans and the newly crowned most popular crossover in Canada, the Dodge Journey. Sales were also bolstered by the increased demand for fuel- efficient vehicles such as the Jeep® Patriot and Dodge Caliber. "Chrysler Canada's retail sales growth this year is driven by three vehicle segments that are increasing in popularity with Canadian consumers: fuel-efficient compacts, long-wheelbase minivans and crossovers," Dave Buckingham, Vice President - Sales, Chrysler Canada, said. "Fuel efficiency continues to remain top of mind for consumers. Chrysler Canada is well positioned to capitalize on this demand with 20 vehicles capable of 30-plus MPG (highway)." As a result of the overwhelming response from customers, Chrysler's "Thank You Canada" pricing program will be extended through June. The program positions 13 Chrysler, Jeep and Dodge vehicles under $20,000. "The Thank You Canada program has helped increase demand for both new and established vehicles in Chrysler's lineup and kept our sales momentum strong," Mr. Buckingham added. May Highlights Minivans continue to have strong appeal for Canadian consumers, as total May sales of the Dodge Grand Caravan and Chrysler Town & Country reached an all-time monthly high of 6,528 units, an increase of 52% compared to the same month last year. Dodge Grand Caravan and Chrysler Town & Country minivan sales are up a significant 48% (21,645 units) through the first five months of the year. "Our minivan business is remarkable in Canada," Reid Bigland, President and CEO of Chrysler Canada, said. "With rising fuel prices, Canadian consumers are struggling with the costs associated with large SUVs, but do not want to forego the functionality. As a result, they are getting back into our minivans in record numbers. The minivan provides exceptional fuel economy, outstanding functionality and is available for the first time ever at a starting price of under $20,000." With sales averaging 4,300 units per month, the minivan is Chrysler Canada's top-selling vehicle, Canada's third-highest selling vehicle in 2007 and the No. 1 minivan in the country for 24 consecutive years. Canada's newly crowned favourite crossover, the fuel-efficient Dodge Journey, had another month of increasingly strong sales with 1,581 units sold. This versatile crossover has won over Canadians with its 35 MPG fuel economy (highway), a seven-passenger seating capability and a starting price of $19,999. Sales of Dodge Ram, Chrysler's second-highest volume vehicle, held steady in May with 4,034 units sold. Combined Jeep Patriot, Compass and Dodge Caliber sales were up 36% (5,771 units) compared to May 2007, setting a new record for best month sales. Jeep Patriot and Dodge Caliber are among Chrysler's top-five selling vehicles, and are just two of the over 20 vehicles that achieve an excess of 30 MPG Highway. About Chrysler Headquartered in Auburn Hills, Michigan, Chrysler LLC -- http://www.chrysler.com/-- a unit of Cerberus Capital Management LP, produces Chrysler, Jeep(R), Dodge and Mopar(R) brand vehicles and products. The company has dealers worldwide, including Canada, Mexico, U.S., Germany, France, U.K., Argentina, Brazil, Venezuela, China, Japan and Australia. * * * As reported in the Troubled Company Reporter on May 9, 2008, Fitch Ratings downgraded the Issuer Default Rating of Chrysler LLC to 'B' from 'B+', with a Negative Rating Outlook. Fitch has also downgraded the senior secured bank facilities, including senior secured first-lien bank loan to 'BB/RR1' from 'BB+/RR1'; and senior secured second-lien bank loan to 'CCC+/RR6' from 'BB+/RR1'. The recovery rating on the second lien was also downgraded from 'BB+/RR1' to 'CCC+/RR6' based on lower asset value assumptions and associated recoveries in the event of a stress scenario. CLARIENT INC: March 31 Balance Sheet Upside-Down by $2,550,000 -------------------------------------------------------------- Clarient Inc.'s consolidated balance sheet at March 31, 2008, showed $30,282,000 in total assets and $32,832,000 in total liabilities, resulting in a $2,550,000 total stockholders' deficit. At March 31, 2008, the company's consolidated balance sheet also showed strained liquidity with $18,223,000 in total current assets available to pay $28,525,000 in total current liabilities. The company reported a net loss of $934,000 in the first quarter ended March 31, 2008, compared with net income of $1,289,000 in the same period in 2007. Results for the first quarter ended March 31, 2007, included a $5,397,000 income from the discontinued operations of the company's former instrument systems business which was sold on March 8, 2007. Total revenue increased to $15,886,000 during the three months ended March 31, 2008, from $8,829,000 during the three months ended March 31, 2007. The company added 46 new customers in the three months ended March 31, 2008, and increased its penetration to existing customers during the period. 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?2d4a Going Concern Doubt As reported in the Troubled Company Reporter on April 10, 2008, KPMG LLP, in Costa Mesa, Calif., expressed substantial doubt about Clarient 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 recurring losses, negative cash flows from operations, and working capital and net capital deficiencies. In addition, KPMG said it is not probable that the company can remain in compliance with the restrictive monthly financial covenant in its bank credit facility. In order to comply with the covenants in the current debt agreement, the company must achieve operating results at levels not historically achieved by the company. About Clarient Inc. Based in Aliso Viejo, Calif., Clarient, Inc. (Nasdaq: CLRT) -- http://www.clarientinc.com/-- is an advanced oncology diagnostics services company. The company's principal customers include pathologists, oncologists, hospitals and biopharmaceutical companies. CLASS V FUNDING: Moody's to Review Notes Rating for Possible Cut ---------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of six classes of notes issued by Class V Funding II, Ltd., and left on review for possible further downgrade rating of one of these classes of notes as: Class Description: $68,000,000 Class A-1 Second Priority Senior Secured Floating Rate Notes Due 2046 -- Prior Rating: Aaa, on review for possible downgrade -- Current Rating: Ba1, on review for possible downgrade Class Description: $68,000,000 Class A-2A Second Priority Senior Secured Floating Rate Notes Due 2046 -- Prior Rating: Baa3, on review for possible downgrade -- Current Rating: Ca Class Description: $68,000,000 Class A-2B Second Priority Senior Secured Floating Rate Notes Due 2046 -- Prior Rating: Baa3, on review for possible downgrade -- Current Rating: Ca Class Description: $45,000,000 Class B Third Priority Secured Floating Rate Notes Due 2046 -- Prior Rating: Ba1, on review for possible downgrade -- Current Rating: C Class Description: $7,000,000 Class C Fourth Priority Secured Floating Rate Notes Due 2046 -- Prior Rating: Ba2, on review for possible downgrade -- Current Rating: C Class Description: $26,000,000 Class D Fifth Priority Mezzanine Secured Floating Rate Deferrable Notes Due 2046 -- Prior Rating: Ca -- Current Rating: C Class V Funding II, Ltd. is a collateralized debt obligation backed primarily by a portfolio of structured finance securities. On Jan. 22, 2008 the transaction experienced an event of default caused by a failure of the Class A/B/C Overcollateralization Ratio to be greater than or equal to the required amount set forth in Section 5.1(i) of the Indenture dated May 18, 2006. The rating actions taken reflect continuing deterioration in the credit quality of the underlying portfolio and the increased expected loss associated with the transaction. Losses are attributed to diminished credit quality on the underlying portfolio. As provided in Article V of the Indenture during the occurrence and continuance of an Event of Default, the Controlling Class may be entitled to direct the Trustee to take particular actions with respect to the Collateral. The severity of losses may depend on the timing and choice of remedy to be pursued by the Controlling Class. Because of this uncertainty, the rating of the Class A-1 Notes issued by Class V Funding II, Ltd. is on review for possible further action. COHR HOLDINGS: S&P Trims Rating to B- with Outlook Remains Neg. --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Cohr Holdings Inc. (doing business as Masterplan Inc.) to 'B-' from 'B'. The outlook remains negative. At the same time, S&P lowered the rating on the company's senior secured first-lien credit facilities to 'B-' from 'B+'. S&P revised the recovery rating on this debt to '4', indicating the expectation for average (30% to 50%) recovery of principal and pre-petition interest in the event of a payment default, from '2'. "The downgrades reflect Masterplan's much weaker-than-expected performance and erosion of its financial risk profile, and the recent loss of its largest customer," said Standard & Poor's credit analyst David Peknay. The low-speculative-grade rating reflects Masterplan's highly leveraged financial risk profile, very concentrated customer base, and uncertain business prospects. The company was acquired in early 2007 by Berkshire Partners through a leveraged buyout. Masterplan maintains and repairs health care equipment including diagnostic imaging equipment such as CT, MRI, ultrasound, and biomedical equipment such as patient monitoring devices and infusion pumps. The company also sells refurbished parts to existing companies and third parties. COLLYBUS CDO: Moody's to Review Notes Rating for Possible Cut ------------------------------------------------------------- Moody's Investors Service has downgraded and placed on review for possible further downgrade the ratings on these notes issued by Collybus CDO I Ltd. Class Description: $675,000,000 Class A-2 Senior Secured Floating Rate Notes due 2047 -- Prior Rating: Aaa -- Current Rating: A2, on review for possible downgrade Class Description: $55,000,000 Class A-3 Senior Secured Floating Rate Notes due 2047 -- Prior Rating: Aa1 -- Current Rating: Baa1, on review for possible downgrade Class Description: $53,000,000 Class B Senior Secured Floating Rate Notes due 2047 -- Prior Rating: Aa3 -- Current Rating: Baa3, on review for possible downgrade Class Description: $35,000,000 Class C Deferrable Senior Secured Floating Rate Notes due 2047 -- Prior Rating: A3 -- Current Rating: B1, on review for possible downgrade Additionally, Moody's downgraded these notes: Class Description: $44,000,000 Class D Deferrable Senior Secured Floating Rate Notes due 2047 -- Prior Rating: Baa3 -- Current Rating: Ca According to Moody's, the rating actions are the result of deterioration in the credit quality of the transaction's underlying collateral pool, which consists primarily of structured finance securities. In addiiton, Moody's also withdrew the ratings on this notes: Class Description: $90,000,000 Class A-1 Senior Secured Floating Rate Notes due 2047 The rating was withdrawn because the notes were paid off in full. CREDITSIGHTS INC: Creditor Silver Birch Stake for Auction June 10 ----------------------------------------------------------------- Silver Birch Investments 1 LLC, a secured creditor in CreditSights Inc., is selling its 25,000 shares of stock, subject to higher and better offers, at an auction on June 10, 2008, 10:00 a.m. at: Dan Pecar Newmann & Kleiman PC One American Square, Suite 2300 Indiapolis, IN 46282 The shares of stock in CreditSights is a security for the indebtedness owed to Silver Birch. For more information, and qualification requirements, interested parties may contact: Jeffrey Abrams Dann Pecar Newmann & kleiman PC One American Square, Suite 2300 Indiapolis, IN 46282 Tel (317) 632-3232 CreditSights Inc. is a research provider that integrate debt and equity research into a single view across a company's entire capital structure. The company has more than 50 analysts that identify the best investment opportunity in each of the companies and sectors that they cover. CreditSights' research focuses on corporate and sovereign issuers, which have securities that are actively traded in the corporate bond, credit derivatives, equity- linked and equity markets. CROWN GREEN: Assets Auctioned by Secured Lenders ------------------------------------------------ Rights, title and and membership interests of Crown Green Associates LLC held by Greenfield Crown LLC and Crown Indiana Associates LP aggregating 100% was auctioned June 3, 2008, at the office of Baker and Daniels LLP at 300 North Meridian Street, Suite 2700 in Indianapolis. Erin G. Apstein, Esq., at Brown, Rudnick, Berlack, Israels LLP represents Greenfield Crown and Crown Indiana. Crown Green Associates LLC is a Delaware limited liability company, organized to acquire, own, and operate the real property located at 135 North Pennsylvania Avenue in Indianapolis. DAVIS SQUARE: Moody's to Review Notes Rating for Possible Cut ------------------------------------------------------------- Moody's Investors Service has downgraded and placed on review for possible further downgrade the ratings on these notes issued by Davis Square Funding VII, Ltd. Class Description: $1,570,000,000 Class A-1-a Floating Rate Notes Due 2042 -- Prior Rating: Aa2, on review for possible downgrade -- Current Rating: B1, on review for possible downgrade Class Description: $50,000,000 Class A-1-b Floating Rate Notes Due 2042 -- Prior Rating: Aa2, on review for possible downgrade -- Current Rating: B1, on review for possible downgrade Additionally, Moody's downgraded these notes: Class Description: $100,000,000 Class A-2 Floating Rate Notes Due 2042 -- Prior Rating: A3, on review for possible downgrade -- Current Rating: Ca Class Description: $160,000,000 Class A-3 Floating Rate Notes Due 2042 -- Prior Rating: A3, on review for possible downgrade -- Current Rating: Ca Class Description: $50,000,000 Class B Floating Rate Notes Due 2042 -- Prior Rating: Baa3, on review for possible downgrade -- Current Rating: Ca Class Description: $39,000,000 Class C Deferrable Floating Rate Notes Due 2042 -- Prior Rating: Ba3, on review for possible downgrade -- Current Rating: C Class Description: $21,000,000 Class D Deferrable Floating Rate Notes Due 2042 -- Prior Rating: B3, on review for possible downgrade -- Current Rating: C According to Moody's, the rating actions are the result of deterioration in the credit quality of the transaction's underlying collateral pool, which consists primarily of structured finance securities. DBS COMMUNICATIONS: Auction of Assets Held Yesterday ---------------------------------------------------- On Jan. 24, 2008, DBS initiated and executed an assignment for the benefit of creditors by conveying all of its assets to Michael L. Kayman, solely as assignee to facilitate an orderly closure and liquidation of its business. The assignee has negotiated an asset purchase agreement with an independent third party to sell his right, title and interest in certain assets of DBS free and clear of liens, including accounts receivable, inventory, contracts, computer and networking equipment, intellectual property and licenses. DBS has a contract with Cingular/AT&T Mobility and Sprint Communications and has intellectual property regarding the DBS tradename "EZ Link." Under the purchase agreement, DBS' assets will be sold for $1,175,000, plus assumption of liabilities. The sale was subsequently held yesterday at 1:00 p.m. at the office of Much Shelist Denenberg Ament & Rubenstein PC at 191 North Wacker Drive, Suite 1800 in Chicago, Illinois. The assets of DBS were offered as a single lot on an "as is" basis. Competing bids were required to top $1,250,000, inclusive of bid protection. The assignee can be reached at: Micheal L. Kayman P.O. Box 1130 Libertyville, IL 60048 Tel: (312) 474-7850 The attorneys for the assignee are Norman B. Newman, Esq., and Colleen. E. McManus, Esq., at Much Shelist Denenberg Ament & Rubenstein. DBS Communications Inc. is located at 150 West Center Court in Schaumburg, Illinois. DELTA AIR: Can't Reject Mesa Termination For Now, Court Rules ------------------------------------------------------------- Mesa Air Group Inc. won on May 29 a preliminary injunction from the United States District Court for the Northern District of Georgia in Atlanta, enjoining Delta Air Lines from terminating its Connection Agreement with Mesa, and its wholly owned subsidiary, Freedom Airlines Inc. On March 28, 2008, Delta notified Mesa of its intent to terminate the Connection Agreement. The Connection Agreement includes, among other arrangements, Mesa's agreement to operate 34 model ERJ-145 regional jets leased utilizing Delta's name. In fiscal 2007, the Connection Agreement accounted for approximately 20% of Mesa's 2007 total revenues. Delta sought 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. On April 7, 2008, Mesa filed a lawsuit against Delta alleging breach of the Connection Agreement and seeking specific performance by Delta of its obligations. On May 9, 2008, Mesa filed a motion for a preliminary injunction in the District Court against Delta to prevent its wrongful termination of the Delta Connection Agreement. The hearing for this matter commenced on May 27, 2008 and ended on May 29 following the District Court's ruling in favor of Mesa. Mesa Air Group had warned in a regulatory filing it may have to seek bankruptcy protection if Delta Air successfully terminated their Connection Agreement. As reported by the Troubled Company Reporter on May 23, 2008, Mesa warned that if Delta is successful in terminating the Connection Agreement, Mesa believes it will be unable to redeploy the 34 ERJ-145 aircraft in a timely manner, or at the lease rates that Mesa receives under the Connection Agreement in the event of any redeployment of the aircraft. In addition to losing approximately $20 million per month in revenue (or approximately $960 million over the next four years), Mesa estimated that leasing costs, labor and other costs totaling approximately $250 million to $300 million over the next four years would be incurred by Mesa. As a result, Mesa warned, its 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 or similar measures, Mesa had warned it will be unable to remedy the defaults and will experience additional defaults in the future. Any default would then trigger other defaults under other existing agreements, which would be material to the operational cash flows of Mesa. On May 14, 2008, Air Midwest, Inc., a wholly owned subsidiary of Mesa, 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. Mesa Chairman and Chief Executive Officer Jonathan Ornstein told WSJ that Mesa is "pleased with the Court's ruling" and hopes for the full resolution of the issue. "As a result, the company's cash flows from operations and its available working capital would be insufficient to meet these cash requirements," Mesa's filing had said, according to Marketwatch. About Mesa Air Mesa Air -- http://www.mesa-air.com-- 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. Mesa has 5,000 employees overall. Freedom Airlines currently operates 34 50-seat ERJ-145 and 7 76- seat CRJ-900 aircraft for Delta Connection. About Delta Air Based in Atlanta, Georgia, Delta Air Lines Inc. (NYSE:DAL) -- http://www.delta.com/-- is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 328 destinations in 56 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. Delta flies to Argentina, Australia and the United Kingdom, among others. The company and 18 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provides the Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provide the Official Committee of Unsecured Creditors with legal advice. John McKenna, Jr., at Houlihan Lokey Howard & Zukin Capital and James S. Feltman at Mesirow Financial Consulting, LLC, serve as the Committee's financial advisors. The Debtors filed a chapter 11 plan of reorganization and disclosure statement explaining that plan on Dec. 19, 2007. On Jan. 19, 2007, they filed revisions to the plan and disclosure statement, and submitted further revisions to the plan on Feb. 2, 2007. On Feb. 7, 2007, the Court approved the Debtors' disclosure statement. In April 25, 2007, the Court confirmed the Debtors' plan. That plan became effective on April 30, 2007. The Court entered a final decree closing 17 cases on Sept. 26, 2007. (Delta Air Lines Bankruptcy News, Issue No. 99; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). DELTA AIR: Balks at EOS Airlines' Plan to Sell Planes ----------------------------------------------------- Delta Air Lines Inc., among other carriers, opposed EOS Airlines Inc.'s plan to auction certain equipment and leases on its planes, Reuters reports. EOS filed for Chapter 11 protection in April 2008, and filed a petition to auction off its assets. EOS asked the U.S. Bankruptcy Court in White Plains, New York, to allow it to auction its all-business-class airline, The Wall Street Journal says. WSJ says EOS also wants to sell leases to its Boeing 757-200 aircraft, customer lists, facilities and federal licenses to operate the airline. Delta asserted its ownership with respect to some of EOS' equipment. EOS is also a party to maintenance, facilities and engine lease contracts with Delta, which Delta may object to being passed onto another party, according to the report. 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 Debtor's schedules showed total assets of $57,707,999 and total liabilities of $16,409,993. The U.S. Trustee for Region 2 appointed creditors to serve on an Official Committee of Unsecured Creditors. The creditors' committee is represented by Cohen Tauber Spievack & Wagner P.C. About Delta Air Based in Atlanta, Georgia, Delta Air Lines Inc. (NYSE:DAL) -- http://www.delta.com/-- is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 328 destinations in 56 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. Delta flies to Argentina, Australia and the United Kingdom, among others. The company and 18 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provides the Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provide the Official Committee of Unsecured Creditors with legal advice. John McKenna, Jr., at Houlihan Lokey Howard & Zukin Capital and James S. Feltman at Mesirow Financial Consulting, LLC, serve as the Committee's financial advisors. The Debtors filed a chapter 11 plan of reorganization and disclosure statement explaining that plan on Dec. 19, 2007. On Jan. 19, 2007, they filed revisions to the plan and disclosure statement, and submitted further revisions to the plan on Feb. 2, 2007. On Feb. 7, 2007, the Court approved the Debtors' disclosure statement. In April 25, 2007, the Court confirmed the Debtors' plan. That plan became effective on April 30, 2007. The Court entered a final decree closing 17 cases on Sept. 26, 2007. (Delta Air Lines Bankruptcy News, Issue No. 99; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). DELTA AIR: Amends Bylaws to Clarify Shareholder Voting Matters -------------------------------------------------------------- In a regulatory filing with the Securities and Exchange Commission dated May 21, 2008, Delta Air Lines Inc. disclosed that its board of directors amended Article III, Section 1(a) and Article IV, Section 1 of Delta's Bylaws. The amendment states that "in an uncontested election for directors, any indication in proxy card or voting instructions to withhold authority for a nominee will constitute a vote cast, which has the effect of a vote against the nominee," Edward H. Bastian, Delta president and chief financial officer, said. The amendments to Delta's Bylaws were effective May 19, 2008, Mr. Bastian told the SEC. A full-text copy of Delta's Amended Bylaws is available for free at http://ResearchArchives.com/t/s?2d51 About Delta Air Based in Atlanta, Georgia, Delta Air Lines Inc. (NYSE:DAL) -- http://www.delta.com/-- is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 328 destinations in 56 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. Delta flies to Argentina, Australia and the United Kingdom, among others. The company and 18 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provides the Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provide the Official Committee of Unsecured Creditors with legal advice. John McKenna, Jr., at Houlihan Lokey Howard & Zukin Capital and James S. Feltman at Mesirow Financial Consulting, LLC, serve as the Committee's financial advisors. The Debtors filed a chapter 11 plan of reorganization and disclosure statement explaining that plan on Dec. 19, 2007. On Jan. 19, 2007, they filed revisions to the plan and disclosure statement, and submitted further revisions to the plan on Feb. 2, 2007. On Feb. 7, 2007, the Court approved the Debtors' disclosure statement. In April 25, 2007, the Court confirmed the Debtors' plan. That plan became effective on April 30, 2007. The Court entered a final decree closing 17 cases on Sept. 26, 2007. (Delta Air Lines Bankruptcy News, Issue No. 99; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). DEN-MARK CONSTRUCTION: Wants to Hire Two Real Estate Brokers ------------------------------------------------------------ Den-mark Construction Inc. and its debtor-affiliates asked the U.S. Bankruptcy Court for the Eastern District of North Carolina for permission to employ Alice Ray of Re/Max Hometown, and Coldwell Banker Howard Perry & Walston Builder Services as brokers. A. Alice Ray Alice Ray will assist the Debtors in marketing and selling their real property. In addition, the Debtors asked the Court for authority allowing the Debtors to assume executory contracts with Ms. Ray and Re/Max Hometown. The Debtors told the Court that it is engaged in the real estate investing, developing, sales and construction in Wake, Granville, Franklin, Cumberland, Durham, Vance, Orange, Alamance and Johnston Counties. According to the Debtors, when they filed for bankruptcy, they were parties to several executory contracts with Ms. Ray and Re/Max Hometown, including exclusive right to sell agreements. The Debtors want Ms. Ray and Re/Max Hometown to continue marketing their property. The Debtors listed 17 real properties in Youngsville, North Carolina, to be marketed by Re/Max Hometown. The Debtors proposed to pay the broker 5% commission of the gross sale price for each of the 17 properties sold. The Debtors and Ms. Ray assured the Court that Ms. Ray and Re/Max Hometown are disinterested persons. The office of Alice Ray is located at 12324 Hampton Way Drive, Suite 202, in Wake Forest, North Carolina. B. Coldwell Banker Howard Perry & Walston Builder Services Coldwell Banker will assist the Debtors in marketing and selling their real property. In addition, the Debtors asked the Court for authority allowing the Debtors to assume executory contracts with the firm. As of the bankruptcy filing, the Debtors owed the firm as broker the principal sum of $51,526. The Debtors listed four properties in Graham, North Carolina to be marketed by Coldwell Banker for 6% commission of gross sales of each of the properties sold. Under an agreement between the firm and the Debtors, the 6% commission includes a 1% carve out that is paid to the developer at closing, and the remaining 5% is divided equally between the buyer and seller agents. If no buyer's agent is involved in the sale, the developer gets 2% and the firm gets 4% of the gross sales price. The office of Coldwell Banker is located at 1001 Wade Avenue in Raleigh, North Carolina. Sharon Andrews, senior manager of Coldwell Banker, will be in-charge of the marketing of the Debtors' properties. About Den-Mark Construction Youngsville, North Carolina-based Den-Mark Construction, Inc. constructs single-family houses. It filed its chapter 11 petition on April 24, 2008 (Bankr. E.D.N.C. Case No. 08-02764) together with three debtor-affiliates, Den-Mark Homes SC, Inc. (08-02766); Marcus Edwards Development, LLC (08-02768); and M&D Development, LLC (08-02769). Mark E. Dowdy and David Dennis Cyrus are the sole shareholders and officers of each of the four debtors. Judge Randy D. Doub presides over the case. Trawick H. Stubbs, Jr., Esq., at Stubbs & Perdue, P.A. represents the Debtors in their restructuring efforts. The Debtors listed total assets of $44,810,901 and total liabilities of $34,537,937, when they filed for bankruptcy. A committee for unsecured creditors has not been appointed in the case. DEN-MARK CONSTRUCTION: Wachovia Opposes Engagements of Brokers -------------------------------------------------------------- Wachovia Bank NA filed with the U.S. Bankruptcy Court for the Eastern District of North Carolina an objection to the request of Den-mark Construction Inc. and its debtor-affiliates to employ various brokers. A. Weichert Realtors Southern Cost Debtor Den-Mark Homes SC Inc. sought permission to employ Weichert Realtors Southern Coast to sell a number of homes in Pine Needles Estates and Woodlyn Meadows. Of the homes in Woodlyn, Wachovia has a first priority security interest in nine homes. One of the lots has already been sold and a commission has been paid to Weichert. The sale of that home resulted in a shortfall of the prepetition payoff amount to Wachovia, the bank asserted. The proposed commission for Weichert is 6% (5% for onsite sales agent). Wachovia said that the Debtor had not identied which homes have onsite sales agents. Wachovia said it objects to any commission to Weichert in excess of 5% since there are several real estate agents willing to sell homes for 5% commission. Further, Wachovia explained that since the Debtor is in bankruptcy, 5% commission is reasonable. In addition, Wachovia said that Weichert's request for a 1% marketing fee in addition to the 6% commission is way too much. B. Coldwell Banker Chicora Real Estate Wachovia said that Den-Mark Homes sought authority to employ Coldwell Banker Chicora Real Estate to sell a number of homes in Palm Lakes Plantation, in which Wachovia has a first priority security interest. The proposed commission to Chicora is 6%, plus reimbursement of marketing expenses. Again, Wachovia objects to commissions in excess of 5%. The bank also claimed that funds paid to Chicora constitute Wachovia's cash collateral. C. Coldwell Banker Howard Perry & Walston Builder Services Debtor Den-Mark Construction sought permission to employ Coldwell Banker Howard Perry & Walston Builder Services to sell a number of houses. The proposed commission to Howard Perry is 6%, with a 1% kickback to the developer. Interestingly, however, with the kickback deducted, Howard Perry will receive a 5% commission, Wachovia related. According to the bank, if there's no buyer's agent, the developer will receive a 2% kickback and Howard Perry will receive a 4% commission. Wachovia pointed that a 4% commission with no buyer's agent is what all other realtors should be receiving. To the extent that the applications are approved, Wachovia asked the Court that the brokers should be allowed a commission no higher than 5%, or 4% if there's no buyer's agent. About Den-Mark Construction Youngsville, North Carolina-based Den-Mark Construction, Inc. constructs single-family houses. It filed its chapter 11 petition on April 24, 2008 (Bankr. E.D.N.C. Case No. 08-02764) together with three debtor-affiliates, Den-Mark Homes SC, Inc. (08-02766); Marcus Edwards Development, LLC (08-02768); and M&D Development, LLC (08-02769). Mark E. Dowdy and David Dennis Cyrus are the sole shareholders and officers of each of the four debtors. Judge Randy D. Doub presides over the case. Trawick H. Stubbs, Jr., Esq., at Stubbs & Perdue, P.A. represents the Debtors in their restructuring efforts. The Debtors listed total assets of $44,810,901 and total liabilities of $34,537,937, when they filed for bankruptcy. A committee for unsecured creditors has not been appointed in the case. DEN-MARK CONSTRUCTION: Taps Warren Perry as Real Estate Counsel --------------------------------------------------------------- Den-Mark Construction Inc. and its debtor-affiliates asked the U.S. Bankruptcy Court for the Eastern District of North Carolina to employ Warren, Perry, Narron, Shackleford & Mackay PLLC as their special counsel. The law firm has represented the Debtors in the past regarding real estate transactions and closings. At the time of the bankruptcy filing, the Debtors owed these amounts to Warren Perry: Marcus Edwards Development LLC $19,954 Den-Mark Construction Inc. $3,090 According to the Debtors, Warren Perry will continue to assist them with their real estate transactions and closings. The firm agreed to be compensated by the Debtors for postpetition services on an hourly basis after approval by the Court, the Debtors related. The Debtors also asked the Court to allow the firm to file applications of compensation and reimbursement as frequently as once every 60 days. The firm can be reached at: James S. Warren, Esq. Warren, Perry, Narron, Shackleford & Mackay PLLC P.O. Box 1187 Wake Forest, NC 27588 Wachovia Balks at Engagement Wachovia Bank NA asserts secured priority interests in several of the Debtors' housing projects. Wachovia acknowledged that as of the bankruptcy filing, Warren Perry was owed amounts by Marcus Edwards and Den-Mark Construction. The bank pointed that the Debtors failed to disclose what the firm's hourly rates are. The bank also pointed that the Debtors failed to disclose the terms under which the firm was paid prepetition. Paying the closing attorney on an hourly basis could result in excess fees being paid, Wachovia said. Any funds paid to Warren Perry constitute Wachovia's cash collateral. Hence, Wachovia objects to any funds being paid to the firm on the terms contained in the Debtors' application. Wachovia argues that Warren Perry should only be engaged to handle real estate closings at reasonable market rates. About Den-Mark Construction Youngsville, North Carolina-based Den-Mark Construction, Inc. constructs single-family houses. It filed its chapter 11 petition on April 24, 2008 (Bankr. E.D.N.C. Case No. 08-02764) together with three debtor-affiliates, Den-Mark Homes SC, Inc. (08-02766); Marcus Edwards Development, LLC (08-02768); and M&D Development, LLC (08-02769). Mark E. Dowdy and David Dennis Cyrus are the sole shareholders and officers of each of the four debtors. Judge Randy D. Doub presides over the case. Trawick H. Stubbs, Jr., Esq., at Stubbs & Perdue, P.A. represents the Debtors in their restructuring efforts. The Debtors listed total assets of $44,810,901 and total liabilities of $34,537,937, when they filed for bankruptcy. A committee for unsecured creditors has not been appointed in the case. DIAMOND GLASS: Connecticut et al. Balk at Sale Bid Procedures ------------------------------------------------------------- Connecticut General Life Insurance Company, Automotive Components Holdings LLC, Oracle USA Inc., and certain local tax authorities object to the sale of substantially all assets of Diamond Glass Inc. and DT Subsidiary Corp. The Debtors have entered into an asset purchase agreement with Diamond Glass Acquisition LLC, the designated stalking horse bidder, under which the bidder would acquire substantially all of the Debtors' assets for $34 million in the form of a credit bid, plus assumed liabilities. A. Connecticut and Oracle Connecticut and Oracle received two notices of zero balance cure amounts for possible assumption and assignment of certain contracts in connection with the Debtors' sale request. The parties argued that the sale provides inadequate information of which contracts the Debtors intend to keep. Connecticut asserts $1.7 million in cure amounts based on its review of the account and prior claims experience, while Oracle posts at least $1,350 in cure amounts on its records. Connecticut and Oracle contend that the cure amounts listed in the notices are incorrect. Accordingly, Connecticut and Oracle ask the Court to deny approval of the Debtors' request until the Debtors have determined which contracts they proposes to assume and assign, and paid each of Connecticut and Oracle's cure amounts. B. Automotive Components Automotive asserts an unpaid prepetition contract claim against the Debtors for $572,327 for glass ACH sold and delivered to the Debtors before their bankruptcy filing. Automotive's claim is secured by an offsetting, prepetition mutual indebtedness for $350,483 that ACH owes to the Debtors for glass replacement services. Automotive's setoff rights are entitled to adequate protection, under Section 506(a) of the U.S. Bankruptcy Code, the same as any other interest in property of the bankruptcy estate. The secured lender previously asked the Court for relief from the automatic stay in order to offset these claims. Automotive objects to the Debtors' request since the Debtors are seeking to sell assets free and clear of liens, including Automotive's first-priority setoff rights, while at the same time allowing the Debtors' secured lenders to credit bid their claims for the purchase of assets. Automotive says its setoff rights are not adequately protected. C. Tax Authorities The Tax Authorities have filed secured claims of $6,000 for unpaid 2008 ad valorem property taxes, which are secured by first priority liens on the Debtors' personal property. The Tax Authorities relate to the Court that the Debtors' sale request includes the disposition of their liens. The Tax Authorities say that it is unclear how their liens will be treated upon the sale of the Debtors' property. The Tax Authorities argue that merely providing that the tax liens attached to the sale proceeds does not adequately protect their liens. The liens should be paid directly from the sale proceeds at closing. The Tax Authorities also contend that the sale of their collateral could not be approved without providing adequate protection for their liens. A credit bid purchaser must agree to take the assets subject to the tax liens and assume responsibility for paying the taxes, the Authorities say. The Tax Authorities are comprised of Bexar County, Dallas County, Forth Ben County, Irving ISD, City of Memphis, City of Richardson and Tarrant County. As reported in the Troubled Company Reporter on May 26, 2008, the Debtors agreed to extend for two weeks all deadlines for submitting bids and participating in the auction. Under the new schedule: (a) letters of intent will be due on June 10, (b) bids will be due 12 noon on Tuesday, June 17, (c) the auction will be conducted beginning at 9 a.m. at the offices of Young, Conaway, Stargatt & Taylor in Wilmington, Delaware on Thursday, June 19, and (d) the sale hearing will be held on Friday, June 20 at 1 p.m., in the United States Bankruptcy Court for the District of Delaware. The new schedule, reflected in an agreed order submitted in the the Debtors' chapter 11 case, also resolves a motion filed under seal by Belron International Limited and Belron US Inc. seeking to have the Court order a similar extension. Belron filed its motion after the Company initially refused Belron's request to extend the deadlines. The Court approved on April 30, 2008, proposed bidding procedures for the sale of substantially all of the Debtors' assets. As reported in the TCR on April 22, 2008, the Debtors, in consultation with their financial advisor NatCity Investments Inc., considered a number of potential sales and restructuring alternatives in order to develop a plan that would maximize value for their creditors and to ensure survivability. About Diamond Glass Based in Kingston, Pennsylvania, Diamond Glass Inc. -- http://www.diamongtriumph.com/and http://www.daimondtriumphglass.com/-- is a provider of automotive glass replacement and repair services. The company and and its debtor-affiliate DT Subsidiary Corp., filed for Chapter 11 bankruptcy petition on April 1, 2008 (Bankr. D. Del. Lead Case No. 08-10601). Michael P. Richman, Esq., at Foley & Lardner LLP, and Donald J. Bowman Jr., Esq., at Young Conaway Stargatt & Taylor LLP, represent the Debtors in their restructuring efforts. The U.S. Trustee for Region 3 appointed five creditors to serve on an Official Committee of Unsecured Creditors. John T. Carrol, III, Esq., and Jeffrey R. Waxman, Esq., at Cozen O'Connor, represent the Committee in this cases. When the Debtors filed for bankruptcy protection, they listed assets of between $10 million and $50 million and debts of between $100 million and $500 million. DIAMOND GLASS: FTI Consulting Approved as Financial Advisor ----------------------------------------------------------- The United States Bankruptcy Court for the District of Delaware authorized the Official Committee of Unsecured Creditors of Diamond Glass Inc. and DTS Subsidiary Corp. to retain FTI Consulting Inc. as its financial advisor. As the Committee's advisor, the firm will monitor the Debtors' efforts and their professional advisors to maximize the values of the Debtors' estate. Specifically, the firm will: a) assist the Committee in the review of financial related disclosure required by the Court including: schedules of assets and liabilities, statement of financial affairs and monthly operating reports; b) assist the Committee with information and analyses required pursuant to the debtor-in-possession financing including, but not limited to, preparation for hearings regarding the use of cash collateral and DIP financing; c) assist with a review of the Debtors' short-term cash management procedures; d) assist with a review of the Debtors' proposed key employee incentive plan and other critical employee benefit programs; e) assist and advice to the Committee with respect to the Debtors' identification of core business assets and the disposition of assets or liquidation of unprofitable operations; f) assist with a review of the Debtors' performance of cost evaluation with respect to the affirmation or rejection of various executory contracts and leases; g) assist regarding the identification of areas of potential cost savings, including overhead and operating expenses reductions and efficiency improvements; h) assist in the review of financial information distributed by the Debtors to creditors and others, including, but not limited to: cash flow projections and budget, cash receipts and disbursement analysis of various asset and liability accounts, analysis of proposed transactions for which court approval is sought; i) attend at meetings and assist in discussions with the Debtors, potential investors, banks, other secured lenders, the Committee and any other official committees organized in these Chapter 11 proceedings, the U.S. Trustee, other parties in interest and professionals hired by the same, as requested; j) assist in the review and preparation of information and analysis necessary for the confirmation of a plan in these Chapter 11 proceedings; k) assist in the evaluation analysis of avoidance actions, including fraudulent conveyances and preferential transfers; and l) render other general business consulting or other assistance as the Committee or its counsel may deem necessary that is consistent with the role of a financial advisor and not duplicative of services provided by other professionals in this proceedings. The firm will be paid $50,000 per month as compensation, plus reimbursement of actual and necessary expenses incurred by the firm. The firm's professionals and their compensation rates are: Designations Hourly Rates ------------ ------------ Senior Managing Directors $540-$720 Managing Directors $465-$550 Directors $380-$475 Senior Consultant $285-$360 Consultant $220-$270 Project Assistant $74-$185 Samuel E. Star, a senior managing director of the firm, attests that the firm is a "disinterested person" as defined in Section 101(14) of the Bankruptcy Code. On April 14, 2008, an FTI official assumed position as interim controller of Zeledyne LLC when it acquired automotive assets of Automotive Components Holding LLC, a secured lender of the Debtors and one of their suppliers. The appointed interim official is not involved in any talks with the Debtors and has not been responsible for approving any extensions of credit or shipment of products to the Debtors, Mr. Star says. About Diamond Glass Based in Kingston, Pennsylvania, Diamond Glass Inc. -- http://www.diamongtriumph.com/and http://www.daimondtriumphglass.com/-- is a provider of automotive glass replacement and repair services. The company and and its debtor-affiliate DT Subsidiary Corp., filed for Chapter 11 bankruptcy petition on April 1, 2008 (Bankr. D. Del. Lead Case No. 08-10601). Michael P. Richman, Esq., at Foley & Lardner LLP, and Donald J. Bowman Jr., Esq., at Young Conaway Stargatt & Taylor LLP, represent the Debtors in their restructuring efforts. The U.S. Trustee for Region 3 appointed five creditors to serve on an Official Committee of Unsecured Creditors. John T. Carrol, III, Esq., and Jeffrey R. Waxman, Esq., at Cozen O'Connor, represent the Committee in this cases. When the Debtors filed for bankruptcy protection, they listed assets of between $10 million and $50 million and debts of between $100 million and $500 million. DIGITAL GAS: Voluntary Chapter 11 Petition ------------------------------------------ Debtor: Digital Gas, Inc. 19849 Middlebelt Road Livonia, MI 48152 Bankruptcy Case No.: 08-52086 Chapter 11 Petition Date: May 16, 2008 Court: Eastern District of Michigan (Detroit) Judge: Walter Shapero Debtor's Counsel: Michael I. Zousmer Nathan, Neuman, Nathan & Zousmer, P.C. 29100 Northwestern Hwy., Suite 260 Southfield, MI 48034 Phone: (248) 351-0099 E-mail: mzousmer@nathanneuman.com Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $1,000,001 to $10,000,000 The Debtor did not file a list of its largest unsecured creditors. DIOGENES CDO: Moody's to Review Notes Rating for Possible Cut ------------------------------------------------------------- Moody's Investors Service has downgraded and left on review for possible further downgrade the ratings on these notes issued by Diogenes CDO I Class Description: $248,000,000 Class A-1 Floating Rate Notes Due December 15, 2043 -- Prior Rating: Aaa -- Current Rating: Ba1, on review for possible downgrade Class Description: $60,800,000 Class A-2 Floating Rate Notes Due December 15, 2043 -- Prior Rating: Aaa -- Current Rating: B2, on review for possible downgrade Class Description: $36,000,000 Class B Floating Rate Notes Due December 15, 2043 -- Prior Rating: Aa2, on review for possible downgrade -- Current Rating: B3, on review for possible downgrade Additionally, Moody's downgraded these notes: Class Description: $12,400,000 Class C Deferrable Floating Rate Notes Due December 15, 2043 -- Prior Rating: Baa2, on review for possible downgrade -- Current Rating: Ca Class Description: $21,200,000 Class D Deferrable Floating Rate Notes Due December 15, 2043 -- Prior Rating: Ba1, on review for possible downgrade -- Current Rating: C According to Moody's, the rating actions reflect increased deterioration in the credit quality of the underlying portfolio. DIOMED HOLDINGS: $8-Mil. Sale of Assets to AngioDynamics Approved ----------------------------------------------------------------- The United States Bankruptcy Court for the District of Massachusetts, Western Division, approved AngioDynamics, Inc.'s purchase of certain United States assets of Diomed Holdings and its wholly owned subsidiary, Diomed, Inc. The sale conditions are set forth in a definitive asset purchase agreement, whereby AngioDynamics has agreed to pay $8 million in cash for the United States assets and $3 million in cash for certain United Kingdom Assets of Diomed Limited. The final purchase price will be subject to adjustment for changes in working capital at the closing date. AngioDynamics expects to simultaneously close the purchase of both the United States and United Kingdom assets by June 16, 2008. "The acquisition of Diomed's United States and United Kingdom assets will greatly strengthen our worldwide presence in the high- growth market to treat varicose veins," said Eamonn Hobbs, President and CEO of AngioDynamics. "The acquisition, combined with the recent settlement with VNUS Medical that provides us with a license to certain patents for use in endovenous laser therapy, enhances our ability to provide physicians with innovative technologies for superior patient care. We believe Diomed's endovenous laser products will be an excellent complement to our venous product line and once the purchase closes we will begin to integrate the businesses and expand our sales organization in both the United States and overseas." On April 10, 2008, AngioDynamics entered into asset purchase agreements with Diomed Holdings, Inc., Diomed, Inc., and Diomed Limited for the acquisition of certain assets of Diomed's business in the United States and United Kingdom. The agreement with Diomed Holdings, Inc. and Diomed, Inc. was subject to an auction process administered by the bankruptcy court as a result of Diomed's Chapter 11 bankruptcy proceedings. Diomed's United States and United Kingdom businesses are engaged in the sale of systems for the endovenous laser treatment of varicose veins, and in the 12-month period ending September 30, 2007, Diomed had worldwide sales of $25.4 million. The agreements do not provide for the acquisition of any interest in Diomed's legal judgment award against Vascular Solutions. About AngioDynamics AngioDynamics, Inc., provides innovative medical devices used by interventional radiologists, surgeons, and other physicians for the minimally invasive treatment of cancer and peripheral vascular disease. The Company's diverse product line includes market- leading radiofrequency ablation systems, vascular access products, angiographic products and accessories, dialysis products, angioplasty products, drainage products, thrombolytic products, embolization products and venous products. On the Net: http://www.angiodynamics.com/ About Diomed Holdings Based in Andover, Massachussetts, Diomed Holdings Inc. (AMEX: DIO) -- http://www.evlt.com/and http://www.diomedinc.com/-- develops and commercializes minimal and micro-invasive medical procedures that use its proprietary laser technologies and disposable products. Diomed's EVLT(R) laser vein ablation procedure is used in varicose vein treatments. Diomed also provides photodynamic therapy for use in cancer treatments, and dental and general surgical applications. Diomed Holdings has no assets other than its 100% ownership in Diomed Inc., its operating unit. Diomed Inc. owns 100% of Diomed Ltd. in the United Kingdom and Diolaser Mexico SA de CV in Mexico. The company and its affiliate, Diomed Inc., filed for Chapter 11 protection on March 14, 2008 (Bankr. D. Mass. Case Nos. 08-40750 and 08-40749). Douglas R. Gooding, Esq., at Choate Hall & Stewart LLP, is the Debtors local counsel and McGuireWoods LLP is its general counsel. Goulston & Storrs P.C. is counsel to the Official Committee of Unsecured Creditors. The company's schedules show total assets of $19,936,479 and total liabilities of $14,743,485. DIOMED HOLDINGS: Faces Patent Infringement Claims from VNUS ----------------------------------------------------------- VNUS Medical Technologies, Inc., said it plans to file a claim against the bankruptcy estate of Diomed Holdings, Inc., for monetary damages attributable to Diomed's alleged past and current infringement of VNUS patents. VNUS filed a patent infringement lawsuit in 2005 against three endovenous laser competitors, Diomed, AngioDynamics and Vascular Solutions. Trial has been scheduled for June 23, 2008. The VNUS patent litigation against Diomed was stayed as a result of Diomed's bankrutpcy filing in March. On Tuesday, VNUS entered into an agreement with AngioDynamics and Vascular Solutions that settles and resolves a patent infringement lawsuit between the companies. The Agreement results in VNUS granting to AngioDynamics and Vascular Solutions, a non-exclusive, non-sublicensable patent license that covers certain products such as disposable endovenous laser fiber kits, laser fibers, and lasers used in the field of endovenous laser ablation. As a part of the agreement, licensees AngioDynamics and Vascular Solutions stipulated that the VNUS patents-in-suit are valid, enforceable, and were infringed by the licensees. The license requires per unit royalty payments for endovenous laser products sold or shipped in the United States until September 11, 2017. In conjunction with the patent license, AngioDynamics and Vascular Solutions have agreed to an upfront payment of $6.8 million and $3.1 million respectively for past infringement of the VNUS patents through May 31, 2008 for AngioDynamics and through March 31, 2008 for Vascular Solutions. Brian Farley, VNUS President and CEO, stated, "This agreement validates the importance and value of our intellectual property in the field of endovenous ablation. It brings to VNUS a favorable result in the enforcement of our endovenous vein ablation patents and is expected to produce a forward royalty stream that allows VNUS to financially benefit from endovenous laser ablation products sold into the vein ablation market over the next nine years." Mr. Farley added, "We expect the financial and other terms of our settlement agreement will also facilitate productive dialog with others who practice the patented methods." Diomed is selling its operations to AngioDynamics for $8,000,000 cash plus assumption of certain liabilities. Today's Troubled Company Reporter has a story on that sale. About VNUS Medical Founded in 1995 and headquartered in San Jose, California, VNUS Medical Technologies -- (Nasdaq: VNUS) -- is a worldwide leader in medical devices for the minimally invasive treatment of venous reflux disease, a progressive condition that causes the varicose veins afflicting 25 million Americans. The pioneering company in the field, VNUS offers the ClosureFAST system, which consists of a proprietary radiofrequency (RF) generator and proprietary disposable endovenous catheters and devices to close diseased veins through the application of temperature-controlled RF energy. VNUS devices have been used in more than 300,000 procedures worldwide. For more information, visit http://www.vnus.com/. About Diomed Holdings Based in Andover, Massachussetts, Diomed Holdings Inc. (AMEX: DIO) -- http://www.evlt.com/and http://www.diomedinc.com/-- develops and commercializes minimal and micro-invasive medical procedures that use its proprietary laser technologies and disposable products. Diomed's EVLT(R) laser vein ablation procedure is used in varicose vein treatments. Diomed also provides photodynamic therapy for use in cancer treatments, and dental and general surgical applications. Diomed Holdings has no assets other than its 100% ownership in Diomed Inc., its operating unit. Diomed Inc. owns 100% of Diomed Ltd. in the United Kingdom and Diolaser Mexico SA de CV in Mexico. The company sell its products through a direct sales force, and a network of distributors in the EU, Latin America and Mexico, the UK, the US, Japan, Australia, South Korea, the Peoples' Republic of China, and Canada. The company and its affiliate, Diomed Inc., filed for Chapter 11 protection on March 14, 2008 (Bankr. D. Mass. Case Nos. 08-40750 and 08-40749). Douglas R. Gooding, Esq., at Choate Hall & Stewart LLP, is the Debtors local counsel and McGuireWoods LLP is its general counsel. Goulston & Storrs P.C. is counsel to the Official Committee of Unsecured Creditors. The company's schedules show total assets of US$19,936,479 and total liabilities of US$14,743,485. DISTRIBUTED ENERGY: Files for Bankruptcy, Gets $2MM Perseus Loan ---------------------------------------------------------------- Distributed Energy Systems Corp. and its subsidiary, Northern Power Systems Inc., filed voluntary petitions under Chapter 11 in the United States Bankruptcy Court for the District of Delaware. The company determined the voluntary filings were necessary to complete going-concern sales of the Northern Power unit and another subsidiary, Proton Energy Systems Inc., and was the best course of action to maximize the value of the company's assets for all stakeholders including its 175 employees. The company expects its operations to function normally during the Chapter 11 process, with little or no impact on how it conducts business. The company will fulfill customer demands and provide uninterrupted customer service by honoring commitments in the normal course of business. The company will continue paying suppliers for goods and services they provide after the filings, and will pay all wages and benefits for active employees, as usual and without interruption. To fund its continuing operations during the Chapter 11 process, the company obtained a $2 million debtor-in-possession financing commitment from its senior secured lender, Perseus Partners VII L.P. Subject to bankruptcy court approval, the DIP financing will be used to supplement the company's cash flow during the Chapter 11 process and is expected to provide adequate funds for the company to operate in the ordinary course of business. "We are grateful for the continuing loyalty and support of our employees and customers," Bernard Cherry, chief executive officer of Distributed Energy Systems Corp., said. "We intend to use the Chapter 11 process as a strategic vehicle to obtain the time and legal protection necessary to complete a structured sale of our two primary operating units, and to maintain the going concern value of both business units. Our dedication to providing our customers with the highest quality products and services will remain strong during this strategic process." The Chapter 11 filings were made on June 4, 2008, in Wilmington, Delaware. The company's legal advisor with respect to the Chapter 11 filings is Young Conaway Stargatt & Taylor LLP and its financial advisor is Allen & Company. About Distributed Energy Systems Based in Wallingford, Connecticut, Distributed Energy Systems (Nasdaq:DESC) -- http://www.distributed-energy.com/-- operates through two wholly-owned subsidiaries: Proton Energy Systems Inc. and Northern Power Systems Inc. Proton is engaged in designing, developing, selling and manufacturing on-site hydrogen gas delivery systems. Northern has a range of businesses, including the design and sale of power generation equipment, engineering, procurement and construction of distributed power systems, the design and sale of direct drive wind turbines, and the servicing of fossil fuel power generation equipment. The company was incorporated on May 19, 2003. DISTRIBUTED ENERGY: Case Summary & 20 Largest Unsecured Creditors ----------------------------------------------------------------- Lead Debtor: Distributed Energy Systems Corp. aka PES New Parent, Inc. 10 Technology Drive Wallingford, CT 06492 Tel: (203) 678-2000 Bankruptcy Case No.: 08-11101 Debtor-affiliates filing separate Chapter 11 petitions: Entity Case No. ------ -------- Northern Power Systems, Inc. 08-11102 aka PES-2 Merger Sub, Inc. Type of Business: The Debtors engage in the design, development, manufacture, and sale of on-site hydrogen gas delivery systems worldwide. See http://www.distributed-energy.com Chapter 11 Petition Date: May 4, 2008 Court: District of Delaware (Delaware) Judge: Kevin Gross Debtors' Counsel: Robert S. Brady, Esq. Email: bankfilings@ycst.com Robert F. Poppiti, Jr., Esq. Email: bankfilings@ycst.com Young, Conaway, Stargatt & Taylor The Brandywine Bldg. 1000 W. St., 17th Flr. P.O. Box 391 Wilmington, DE 19899-0391 Tel: (302) 571-6600 Fax: (302) 571-1253 http://www.ycst.com Total Assets: $16,826,046 Total Debts: $65,546,173 Debtors' Consolidated List of 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Chloride France, SA trade debt $164,276 30 Ave. Montgolfer BP 90 Chassieu Cedex, France Tel: 011-33-478-401-356 Fax: 011-33-478-907-766 St. Paul Travelers trade debt $162,033 CL & Specialty Remittance Ctr. Hartford, CT 06183-1008 Tel: (860) 277-0111 Fax: (860) 277-2158 STM Power trade debt $114,378 275 Metty Drive Ann Arbor, MI 48103 Tel: (734) 214-1448 Fax: (734) 995-0610 Vermont Department of Tax taxes $92,797 Anderson, Rowe & Buckley, Inc. professional services $87,314 Piper Jaffray professional services $85,796 Delstar Energie, Inc. trade debt $85,000 Washington International trade debt $71,496 Holdings, Ltd. Shanghai TSP trade debt $69,500 Garrard Hassan America, Inc. trade debt $63,303 Offshore Technical Assistance trade debt $52,293 Liberty Casting Co., LLC trade debt $47,355 Semikron, Inc. trade debt $38,895 Roman Manuel Vastro Quiroz trade debt $38,044 MARSA Johnson Controls trade debt $34,916 ML Strategies, LLC trade debt $30,000 Enercon Engineering, Inc. trade debt $26,999 Sheedy Drayage Co. trade debt $22,814 Valley Power Systems, Inc. trade debt $22,138 Laser Technologies trade debt $20,88 EDGEWOOD VILLAS: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: Edgewood Villas Limited Dividend Housing Association Limited Partnership 1010 W. Edgewood Boulevard Lansing, MI 48911 Bankruptcy Case No.: 08-04858 Chapter 11 Petition Date: May 30, 2008 Court: Western District of Michigan (Grand Rapids) Judge: Hon. Scott W. Dales Debtor's Counsel: Robert D. Gordon (rgordon@clarkhill.com) Clark Hill PLC 500 Woodward Ave, Ste 3500 Detroit, MI 48226-3435 Telephone (313) 965-8572 Estimated Assets: $1,000,001 to $10 million Estimated Debts: $1,000,001 to $10 million A copy of 's list of 20 largest unsecured creditorsis available for free at http://bankrupt.com/misc/miwb08-04858.pdf EMISPHERE TECHNOLOGIES: Stock to Trade at Nasdaq Capital Market --------------------------------------------------------------- Emisphere Technologies, Inc., received notice from the Listing Qualifications Department of The NASDAQ Stock Market that the company's application to list its common stock on The NASDAQ Capital Market was approved. The company's common stock will begin trading on the Capital Market, and will cease trading on The NASDAQ Global Market, at the opening of business Friday, May 30, 2008. The trading symbol for the company's common stock remains "EMIS." The NASDAQ Capital Market currently includes over 500 companies and operates in substantially the same manner as the NASDAQ Global Market. Securities listed on the NASDAQ Capital Market satisfy all applicable qualification requirements for NASDAQ securities and all companies listed on the NASDAQ Capital Market must meet certain financial requirements and adhere to NASDAQ's corporate governance standards. Based in Cedar Knolls, New Jersey, Emisphere Technologies Inc., (NasdaqGM: EMIS) -- http://www.emisphere.com/-- is a biopharmaceutical company that focuses on a unique and improved delivery of therapeutic molecules using its eligen(R) technology. These molecules and compounds could be currently available or are under development. Such molecules are usually delivered by injection; in many cases, their benefits are limited due to poor bioavailability, slow on-set of action or variable absorption. The eligen(R) technology can be applied to the oral route of administration as well other delivery pathways, such as buccal, rectal, inhalation, intra-vaginal or transdermal. * * * PricewaterhouseCoopers LLP expressed substantial doubt about Emisphere Technologies Inc.'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 reported that the company has experienced sustained operating losses, has limited capital resources, and has significant future commitments. The company has limited capital resources and operations to date have been funded primarily with the proceeds from collaborative research agreements, public and private equity and debt financings and income earned on investments. EOS AIRLINES: Plan to Sell Planes Faces Opposition from Delta -------------------------------------------------------------- Delta Air Lines Inc., among other carriers, opposed EOS Airlines Inc.'s plan to auction certain equipment and leases on its planes, Reuters reports. EOS filed for Chapter 11 protection in April 2008, and filed a petition to auction off its assets. EOS asked the U.S. Bankruptcy Court in White Plains, New York, to allow it to auction its all-business-class airline, The Wall Street Journal says. WSJ says EOS also wants to sell leases to its Boeing 757-200 aircraft, customer lists, facilities and federal licenses to operate the airline. Delta asserted its ownership with respect to some of EOS' equipment. EOS is also a party to maintenance, facilities and engine lease contracts with Delta, which Delta may object to being passed onto another party, according to the report. About Delta Air Based in Atlanta, Georgia, Delta Air Lines Inc. (NYSE:DAL) -- http://www.delta.com/-- is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 328 destinations in 56 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. Delta flies to Argentina, Australia and the United Kingdom, among others. The company and 18 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provides the Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provide the Official Committee of Unsecured Creditors with legal advice. John McKenna, Jr., at Houlihan Lokey Howard & Zukin Capital and James S. Feltman at Mesirow Financial Consulting, LLC, serve as the Committee's financial advisors. The Debtors filed a chapter 11 plan of reorganization and disclosure statement explaining that plan on Dec. 19, 2007. On Jan. 19, 2007, they filed revisions to the plan and disclosure statement, and submitted further revisions to the plan on Feb. 2, 2007. On Feb. 7, 2007, the Court approved the Debtors' disclosure statement. In April 25, 2007, the Court confirmed the Debtors' plan. That plan became effective on April 30, 2007. The Court entered a final decree closing 17 cases on Sept. 26, 2007. (Delta Air Lines Bankruptcy News, Issue No. 99; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). 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 Debtor's schedules showed total assets of $57,707,999 and total liabilities of $16,409,993. The U.S. Trustee for Region 2 appointed creditors to serve on an Official Committee of Unsecured Creditors. The creditors' committee is represented by Cohen Tauber Spievack & Wagner P.C. EQUITY RESOURCE: Case Summary & 8 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Equity Resource Inc. 2400 North Tenaya Las Vegas, NV 89129-6023 Bankruptcy Case No.: 08-15615 Type of Business: The debtor is a mortgage lender. Chapter 11 Petition Date: May 30, 2008 Court: District of Nevada (Las Vegas) Judge: Hon. Mike K. Nakagawa Debtor's Counsel: Kevin R. Hansen (krhlaw@cox.net) Kevin R. Hansen Ltd. 208 South Jones Blvd. Las Vegas, NV 89107 Telephone (702) 258-8200 Fax (702) 974-0784 Estimated Assets: $1,000,001 to $10 million Estimated Debts: $10,000,0001 to $50 million A copy of debtor's petition and a list of its 8 largest unsecured creditors is available for free at: http://bankrupt.com/misc/nvb08-15615.pdf ESP FUNDING: Moody's Cuts Notes Ratings, to Undertake Review ------------------------------------------------------------ Moody's Investors Service has downgraded ratings of five classes of notes issued by ESP Funding I, Ltd. and left on review for possible further downgrade the rating of four of these classes. The notes affected by the rating action are: Class Description: $100,000,000 Class A-1R Revolving Floating Rate Senior Secured Notes Due 2046 -- Prior Rating: Aa2, on review for possible downgrade -- Current Rating: Baa1, on review for possible downgrade Class Description: $395,000,000 Class A-1T1 Floating Rate Senior Secured Notes Due 2046 -- Prior Rating: Aa2, on review for possible downgrade -- Current Rating: Baa1, on review for possible downgrade Class Description: $30,000,000 Class A-1T2 Floating Rate Senior Secured Notes Due 2046 -- Prior Rating: A3, on review for possible downgrade -- Current Rating: B2, on review for possible downgrade Class Description: $100,000,000 Class A-2 Floating Rate Senior Secured Notes Due 2046 -- Prior Rating: Ba1, on review for possible downgrade -- Current Rating: Caa2, on review for possible downgrade Class Description: $90,000,000 Class A-3 Floating Rate Senior Secured Notes Due 2046 -- Prior Rating: Caa1, on review for possible downgrade -- Current Rating: Ca ESP Funding I, Ltd. is a collateralized debt obligation backed primarily by a portfolio of structured finance securities. On Feb. 27, 2008 the transaction experienced an event of default caused by a failure of the Class A Principal Coverage Ratio to be greater than or equal to the required amount set forth in Section 5.1(h) of the Indenture dated Sept. 7, 2006. That event of default is continuing. The rating actions taken reflect continuing deterioration in the credit quality of the underlying portfolio and the increased expected loss associated with the transaction. Losses are attributed to diminished credit quality on the underlying portfolio. As provided in Article V of the Indenture during the occurrence and continuance of an Event of Default, the Controlling Class may be entitled to direct the Trustee to take particular actions with respect to the Collateral. The severity of losses may depend on the timing and choice of remedy to be pursued by the Controlling Class. Because of this uncertainty, the ratings of Class A-1R, Class A-1T1, Class A-1T2 and Class A-2 Notes issued by ESP Funding I, Ltd are on review for possible further action. FALCON MOTORS: Voluntary Chapter 11 Case Summary ------------------------------------------------ Debtor: Falcon Motors, Inc. 774 North Bedford Road Bedford Hills, NY 10517 Bankruptcy Case No.: 08-22730 Chapter 11 Petition Date: May 22, 2008 Court: Southern District of New York (White Plains) Debtor's Counsel: Jonathan S. Pasternak, Esq. (jsp@rattetlaw.com) Rattet, Pasternak & Gordon Oliver, LLP 550 Mamaroneck Avenue, Suite 510 Harrison, NY 10528 Tel: (914) 381-7400 Fax: (914) 381-7406 Estimated Assets: $1 million to $10 million Estimated Debts: $1 million to $10 million The Debtor did not file a list of its 20 largest unsecured creditors. FALCON RIDGE: March 31 Balance Sheet Upside-Down by $609,852 ------------------------------------------------------------ Falcon Ridge Development Inc.'s consolidated balance sheet at March 31, 2008, showed $3,230,487 in total assets and $3,840,339 in total liabilities, resulting in a $609,852 total stockholders' deficit. At March 31, 2008, the company's consolidated balance sheet also showed strained liquidity with $4,270 in total current assets available to pay $3,043,573 in total current liabilities. The company reported a net loss of $3,044,844, on net sales of $35,143, for the second quarter ended March 31, 2008, compared with a net loss of $544,971, on zero net sales, in the same period ended March 31, 2007. 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?2d3f Going Concern Doubt As reported in the Troubled Company Reporter on Jan. 17, 2008, Moore & Associates Chartered, in Las Vegas, Nevada, expressed substantial doubt about Falcon Ridge Development 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 auditor pointed to Falcon Ridge's accumulated operating losses during 2007 and 2006. The company reported a loss of $3,044,844 for the second quarter ended March 31, 2008, has a working capital deficit and implementation of its business plan is dependent upon its ability to raise additional capital. About Falcon Ridge Development Headquartered in Albuquerque, New Mexico, Falcon Ridge Development Inc. -- http://www.falconridgedev.com/-- acquires tracts of raw land for development into residential lots for sale to homebuilders. FEDDERS CORP: Wants Plan Filing Deadline Moved to June 14 --------------------------------------------------------- Fedders Corporation and its debtor-affiliates ask the United States Bankruptcy Court for the District of Delaware to extend their exclusive periods to: i) file a Chapter 11 plan until June 14, 2008, and ii) solicit acceptances of that plan until August 31, 2008. The Debtors request for more time to allow the term lenders -- Goldman Sachs Credit Partners LP, Camulos Master Fund LP and Highland Capital Management LP -- to review a draft Chapter 11 plan. The Debtors reached agreement with the term lenders regarding the terms and conditions for the plan. The Debtors tell the Court that they intend to file the Chapter 11 plan before June 14, 2008. The Court will convene a hearing on June 18, 2008, at 2:00 p.m., to consider approval of the Debtors' request. Objections, if any, are due June 11, 2008. The Debtors' exclusive plan filing period expired on May 31, 2008. Briefly Noted As reported in the Troubled Company Reporter on May 26, 2008, the Court authorized the Debtors to sell "Indoor Air-Quality Assets" and stock to Tomkins Industries Inc., Tomkins Finance PLC, Air System Components Investments China Limited and Ruskin Air Management Limited for $25 million. The Debtors intended to divest these assets: a) Indoor Air-Quality Businesses of IAQ Debtors -- Fedders International Inc., Herrmidifier Company Inc., Trion Inc., Envirco Corporation -- and non-debtor Trion Limited and b) stock of Trion GmbH and Fedders Indoor Air Quality (Suzhou) Co., Ltd. Based in Liberty Corner, New Jersey, Fedders Corporation -- http://www.fedders.com/-- manufactures and markets air treatment products, including air conditioners, air cleaners, dehumidifiers, and humidifiers. The company has production facilities in the United States in Illinois, North Carolina, New Mexico, and Texas and international production facilities in the Philippines, China and India. The company and several affiliates filed for Chapter 11 protection on Aug. 22, 2007, (Bankr. D. Del. Lead Case No. 07-11182). The law firm of Cole, Schotz, Meisel, Forman & Leonard P.A.; and Norman L. Pernick, Esq., Irving E. Walker, Esq., and Adam H. Isenberg, Esq., at Saul Ewing LLP, represent the Debtors in their restructuring efforts. The Debtors have selected Logan & Company Inc. as claims and noticing agent. The Official Committee of Unsecured Creditors is represented by Brown Rudnick Berlack Israels LLP. When the Debtors filed for protection from its creditors, it listed total assets of $186,300,000 and total debts of $322,000,000. FIRST FRANKLIN: Fitch Downgrades Ratings on Six Classes of Notes ---------------------------------------------------------------- Fitch Ratings has taken rating actions on seven First Franklin Net Interest Margin note securities. Unless stated otherwise, any bonds that were previously placed on Rating Watch Negative are now removed. First Franklin NIM 2005-FF5 LTD: -- $721 thousand class N-2 downgraded to 'C/DR6' from 'BBB-'; -- $1.6 million class N-3 downgraded to 'C/DR6' from 'BB'. Underlying transaction: First Franklin Mortgage Loan Trust 2005-FF5 FFMLT CI-14 NIM, Series 2005-FFH3: -- $4.8 million class N-1 downgraded to 'C/DR6' from 'B'; -- $3.7 million class N-2 remains at 'C/DR6'; -- $4.0 million class N-3 remains at 'C/DR6'. Underlying transaction: First Franklin Mortgage Loan Trust 2005-FFH3 FFMLT CI-15 NIM, Series 2005-FFH4: -- $1.8 million class N-1 downgraded to 'C/DR6' from 'BB'; -- $4.4 million class N-2 remains at 'C/DR6'; -- $3.0 million class N-3 remains at 'C/DR6'. Underlying transaction: First Franklin Mortgage Loan Trust 2005-FFH4 FFML NIM Notes, Series 2006-FF10: -- $14.5 million class A downgraded to 'C/DR5' from 'B'; -- $3.8 million class B remains at 'C/DR5'. Underlying transaction: First Franklin Mortgage Loan Trust 2006-FF10 FFML NIM Notes, Series 2006-FF12: -- $14.1 million class A downgraded to 'C/DR5' from 'BB'; -- $5.1 million class B downgraded to 'C/DR6' from 'B'. Underlying transaction: First Franklin Mortgage Loan Trust 2006-FF12 FFML NIM Notes, Series 2006-FF15: -- $26.8 million class A downgraded to 'C/DR4' from 'B'; -- $12.0 million class B remains at 'C/DR5'. Underlying transaction: First Franklin Mortgage Loan Trust 2006-FF15 FFML NIM Notes, Series 2006-FF17: -- $10.2 million class A downgraded to 'C/DR5' from 'B'; -- $4.2 million class B remains at 'C/DR5'. Underlying transaction: First Franklin Mortgage Loan Trust 2006-FF17 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. FORD MOTOR: Starts Making Flex, Adds 500 Jobs in Oakville Plant --------------------------------------------------------------- Further building its strength in the rapidly growing crossover vehicle market, Ford Motor Company disclosed the production launch of the 2009 Ford Flex at the Ford Oakville Assembly Complex. The Oakville plant has increased production and is adding 500 jobs in an effort to keep up with the demand for its hot-selling crossovers including the Lincoln MKX, Ford Edge and Ford Flex, which starts arriving in dealership showrooms this summer. "We're providing still more evidence that Ford is committed to delivering more products people want, further building on our crossover leadership," Mark Fields, Ford's President of The Americas told more than 1,000 employees, government officials and Canadian Auto Workers representatives at the launch celebration. "Flex drives as good as it looks, and the Oakville team is going to deliver another high-quality crossover for customers." Crossover vehicles have been the fastest-growing vehicle segment in North America this decade. During the past two years, Ford crossover growth in North America is the fastest in the industry. In the U.S., Ford Edge was the best-selling mid-size crossover in 2007 and is to date in 2008. In Canada, the crossover segment grew 89% in 2007 versus the previous year, and Ford of Canada sold more crossovers than any other manufacturer. Reaction to Ford's newest crossover has been strong, a point celebrated by attendees of the launch ceremony including hockey great Wayne Gretzky who emerged from a 2009 Ford Flex. "The team here at Oakville continues to be at the top of their game," Mr. Gretzky said. "By working together, they are building a great success story." Innovative Virtual Manufacturing The 2009 Ford Flex, the first Ford product fully developed under the Global Product Development System, also was among the first Ford vehicles to fully utilize digital design and manufacturing technology to ensure high quality at every stage of the vehicle's development. By running thousands of engineering checks in the vehicle's digital pre-assembly phase, the product team dramatically reduced the number of potential manufacturing concerns, helping ensure Flex will meet the highest customer expectations in every market where it's sold. "We continue to raise the bar on ourselves with standardized quality-driven processes in all areas of the company – design, product development, manufacturing and customer service," Joe Hinrichs, group vice president, Global Manufacturing and Labor Affairs, said. "Now Ford's quality is on par with the best in the industry. Our unrelenting commitment to world-class quality guides everything we do." Oakville Assembly Complex is an example of how Ford is moving toward flexible manufacturing across its North American operations. The plant produces two unique vehicle platforms in its flexible body shop. Edge, Flex and the Lincoln MKX come down the same assembly line. This flexible system means the plant can efficiently adapt to shifts in consumer demand. "The news couldn't be better for the Oakville operations," Barry Engle, Ford of Canada president and CEO, said. "The products are selling as fast as we can build them. We're adding another show- stopper vehicle, and we're creating new employment." In 2005, the 5.4 million square-foot (486,000 m2) plant began a $1 billion conversion to flexible manufacturing, including a state-of-the-art body assembly facility. As a flexible plant, OAC can build multiple models on unique architectures enabling the plant to change the mix, volume and options of products more quickly in response to consumer demand – representing a new level of market-driven manufacturing agility. Flex combines a unique "box-on-box" design with class-leading package, delivers fuel economy of 12.6L/100 km in the city and 8.4L/100 km on the highway – or 17/24 mpg, respectively – and offers other "firsts," including: * The latest generation of Ford's successful SYNC technology, which allows for voice activation of in-car technology as well as hand-free operation of mobile phones and MP3 players. * A compressor-driven refrigerator/freezer, which works some 30% faster than home fridge/freezers. * Multi-panel Vista Roof, which gives each individual in the vehicle their own view. * A reverse camera system that shows a rear-view image on the 8-inch screen when Flex is in reverse. * Ford's new EasyFuel capless refueling system, which allows for clean and simple refueling without a fuel cap. About Ford Motor Company 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: Total May 2008 Sales Down 16% at 217,998 Units ---------------------------------------------------------- Total Ford Motor Company sales, including Jaguar, Land Rover, and Volvo, were 217,998, down 16%. For the second time in its nine-year history, Ford Focus sales eclipsed the 30,000-unit milestone in May. Focus sales totaled 32,579, up 53% compared with a year ago. Retail sales to individual customers more than doubled (up 105%). The first time was October 2001, when industry sales soared in response to zero-percent financing. "Our dealers are selling the Focus at unprecedented turn rates," Jim Farley, Ford group vice president, Marketing and Communications, said. "In fact, Focus' retail sales were 91% of beginning inventory, which puts it in the same league as the industry's best-selling small cars. This is a strong statement about customer demand for Ford's newest small car." Ford is moving to increase Focus availability. In early April, Ford announced plans to produce 245,000 Focus units in 2008, approximately 30% more than in 2007. Ford now is targeting to produce 280,000 Focus units in 2009. Ford Fusion sales were the highest for any month ever (18,088) and up 27% from a year ago, including a 30% increase to retail customers. The Mercury Sable and Milan also posted higher retail sales. "Our products and our dealers are getting us back in the car business," Mr. Farley said. "Our small and mid-size cars are outperforming the industry, and we're only just beginning." Late this year, a redesigned Fusion, Milan and MKZ will go into production. Additionally, Fusion and Milan will be offered in new hybrid versions. Last week, Ford announced its global B-car, the Ford Fiesta, will be produced in North America in early 2010. Two Fiesta models will be offered - a sedan and a hatchback - helping feed customers' growing demand for small cars. In all, Ford, Lincoln and Mercury car sales to retail customers were up 20%. Total car sales, including sales to fleet customers, were up 4% in May. In May, crossover sales were lower than a year ago but remained at high levels as sales for the Ford Escape and Edge, Mercury Mariner and Lincoln MKX were among the highest recorded. During the past two years, sales growth for the company's crossovers has outpaced the industry. The company's gains in the small and mid-size car market are helping to mitigate sharp declines among traditional SUVs (down 44%) and trucks and vans (down 29%) as well as lower sales to daily rental companies (down 30%). Ford, Lincoln and Mercury sales totaled 206,000, down 16%. North American Production Today, the company is confirming the production plans it announced May 22. The second-quarter production plan is 690,000 units. The third-quarter plan is 525,000 units, in the middle of the range the company announced May 22. The fourth quarter production plan continues to be in the range of 590,000 to 630,000 units. About Ford Motor Company 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. FORTIUS I: Moody's Cuts Notes Ratings, to Undertake Review ---------------------------------------------------------- Moody's Investors Service has downgraded and placed on review for possible further downgrade the ratings on these notes issued by Fortius I Funding, Ltd.: Class Description: $390,000,000 Class A-1 Floating Rate Notes Due 2041 -- Prior Rating: Aaa -- Current Rating: A2, on review for possible downgrade Class Description: $84,000,000 Class A-2 Floating Rate Notes Due 2041 -- Prior Rating: Aaa -- Current Rating: A2, on review for possible downgrade Class Description: $57,000,000 Class B Floating Rate Notes Due 2041 -- Prior Rating: Aa2 -- Current Rating: Ba1, on review for possible downgrade Class Description: $15,000,000 Class C Deferrable Floating Rate Notes Due 2041 -- Prior Rating: A2 -- Current Rating: B1, on review for possible downgrade Class Description: $30,000,000 Class D Deferrable Floating Rate Notes Due 2041 -- Prior Rating: Baa2 -- Current Rating: Caa2, on review for possible downgrade Additionally, Moody's downgraded these notes: Class Description: $5,000,000 Class E Deferrable Floating Rate Notes Due 2041 -- Prior Rating: Ba1 -- Current Rating: Ca Class Description: $19,000,000 Preferred shares -- Prior Rating: Ba3 -- Current Rating: Ca According to Moody's, the rating actions are the result of deterioration in the credit quality of the transaction's underlying collateral pool, which consists primarily of structured finance securities. FORWARD MOMENTUM: Voluntary Chapter 11 Case Summary --------------------------------------------------- Debtor: Forward Momentum Group, LLC 2831 11th Street Northwest Washington, DC 20001 Bankruptcy Case No.: 08-00324 Chapter 11 Petition Date: May 9, 2008 Court: District of Columbia Judge: S. Martin Teel, Jr. Debtor's Counsel: Latif Doman, Esq. Doman Davis LLP 1001 Pennsylvania Ave Northwest Suite 600S Washington, DC 20004 Tel: (202) 772-6685 Estimated Assets: $1 million to $10 million Estimated Debts: $500,000 to $1 million The Debtor did not file a list of its 20 largest unsecured creditors. FRANCINE PASSA: Case Summary & 18 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Francine Passa 1600 Sunny View Way Santa Rosa, CA 95401 Bankruptcy Case No.: 08-10889 Chapter 11 Petition Date: May 13, 2008 Court: Northern District of California (Santa Rosa) Judge: Alan Jaroslovsky Debtor's Counsel: Michael C. Fallon, Esq. (mcfallon@fallonlaw.net) Law Offices of Michael C. Fallon 100 East Street, Suite 219 Santa Rosa, CA 95404 Tel: (707) 546-6770 Fax: (707) 546-5775 Estimated Assets: $1 million to $10 million Estimated Debts: $1 million to $10 million Debtor's list of its 18 largest unsecured creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ World Savings & Loan Real Estate $933,398 4101 Wiseman Boulevard Secured: San Antonio, TX 78251 $900,000 Wells Fargo Home Mortgage Real Estate $597,550 P.O. Box 10335 Secured: Des Moines, IA 50306 $450,000 Gabriella Passa Real Estate $108,000 301 Montego Key Secured: Novato, CA 94949 $900,000 Senior Lien: $933,398 Bill Cole Personal Loan $65,000 VISDSNB Credit Card $22,049 Wells Fargo Credit Card $17,105 Joe Piasta Legal Fees $12,800 Citibank USA Charge Account $3,541 Unsecured $3,523 Sears/CBSD Credit Card $9,127 American Express Credit Card $4,906 Ford Moor Credit Corp. Vehicle $31,506 Secured: $25,000 GEMB/JCP PPP Check Credit $3,587 Washington Mutual Credit Card $2,988 HSBC/Best Buy Charge Account $2,947 Brian Lanz Legal Fees $2,352 HSBC/Gotts Charge Account $1,929 Bank of America Credit Card $1,768 DSNB Macy's Charge Account $1,147 FREMONT GENERAL: Unit Completes Sale of $12BB Loan Investment ------------------------------------------------------------- Fremont General Corporation's subsidiary, Fremont Investment & Loan, has completed the sale of its remaining mortgage servicing rights on their $12.2 billion serviced loan portfolio to Litton Loan Servicing LP as contemplated by the Asset Purchase Agreement entered into between FIL and Litton on May 7, 2008. The MSR's sold to Litton included all rights to service mortgage loans under servicing agreements, including the rights to receive servicing fees and ancillary income payable to FIL, as servicer, and the rights and obligations to make, any advances required pursuant to any servicing agreement, including obligations to reimburse funds borrowed from any custodial or other accounts under a servicing agreement, well as certain other rights to reimbursement. FIL received approval of the Asset Purchase Agreement from the California Department of Financial Institutions and a notice of non-objection of the Federal Deposit Insurance Corporation. About Litton Loan Servicing Headquartered in Houston, Texas, Litton Loan Servicing LP -- https://www.littonloan.com/ -- is a Delaware limited partnership and an affiliate of Goldman Sachs & Co. that collects principal and interest payments on prime and subprime residential mortgages, including Federal Housing Administration, Veterans Administration, and manufactured home loans. The company's loan portfolio includes approximately 300,000 mortgages worth some $40 billion. California, Florida, and Texas are its largest markets. Litton Loan Servicing was founded in 1988 by Larry Litton Sr., who remains president and CEO of the company. About Fremont General Headquartered in Brea, California, Fremont General Corporation (NYSE: FMT) -- http://www.fremontgeneral.com/-- is a financial services holding company which is engaged in deposit gathering through a retail branch network in Central and Southern California and residential real estate mortgage servicing through its wholly owned subsidiary Fremont Investment & Loan. Fremont Investment funds its operations primarily through deposit accounts sourced through its 22 retail banking branches which are insured up to the maximum legal limit by the Federal Deposit Insurance Corporation. It had $8.8 billion in total assets at Sept. 30, 2007. The Retail banking Division of Fremont Investment & Loan continues to offer a variety of savings and money market products as well as certificates of deposits across its 22 branch network. Customer deposits remain fully insured by the FDIC up to at least $100,000 and retirement accounts remain insured separately up to an additional $250,000. * * * As reported in the Troubled Company Reporter on April 21, 2008, Fitch Ratings downgraded Fremont General Corporation ratings and removed the negative rating outlook as: (i) long-term issuer default rating to 'D' from 'CC'; and (ii) individual rating to 'F' from 'E'. FRONTIER AIRLINES: Settles Trustee's Objection to Severance Plan ---------------------------------------------------------------- The objection of Diana G. Adams, United States Trustee for Region 2, to Frontier Airlines Inc.'s request to establish and implement, a Director and Officer Severance Plan for 65 of their current employees, has been resolved after Frontier Airlines supplied information the U.S. Trustee wanted, the Sacramento Business Journal reported. The report added that Frontier provided the information that the average proposed severance is $14,418 to non-management employees, and that almost 5,000 of Frontier's employees already have severance plans. Ms. Adams had told the U.S. Bankruptcy Court for the Southern District of New York that the Debtors' proposed severance plan for their directors and officers "ignored the terms and intent of Section 503(c)(2) of the Bankruptcy Code", which explicitly govern severance plans for executives. According to Ms. Adams, the Debtors misplaced their focus on the requirements of Section 503(c)(3), which applies only where the Plan does not provide bonuses or severance for executives, and on the business judgment standard of Section 363, which does not apply. Section 503(c), which was enacted as part of the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005, (i) strictly limits bonus and severance payments to insiders, and (ii) prohibits transfers to insiders outside of the ordinary course of business unless justified by the facts and circumstances of the case, the U.S. Trustee explains. Congress enacted Section 503(c) in response to "perceived abuses of the bankruptcy system by the directors and officers of giant companies . . . who lined their own pockets, but left thousands of employees and retirees out in the cold," Ms. Adams said, citing In re Nellson Nutraceutical Inc., 369 B.R. 787, 800 (Bankr. D. Del. 2007). However, a recent amendment to Section 503 limiting compensation to insiders, "makes it abundantly clear that, to the extent a proposed transfer falls within Section 503(c)(1) or (c)(2), then the business judgment rule does not apply, irrespective of whether a sound business purpose may actually exist," Ms. Adams added, pointing the Court to In re Dana Corporation, 351 B.R. 96, 100 (Bankr. S.D.N.Y. 2006). Likewise, she said, the Court may review a compensation plan under Section 503(c)(3) only if the proposed plan payments are "not primarily motivated by retention or in the nature of severance." Because the Plan is clearly in the nature of severance, the Court must review the Plan under Section 503(c)(2), Ms. Adams asserted. Ms. Adams argued that the Severance Plan must be disapproved because (i) "[the payments contemplated are] not part of a plan that is generally acceptable to all full-time employees," as required under Section 503(c)(2)(A); and (ii) does not present that "the amount of the payment is not greater than 10 times the amount of mean severance pay given to non-management employees during the calendar year in which the payment is made" under Section 503(c)(2)(B). The Debtors' contention that widespread financial losses, uncertainty in the airline industry, and cuts in the salaries of the Debtors' employees, including executives militate against approval of the Severance Plan, Ms. Adams said. Ms. Adams maintained that the Debtors failed to: -- present a reasonable relationship between the Severance Plan and the results the Debtors hope to attain from implementing the Plan; -- show that the Severance Plan is reasonable in light of the Debtors' financial status; -- present the fairness of the Severance Plan, with respect to the record which establishes that severance programs are not available to union employees; -- show that the proposed Severance Plan is consistent with industry standards, but only due to "the current climate of instability;" and -- provide information on the decision-making process, research and the basis for the conclusions of their compensation consultants, Watson Wyatt Worldwide, that the Severance Plan for Frontier's executives is warranted. "The Debtors' financial condition and their future operations outside of bankruptcy are virtually unknown; hence, the Debtors must not reduce their cash flow or attempt to enrich their executives at the expense of other employees," Ms. Adams told Judge Robert D. Drain. Debtors Say Payment Plan Complies with Code Marshall S. Huebner, Esq., at Davis Polk & Wardwell, in New York, told the Court that the Severance Plan is fully compliant with the cap imposed on severance payments by Section 503(c)(2)(B) of the Bankruptcy Code. "While most Covered Employees will receive much less, and many may even get zero severance due to the newly imposed mitigation requirement, the Debtors have capped payments under the Severance Plan at $144,180, which is 10 times the $14,418 average severance paid by the Debtors to non-insiders to date in 2008, as attested, inter alia, by Ann Block, senior vice president of People at Frontier Airlines Holdings, Inc.," Mr. Huebner explained. Mr. Huebner added that although only 65 employees are covered by the Severance Plan, the severance is already provided to Frontier's almost 5,000 non-union employees pursuant to a severance plan addressed in the Court order entered April 14, 2008, authorizing the Debtors to honor prepetition employee obligations. Each union representing approximately 20% of Frontier employees that are unionized -- including pilots, mechanics, tool room employees, maintenance cleaners, material specialists and dispatchers -- has a different but analogous rights that satisfy the dictates of Section 503(c)(2) of the Bankruptcy Code; hence, the U.S. Trustee's assertion that the Debtors ignore the terms and intent of Section 503(c)(2), is patently incorrect, Mr. Huebner told the Court. While Ms. Adams asserted that compliance with Section 503(c)(2) obviates the need for a showing that the Severance Plan is justified as a sound business judgment, Mr. Huebner said that Frontier's business model is one that is based on a lean and flat organizational structure that makes the company uniquely vulnerable to significant disruptions from even minor management attrition. Mr. Huebner noted that the maximum severance of Frontier's chief executive officer, assuming that there is no mitigation, is $144,180 -- an amount equivalent to approximately 3% and less than 5% of the severance payables to the CEOs of United Air Lines and Northwest Airlines Corporation, which severance programs have been approved by the Court. The Severance Plan, which provides severance pay in the amount of six months, nine months or $144,180 is quite conservative, says Mr. Huebner. Moreover, because of the newly imposed mitigation requirement, many Covered Employees may get much less than $144,180, and some may get no severance at all, he said. For these reasons, the Debtors asserted that the Severance Plan fully complies with, and is authorized by, Sections 503(c)(2) and (c)(3) of the Bankruptcy Code. About Frontier Airlines Headquartered in Denver, Colorado, Frontier Airlines Inc. -- http://www.frontierairlines.com/-- provides air transportation for passengers and freight. The company and its affiliates operate jet service carriers linking their Denver, Colorado hub to 46 cities coast-to-coast, 8 cities in Mexico, and 1 city in Canada, well as provide service from other non-hub cities, including service from 10 non-hub cities to Mexico. As of May 18, 2007 they operated 59 jets, including 49 Airbus A319s and 10 Airbus A318s. The Debtor and its debtor-affiliates filed for Chapter 11 protection on April 10, 2008, (Bankr. S.D.N.Y. Case No. 08-11297 through 08-11299.) Hugh R. McCullough, Esq. at Davis Polk & Wardwell represent the Debtors in their restructuring efforts. Togul, Segal & Segal LLP is Debtors' Conflicts Counsel, Faegre & Benson LLP is the Debtors' Special Counsel, and Kekst and Company is the Debtors' Communications Advisors. Epiq Bankruptcy Solutions serves as the Debtors' notice and claims agent. The Official Committee of Unsecured Creditors is represented by Wilmer Cutler Pickering Hale and Dorr LLP. At Dec. 31, 2007, Frontier Airlines and its subsidiaries' total assets was US$1,126,748,000 and total debts was US$933,176,000. The Debtors have until Aug. 8, 2008, to exclusively file a chapter 11 plan. (Frontier Airlines Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) FRONTIER AIRLINES: Court Okays Director & Officer Severance Plan ---------------------------------------------------------------- Frontier Airlines Holdings, Inc. and its debtor-affiliates won permission from the U.S. Bankruptcy Court for the Southern of New York to implement a Director and Officer Severance Plan for their directors, senior directors, vice-presidents and other executives, various reports say. As reported by the Troubled Company Reporter on May 21, 2008, Marshall S. Huebner, Esq., at Davis Polk & Wardwell, in New York, said "[p]ayments under the Severance Plan are capped at $144,1805 despite the fact that this results in senior executives having as little as 5 months severance (a fraction of what is typical). Moreover, because of the Severance Plan's new mitigation provisions, even the most senior executive, if severed, will likely receive substantially less than $144,180." Participation in the Severance Plan is limited to regular, full- time employees of the Debtors who are at the director level or above: No. of Severance Group Description Participants Pay ----- ----------- ------------ ---------- A Frontier president, CEO, all 6 US$144,180 executive vice presidents and for five to senior vice presidents, vice 10 months president and general counsel B all other Frontier vice 10 9 months presidents and Lynx officers C Frontier and Lynx directors 49 6 months and senior directors The Severance Plan offers benefits including (i) travel privileges provided by Frontier to similarly situated active employees; and (ii) assistance with applicable medical, dental and vision care benefit covered by the Debtors' COBRA Plan. The Severance Plan is available solely in the event of the Covered Employee's qualifying termination of employment: (a) A Covered Employee will be eligible to receive benefits under the Severance Plan only if his or her employment is terminated without Cause or following a change in control, as defined in the Severance Plan, or for good reason, including (i) material reduction in the employee's base salary; (ii) material diminution of the employee's position, responsibilities or duties; or (iii) relocation of the employee's work location more than 50 miles from its current location; (b) A Covered Employee will not be eligible to participate in the Severance Plan unless he or she waives all rights under any other severance arrangement to which the employee may be a party as of the effective date of the Severance Plan, including, but not limited to, rights under a prepetition offer letter, if applicable. (c) Following a qualifying termination event, a Covered Employee will receive a severance payment that varies according to salary and employment level; (d) Cash severance will be paid in installments -- as salary continuation rather than as a lump-sum payment; (e) All severance will be subject to a mitigation requirement in the event the severed employee finds new employment, which commences in the ninth week for Group A employees; (f) Following a qualifying termination event, a Covered Employee may continue any applicable medical, dental or vision care benefit covered by COBRA. (g) A Covered Employee's receipt of Severance will be subject to the Employee's continuing compliance with the Severance Plan's confidentiality and non-solicitation provisions; and (h) To the extent necessary to avoid the imposition of taxes, interest and penalties required by Section 409A of the Internal Revenue Code, any payment or benefit to which a Covered Employee is eligible under the Severance Plan, will be adjusted to comply with Section 409A, while maintaining the intent of the Severance Plan. A full-text copy of the Severance Plan is available for free at: http://bankrupt.com/misc/FAH_SeverancePlan.pdf The Debtors believe the cost of the Severance Plan is modest. In a statement filed with with the Court, Watson Wyatt senior consultant Nick Bubnovich said that absent mass terminations, the Severance Plan will likely cost well under US$1,500,000 in the aggregate, for all 65 Covered Employees. Even assuming mass terminations, he said, mitigation requirements would likely cause the actual cost to be between US$2,200,000 to US$2,700,00, assuming mitigation of 40-50%. Mr. Bubnovich believes that the Severance Plan will act as a necessary reassurance for Frontier's employees and an important barrier against unwanted attrition. "[Absent the Severance Plan,] Frontier's stakeholder value will be negatively impacted by distracted employees who may feel they have no choice but to consider other options and further attrition that Frontier's operations cannot afford," Mr. Bubnovich said. The Severance Plan's provisions were intended to preserve liquidity for Frontier, he said. About Frontier Airlines Inc. Headquartered in Denver, Colorado, Frontier Airlines Inc. -- http://www.frontierairlines.com/-- provide air transportation for passengers and freight. They operate jet service carriers linking their Denver, Colorado hub to 46 cities coast-to-coast, 8 cities in Mexico, and 1 city in Canada, well as provide service from other non-hub cities, including service from 10 non-hub cities to Mexico. As of May 18, 2007 they operated 59 jets, including 49 Airbus A319s and 10 Airbus A318s. The Debtor and its debtor-affiliates filed for Chapter 11 protection on April 10, 2008, (Bankr. S.D.N.Y. Case No. 08-11297 through 08-11299.) Hugh R. McCullough, Esq. at Davis Polk & Wardwell represent the Debtors in their restructuring efforts. Togul, Segal & Segal LLP is Debtors' Conflicts Counsel, Faegre & Benson LLP is the Debtors' Special Counsel, and Kekst and Company is the Debtors' Communications Advisors. Epiq Bankruptcy Solutions serves as the Debtors' notice and claims agent. The Official Committee of Unsecured Creditors is represented by Wilmer Cutler Pickering Hale and Dorr LLP. At Dec. 31, 2007, Frontier Airlines and its subsidiaries' total assets was US$1,126,748,000 and total debts was US$933,176,000. The Debtors have until Aug. 8, 2008, to exclusively file a chapter 11 plan. (Frontier Airlines Bankruptcy News; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) GARZA RIVERA: Case Summary & 12 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: Garza Rivera Welding Co. LP P.O. Box 60643 Midland, TX 79711 Bankruptcy Case No.: 08-70118 Chapter 11 Petition Date: June 2, 2008 Court: Western District of Texas (Midland) Judge: Ronald B. King Debtor's Counsel: Neal R. Allen, Esq. 3108 North Big Spring #105 Midland, TX 79705 Tel: (432) 685-3078 Fax: (432) 685-3066 e-mail: neal@mbl-allen.com Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $1,000,001 to $10,000,000 A copy of the Debtor's petition and a list of its 12 largest unsecured creditors with claims less than $100,000 are available for free at http://bankrupt.com/misc/twb08-70118.pdf GENERAL MOTORS: May 2008 Sales Down 30% Due to American Axle Stike ------------------------------------------------------------------ General Motors Corp. dealers in the United States delivered 272,363 vehicles in May. The sales increase in fuel efficient cars and crossover vehicles could not make up for soft truck demand and a decline in fleet deliveries impacted by the American Axle strike. Approximately 15-18,000 sales were lost in May, or will be retimed, due to various work stoppages including the American Axle & Manufacturing Holdings Inc. strike. Compared with a strong May 2007, total sales were down 30% (28% unadjusted). Truck sales declined 39%. Dealer inventories were at their lowest level since August 2005 with about 772,000 vehicles in stock, down about 219,000 vehicles compared with last May, and down more than 136,000 vehicles compared with December 2007. "We are very pleased with our performance in many critical car and crossover products as consumer preferences continue to shift toward these vehicles," Mark LaNeve, vice president, GM North America Vehicle Sales, Service and Marketing, said. "Our challenge in May was having enough vehicles available to sell. We would have posted even stronger sales of the Chevrolet Malibu, Impala, HHR, and Cobalt, Cadillac CTS, Pontiac Vibe and crossovers Buick Enclave, GMC Acadia and Saturn Outlook if product availability were better." "Obviously, most trucks segments were weak across the industry - and we were no exception," Mr. LaNeve added. "Today's production adjustment announcement at the annual GM shareholders meeting shows that we are intent on increasing car and crossover production and leveraging our competitive position for the economic recovery while acknowledging the impact of a challenging economic environment on truck sales." Chevrolet Malibu total sales were up 34% with retail sales up 103%, Aveo sales were up 39% total and 22% retail, and Cobalt sales were up 15% total and 1% retail and HHR was up 24% total and 33% retail. Pontiac Vibe total sales were up 65% and retail sales were up 36% compared with May 2007. Saturn Aura was up 5% retail, and the Astra saw increasing sales with nearly 1,100 vehicles sold. In the luxury car segment, the award-winning Cadillac CTS saw total sales increase 11% with an impressive retail increase of 18% compared with the same month a year ago. GM's popular crossover Buick Enclave, GMC Acadia and Saturn Outlook together accounted for more than 12,000 vehicle sales in the month. There were 6,600 Acadia, 2,900 Enclave and 2,500 Outlook total sales. "We see the mix shift as a tremendous opportunity for GM," Mr. LaNeve added. "We have a full lineup of vehicles - including five hybrid models -- that provide industry-leading value, great fuel economy and the best warranty coverage of any full-line automaker." Certified Used Vehicles May 2008 sales for all certified GM brands, including GM Certified Used Vehicles, Cadillac Certified Pre-Owned Vehicles, Saturn Certified Pre-Owned Vehicles, Saab Certified Pre-Owned Vehicles, and HUMMER Certified Pre-Owned Vehicles, were 46,574 vehicles, up 1.5% from May 2007. Year-to-date sales are 214,686 vehicles, down nearly 6% from the same period last year. GM Certified Used Vehicles, the industry's top-selling certified brand, posted May sales of 40,393 vehicles, a slight increase over a strong May 2007 sales performance. Cadillac Certified Pre-Owned Vehicles sold 3,707 vehicles, up 20%. Saturn Certified Pre-Owned Vehicles sold 1,432 vehicles, down 11%. Saab Certified Pre-Owned Vehicles sold 851 vehicles, up 7%, and HUMMER Certified Pre-Owned Vehicles sold 191 vehicles, up 127%. "GM Certified Used Vehicles posted its strongest monthly sales performance this year, with sales up for the fifth consecutive month, while Cadillac, Saab and HUMMER Certified Pre-Owned Vehicles also posted solid gains," Mr. LaNeve said. "In a challenging economic environment, we're encouraged to see more consumers opting for the quality, value and peace-of-mind assurances that come with the purchase of a certified GM vehicle." May 2008 Production in North America In May, GM North America produced 248,000 vehicles (118,000 cars and 130,000 trucks). This is down 153,000 vehicles or 38% compared with May 2007 when the region produced 401,000 vehicles (139,000 cars and 262,000 trucks). (Production totals include joint venture production of 17,000 vehicles in May 2008 and 18,000 vehicles in May 2007.) Approximately 100,000 units of production, including between 15- 18,000 potential fleet sales, were lost in May due to the American Axle work stoppage. Since the dispute began last February, approximately 330,000 units of production were lost. Approximately 33,000 additional units of production were lost due to other local work stoppages. GMNA has revised its forecast for 2008 second-quarter production to 835,000 vehicles, down 115,000 units from the prior forecast to reflect May production losses caused primarily by the American Axle strike. As of June 3, all GM plants impacted by the strike have returned to production. Additionally, GM North America's initial 2008 third-quarter production forecast is set at 1.055 million vehicles (441,000 cars and 614,000 trucks), up 35,000 vehicles or 3% from third-quarter 2007 actuals. GM North America built 1.020 million vehicles (367,000 cars and 653,000 trucks) in the third-quarter of 2007. About GM 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. GENERAL MOTORS: Economic Challenges Spur Plans to Shutter 4 Plants ------------------------------------------------------------------ General Motors Corp. disclosed a range of strategic initiatives to aggressively respond to growing demand for fuel-efficient vehicles and to economic and market challenges in North America. Rick Wagoner, GM chairman and CEO, made the announcements as part of the GM annual meeting of stockholders. Major initiatives announced by Mr. Wagoner include: * A new global compact car program for Chevrolet, a next generation for the popular Chevy Aveo, and a high efficiency engine module for the U.S. market. * Funding for production of the Chevy Volt extended-range electric vehicle. * Addition of third shifts to Lordstown and Orion, which build hot-selling Chevy and Pontiac cars. * Cessation of production at four plants that build pickups, SUVs and medium-duty trucks. * A strategic review of the Hummer brand. "From the start of our North American turnaround plan in 2005, I've said that our goal is not just to return GM to profitability, but to structure GM globally for sustained profitability and growth," Mr. Wagoner said. "Since the first of this year, however, U.S. economic and market conditions have become significantly more difficult. Higher gasoline prices are changing consumer behavior, and they are significantly affecting the U.S. auto industry sales mix." In North America, GM has been moving rapidly and successfully to revitalize its car lineup and grow its crossover business. New GM cars and crossovers, including the Cadillac CTS, Chevy Malibu, Pontiac Vibe and Buick Enclave, have been selling strongly, and GM intends to build on this success. In fact, 18 of the next 19 new GM products for the U.S. will be cars or crossovers. Additional operational and strategic actions will be required to position GM for sustainable profitability and growth. These initiatives fall into three broad areas: product and technology, manufacturing facilities and capacity, and the Hummer brand. New Chevrolet Models Approved To further strengthen GM's lineup of fuel-efficient cars, the GM board has approved a next-generation compact Chevy for the U.S. and global markets, a next generation of the popular Chevy Aveo, and a U.S. production module of GM's 1.4-liter turbocharged four- cylinder engine. The new Chevy compact will be better equipped than today's compact cars, and will be designed to set quality and safety benchmarks for the compact class. Production will begin in mid-2010 at GM's Lordstown, Ohio, plant, subject to final negotiations with state and local authorities. "This car will represent the first U.S. application of our global architecture strategy," Mr. Wagoner said. "This strategy will pay major dividends as we leverage our extensive car product development capability in Europe, Korea, and other locations to accelerate the shift in our U.S. product portfolio." The next-generation compact will be pure Chevrolet in design, and will feature the 1.4-liter turbocharged version of GM's global four-cylinder engine. With this engine and a manual transmission, the new Chevy is expected to achieve a 9 mpg improvement over Chevy's current entry in this segment. The engine will be produced in Flint, Michigan, again subject to final negotiations with state and local authorities. Also recently approved was a next generation of the popular Chevy Aveo. Based on a global architecture, the Aveo is also expected to have segment-leading fuel economy when it goes on sale in the U.S. market in the second half of 2010. These new Chevy models will help build on GM's leadership in fuel efficient vehicles. For example, GM continues to offer more vehicles with a 30-mpg or better highway fuel economy rating than any competitor. Chevy Volt is a Go The Chevy Volt took a major step toward the showroom with formal approval by the GM board of funding for production of the extended-range electric vehicle. This approval, which includes funding for production development and tooling, indicates that GM leadership believes that the technology for the Volt, including its lithium-ion batteries, will be ready for volume production on schedule. "The Chevy Volt is a go," Mr. Wagoner said. "We believe this is the biggest step yet in our industry's move away from our historic, virtually complete reliance on petroleum to power vehicles. We intend to show a production version of the Chevy Volt publicly in the very near future, and we remain focused on our target of getting the Volt into Chevrolet showrooms by the end of 2010." Preliminary plans are to produce the Volt at GM's Detroit- Hamtramck Assembly Center, subject to successful discussions with state and local governments. Capacity Adjustments Address Market Shifts GM will react to the shift in the U.S. market by increasing production of small and midsize cars and reducing production of pickups and truck-based SUVs. GM will add a third shift in September to the Orion Assembly Center in Michigan, which builds the hot-selling Chevy Malibu and Pontiac G6. Also in September, the company plans to add a third shift at Lordstown Car Assembly in Ohio, which builds the Chevy Cobalt and Pontiac G5. On the other side of the mix equation, market-related declines in truck sales mean that, over time, GM will cease production at four truck plants. Oshawa Truck Assembly in Canada, which builds the Chevy Silverado and GMC Sierra, will likely cease production in 2009, while Moraine, Ohio, which builds the Chevy TrailBlazer, GMC Envoy and Saab 9-7x, will end production at the end of the 2010 model run, or sooner, if demand dictates. Janesville, Wisconsin, will cease production of medium-duty trucks by the end of 2009, and of the Tahoe, Suburban and Yukon in 2010, or sooner, if market demand dictates. Chevrolet Kodiak medium-duty truck production will also end in Toluca, Mexico, by the end of this year. GM expects that these actions, along with the recent announcement to remove shifts at two other U.S. truck plants (Pontiac and Flint, Michigan), will result in an additional GM North America structural cost savings of more than $1 billion, on a running rate basis, by 2010. This is on top of the approximately $5 billion running rate reduction by 2011 that we announced earlier this year, and also in addition to the $9 billion reduction accomplished over the 2006-07 period in North America. GM will work closely with its union partners to mitigate the impact of these difficult actions, which are made necessary by long-term changes in consumer demand for trucks and SUVs. Strategic Assessment for Hummer Brand Finally, GM is undertaking a strategic review of the Hummer brand to determine its fit within the GM portfolio. At this point, the company is considering all options, from a complete revamp of the product lineup to a partial or complete sale of the brand. Moving Forward "We are making a number of important announcements today, covering everything from product and technology investments to capacity adjustments to a strategic review of our Hummer brand," Mr. Wagoner said. "These moves are all in response to the rapid rise n oil prices and the resulting changes in the U.S., changes that we believe are more structural than cyclical. "While some of the actions, especially the capacity reductions, are very difficult, they are necessary to adjust to changing market and economic conditions and to keep GM's U.S. turnaround on track and moving forward." About General Motors 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. GENERAL MOTORS: Truck Production Halt Won't Affect S&P's Rating --------------------------------------------------------------- Standard & Poor's Ratings Services said that its ratings on General Motors Corp. (GM; B/Negative/B-3) are not immediately affected by the company's announcement that it will cease production at four North American truck plants over the next two years. These closures are in response to the re-energized shift in consumer demand away from light trucks. GM previously said only one shift was being eliminated at each of the four truck plants. Production is being increased at plants producing small and midsize cars, but the cash contribution margin from these smaller vehicles is far less than that of light trucks. Consequently, despite ongoing cost reductions, including the plant closures announced today, GM's challenge remains managing its liquidity during 2008 and 2009 in the face of lower U.S. light- vehicle sales and the dramatic and accelerated shift away from light trucks. Currently, S&P view GM's liquidity as adequate. GENITOPE CORP: Continues to Grapple With Liquidity Woes ------------------------------------------------------- Genitope Corporation, a development-stage enterprise, said in a regulatory filing with the Securities and Exchange Commission it is currently in initial settlement discussions with its landlord to reach a settlement in connection with its remaining obligations under its lease agreements outside the protection of federal bankruptcy laws. If the company is unable to settle its obligations to the landlord and other creditors, or if it is unable to obtain financing to support continued satisfaction of its lease and other debt obligations, the company said it would likely be in default under the lease and credit agreements and would likely need to seek protection under the provisions of the U.S. Bankruptcy Code. In that event, the company said it may seek to reorganize the business, or a trustee may be appointed by the court to liquidate its assets. Genitope entered into agreements in May 2005 for the lease of roughly 220,000 square feet of space located in two buildings in Fremont, California, for its manufacturing facility and corporate headquarters. There are currently 12.5 years remaining on the lease with a total cash rental obligation of $100,400,000 as of March 31, 2008. Genitope is in the process of determining whether or when to vacate the buildings. The company acknowledges that in the event it vacates both buildings, it will have continuing obligations under the lease agreements that it may be unable to satisfy. The company has satisfied its rent and related obligations under the lease agreements through the end of April 2008. In May 2008, it received a notice of default from the landlord for non-payment of amounts due for May. Genitope said in the regulatory filing that it has not generated any revenues, and it continues to finance research through private placements of common and preferred stock and public offerings of common stock, including its most recent underwritten public offerings in May 2007 and subsequent shelf take-down in October 2007, its line-of-credit facilities, and interest income earned from our cash and cash equivalents and marketable securities. Genitope said it continues to incur significant losses since its inception in 1996, as it has previously devoted substantially all of its efforts to research and development activities, including clinical trials. As of March 31, 2008, the company had an accumulated deficit of $313.5 million and cash, cash equivalents and marketable securities of $13.4 million, including $1.0 million of cash and marketable securities which is restricted as to its use under the lease arrangement. Default Under GECC Loan Genitope is a party to an October 31, 2006 loan and security agreement with General Electric Capital Corporation, under which GECC agreed to extend a line of credit for the purchase of computer, laboratory and manufacturing equipment. Genitope agreed to provide 25% of the funded loan amount as a cash security deposit. As of March 31, 2008, due to a default of the loan covenants, the entire outstanding balance of $3.5 million has been recorded as the current portion due under the credit line. Genitope said the borrowings are secured by the equipment purchased and repaid over 36 months. On April 14, 2008, Genitope received a notice of acceleration and demand for payment pursuant to the Master Security Agreement and those certain promissory notes and related security deposit pledge agreements. The notice advised the company that it was in default of its obligations to make installment payments due under the promissory notes on April 1, 2008 and declared the acceleration of all of its indebtedness to GECC. Genitope has not paid any amounts accelerated under the agreements and are currently in discussions with GECC regarding payment, settlement of amounts due, and penalties for non-payment. Genitope said it has capital resources sufficient to support operations through approximately June 2008. The company is unlikely to be able to raise sufficient funds to continue existing operations beyond that time, particularly in light of its obligations under its lease agreements. Workforce Reducation Plan To conserve cash, the company has implemented a plan for a substantial reduction of its workforce. It is also evaluating alternatives with respect to the sale of equipment and other non- critical assets. In addition, it is pursuing strategic alternatives for its monoclonal antibody and MyVax programs, including potentially through a spin-off or sale to a separately funded entity or entities. On March 14, 2008, the company provided a notice under the federal Worker Adjustment and Retraining Notification Act to 165 employees that it planned to conduct a "mass layoff" at its facility in Fremont and that their employment was expected to end on May 13, 2008. On March 27, 2008 and March 31, 2008, the company provided WARN notices to eight of its nine executive officers, excluding only Dan W. Denney, Jr., its Chief Executive Officer, that their employment was expected to end on May 26, 2008 and May 30, 2008. The company established a Performance Incentive Plan designed to provide incentives to participants in the Plan to remain employed with the company on a short-term basis and to achieve targeted business objectives critical to the preservation and maximization of the Company's value. All executive officers, other than Dan W. Denney, Jr., the President, Chief Executive Officer and interim Chief Financial Officer, are eligible to participate in the Plan. Under the Plan, each executive officer received a set of written performance objectives to be achieved by that executive officer during the WARN notice period. On April 25, 2008, the company provided WARN notices to all remaining employees, except for Dan W. Denney, Jr., Ph.D., that their employment is expected to end by July 1, 2008. Based in Fremont, California, Genitope focuses on the research and development of novel immunotherapies for the treatment of cancer. Until it suspended its development in March 2008, the company's lead product candidate was MyVax personalized immunotherapy. The company has also been developing a panel of monoclonal antibodies that potentially represents an additional novel, personalized approach for treating Non-Hodgkin's Lymphoma. GLACIER FUNDING: Moody's Cuts Notes Ratings, to Undertake Review ---------------------------------------------------------------- Moody's Investors Service has downgraded and left on review for possible downgrade the ratings on these notes issued by Glacier Funding CDO V, Ltd.: Class Description: $200,000,000 Class A-1 First Priority Senior Secured Floating Rate Notes Due 2051 -- Prior Rating: Aaa, on review for possible downgrade -- Current Rating: Ba2, on review for possible downgrade Class Description: $122,000,000 Class A-2 Second Priority Senior Secured Floating Rate Notes Due 2051 -- Prior Rating: Baa3, on review for possible downgrade -- Current Rating: B3, on review for possible downgrade Class Description: $46,000,000 Class A-3 Third Priority Senior Secured Floating Rate Notes Due 2051 -- Prior Rating: Ba3, on review for possible downgrade -- Current Rating: Caa2, on review for possible downgrade Class Description: $44,000,000 Class B Fourth Priority Senior Secured Floating Rate Notes Due 2051 -- Prior Rating: B3, on review for possible downgrade -- Current Rating: Caa3, on review for possible downgrade Class Description: $15,000,000 Class C Fifth Priority Senior Secured Floating Rate Notes Due 2051 -- Prior Rating: Caa2, on review for possible downgrade -- Current Rating: Caa3, on review for possible downgrade According to Moody's, the rating actions are the result of deterioration in the credit quality of the transaction's underlying collateral pool, which consists primarily of structured finance securities. GLOBAL MOTORSPORT: Wants Plan Filing Deadline Extended Sept. 29 --------------------------------------------------------------- Global Motorsport Group Inc. and its debtor-affiliates ask the United States Bankruptcy Court for the District of Delaware to extend their exclusive periods to: i) file a Chapter 11 plan until Sept. 29, 2008, and ii) solicit acceptances of that plan through and including Nov. 27, 2008. The Debtors remind the Court that they have completed on March 7, 2008, the sale of their assets including the assumption and assignment of certain executory contracts and leases to Dae-Il USA Inc pursuant to an asset purchase agreement entered between the Debtors and Dae-Il. Under the agreement, Dae-Il has until Sept. 3, 2008, to designated any held contracts that it intends to keep. As reported in the Troubled Company Reporter on March 12, 2008, the Court authorized the Debtors to sell all their assets to Dae-II for $16 million. The Debtors say that they need more time to negotiate with their creditors an acceptable Chapter 11 plan and Disclosure Statement explaining that plan. The extension will able the Debtors to review and evaluate claims filed by creditors against the Debtors. The Court will convene a hearing on June 25, 2008, at 1:30 p.m., to consider the Debtors' request. Objections, if any, are due June 18, 2008, at 4:00 p.m. About Global Motorsport Headquartered in Morgan Hill, California, Global Motorsport Group Inc. -- http://www.gmgracing.com/home.shtml-- are dealers of European model sports cars. The company is also known as Global Motorsport Parts Inc. The company and three of its affiliates filed for protection on Jan. 31, 2008 (Bankr. D. Del. Lead Case No. 08-10192). The Debtors selected Laura Davis Jones, Esq., at Pachulski Stang Ziehl & Jones LLP, as counsel. The U.S. Trustee for Region 3 has yet to appoint creditors to serve on an Official Committee of Unsecured Creditors in these cases. Bayard P.A. represents the Committee in these cases. When the Debtors filed for protection against their creditors, it listed assets between $50 Million to $100 Million and debts between $100 Million to $500 Million. GLOBAL REALTY: Posts $780,519 Net Loss in 2008 First Quarter ------------------------------------------------------------ Global Realty Development Corp. reported a net loss of $780,519 for the first quarter ended March 31, 2008, compared with a net loss of $1,371,660 in the same period in 2007. The company generated zero revenues in both periods. This is primarily due to the discontinuance of the company's real estate development operations. At March 31, 2008, the company's consolidated balance sheet showed $6,355,444 in total assets, $5,163,237 in total liabilities, and $1,192,207 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?2d48 Going Concern Doubt Meyler & Company, LLC, in Middletown, N.J., expressed substantial doubt about Global Realty Development Corp.'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 reported that the company incurred net losses of $15,984,242 and $6,893,742 in 2007 and 2006, respectively, and had an accumulated deficit of $38,275,415 at Dec. 31, 2007. The company has an accumulated deficit of $39,055,934 at March 31, 2008. About Global Realty Headquartered in Coral Springs, Fla., Global Realty Development Corp. (OTC BB: GRLY) -- http://www.grdcorporation.com/-- is presently developing plans to establish business interests in pachinko businesses in Japan. Pachinko is closely related to slot machines and estimated to be a $250 billion industry in Japan. The company to date has been primarily a commercial and residential land development company with properties located in Australia. The company, however, sold all of its real estate companies in December 2007. GMAC LLC: Subsidiary Outlines Initiatives to Stabilize Liquidity ---------------------------------------------------------------- GMAC Financial Services and its wholly-owned mortgage subsidiary, Residential Capital LLC, have outlined a series of initiatives aimed at stabilizing the liquidity position of the mortgage unit and pursuing sufficient funding to operate the business to comply with covenants in its finance agreements. The initiatives include extending near-term debt maturities, refinancing credit facilities, extending new facilities and the sale of assets. GMAC and ResCap have been working with their banking partners on plans to refinance various credit lines at both companies. The companies are currently in the process of finalizing the credit facilities and expect to announce details shortly. In May, ResCap launched private debt tender and exchange offers to extend near-term maturities and provide financial flexibility. Interim results of the exchange were announced on May 21, 2008 and reflected approximately 80% of notes tendered maturing 2008 - 2009 and approximately 63% of notes tendered maturing 2010 - 2015. In addition, GMAC disclosed that it is in negotiations to provide ResCap with a new $3.5 billion senior secured credit facility. Moreover, GMAC and ResCap have reached an agreement for GMAC to contribute to ResCap approximately $250 million principal amount of ResCap's Floating Rate Notes due June 2008, in exchange for additional ResCap preferred units, which are exchangeable at GMAC's option at any time after Jan. 1, 2009, subject to certain conditions, into preferred units of IB Finance Holdings, LLC, the owner of GMAC Bank. GMAC also tendered approximately $93 million principal amount of ResCap's 8.125% Notes due 2008, in exchange for new notes. As previously disclosed, in order to satisfy its liquidity needs and comply with anticipated covenants to be included in new debt agreements requiring maintenance of minimum cash balances, ResCap believed it was required to consummate in the near term certain asset sales or other capital generating actions over and above its normal mortgage finance activities and previously budgeted asset sales to provide additional cash of approximately $600 million by June 30, 2008. In addition to such amount, ResCap now estimates that it may require additional cash of up to approximately $1.4 billion to meet its near term liquidity needs based upon internal cash forecasts targeting sufficient cash surpluses and to satisfy its anticipated cash covenants. The additional cash requirement is primarily the result of the inability to consummate certain asset sales, due to adverse conditions, aggregating approximately $1.3 billion, which were previously included in its liquidity forecast and expected to be completed by June 30, as well as other factors (including the adverse movement of hedge collateral, decreases in advance rates under certain of our bilateral facilities and fees in connection with the amendment and extension of our bilateral facilities). There can be no assurance that ResCap's liquidity needs will not be greater or less than currently anticipated as a result of additional factors and events. If liquidity needs are greater, ResCap may be unable to independently satisfy its near- term liquidity requirements. Due to these increased near-term liquidity needs, and as part of its refinancing activities, ResCap has reached agreements in principle with GMAC LLC or its designee(s) and Cerberus Capital Management, L.P. or its designee(s) to undertake the transactions in order to satisfy such liquidity needs, as well as provide additional cushion. (a) GMAC has agreed to acquire 100% of ResCap's resort finance business, including its subsidiary, RFC Resort Funding, LLC, for a cash purchase price equal to the fair market value of the business. The Resort Finance business is not part of the primary collateral securing the proposed senior secured credit facility with GMAC or the notes being offered in ResCap's private exchange offers. The initial purchase price will be equal to 90% of the net book value of the Resort Finance business at closing, less outstanding indebtedness under both the related GMAC secured credit facility and a third-party credit facility funding the Resort Finance business as of such date. On June 3, 2008, ResCap will receive an initial deposit of $250 million, representing approximately 73.5% of the net book value of the Resort Finance business. The fair market value of the Resort Finance business will be determined by one or more independent, third-party valuations. If the fair value is independently determined to be greater or less than the net book value of the business, GMAC and ResCap will promptly settle the difference between such amounts. As of April 30, 2008, the net book value of the Resort Finance business was $1,445 million; and, as of May 30, 2008, outstanding indebtedness under the GMAC secured credit facility was $730 million and outstanding indebtedness under the third- party credit facility was $375 million. The purchase agreement will contain representations, covenants and indemnities that are customary for similar types of transactions and consummation of the purchase of the Resort Finance business is subject to customary closing conditions. This transaction is expected to close within 15 business days following the date ResCap receives the initial deposit of $250 million. (b) RFC and GMAC Commercial Finance, LLC have agreed to enter into a Receivables Factoring Facility, pursuant to which certain receivables due from mortgagors with respect to which RFC has made servicing advances will be purchased by GMAC CF from RFC on a non-recourse basis, excluding collection services. The servicing advances are part of the primary collateral securing the proposed senior secured credit facility with GMAC and the new notes being offered in ResCap's private exchange offers, and the proceeds from the Receivables Facility would be reinvested in additional servicing advances that would be primary collateral. The maximum aggregate amount of receivables to be purchased pursuant to the Receivables Facility will be equal to the lesser of (1) $600 million and (2) the aggregate amount of eligible receivables less a commercially reasonable discount rate and reserves. The Receivables Facility will mature one year from closing, subject to early termination for customary events of default. The Receivables Facility contains representations, covenants and indemnities that are customary in similar facilities and is subject to customary closing conditions. This transaction is expected to close no later than June 15, 2008, and $500 million of receivables is expected to be sold in June 2008. (c) Cerberus has committed to purchase certain assets of ResCap with a carrying value of approximately $475 million for consideration consisting of $225 million in cash and a Series B junior preferred membership interest in a newly- formed entity, which will not be a subsidiary of ResCap and the managing member of which will be an affiliate of Cerberus. Newco would purchase from ResCap model home assets of each of GMAC Model Home Finance, LLC, KBOne, LLC, LENOne, LLC, GMCMTH, LLC and WPSHOne, LLC through an acquisition of the equity of such entities and, if any such assets are not reasonably acceptable to Cerberus, such other assets as may be mutually acceptable. To the extent that the Subject Assets include model home assets, such assets are part of primary collateral securing the proposed senior secured credit facility with GMAC and the new notes being offered in ResCap's private exchange offers, but the proceeds of which are subject to certain exceptions from the asset sale covenant under the proposed indentures governing the new notes. If the Subject Assets are primary collateral, then, subject to the exceptions from the asset sale covenant, the sale proceeds would be applied in compliance with such indentures. For purposes of financing Newco's purchase of the Subject Assets, Cerberus will enter into a term loan with Newco in a principal amount equal to the Cash Amount. The term loan would bear interest at a rate of 15% per annum and would compound quarterly to the extent not paid in cash. The term loan would mature on June 30, 2013 and be secured by a pledge of all of the assets of Newco. Cerberus will receive all of the Series A preferred membership interests of Newco in an aggregate amount equal to $10,000, plus all amounts contributed to Newco by Cerberus following the closing to fund expenses associated with the Subject Assets and their disposition. The Series A senior preferred membership interests would be entitled to a preferred return equal to the difference between (I) the greater of (x) 20% of the Cash Amount and (y) a 20% per annum return on the aggregate amount of the initial $10,000 investment, the Cash Amount and any additional capital contributions by Cerberus to Newco, compounded annually, and (II) the interest paid on the term loan. Cerberus would also receive all of the common membership interests of Newco. The Series B junior preferred membership interest will be issued to ResCap with a liquidation preference equal to the difference (but not greater than $250 million) between the net book value at closing of the Subject Assets, as set forth in the books of ResCap, and the Cash Amount, which liquidation preference would increase by a preferred return of 20% per annum, compounded annually. After payment in full of the term loan, the holders of the Series A senior preferred membership interests will be entitled to receive all distributions from Newco (whether from interest or principal payments, sale of assets or upon liquidation) prior to any distributions on the Series B junior preferred membership interests or any other membership interests. Following payment of the return of the Series A senior preferred membership interests, ResCap would be entitled to receive full payment of the liquidation preference of the Series B junior preferred membership interests and then Cerberus, as holder of the common membership interests, would be entitled to receive any remaining surplus. ResCap will pledge all of the Series B junior preferred membership interests to secure the proposed senior secured credit facility with GMAC and the new notes being offered in ResCap's private exchange offers. Newco will be committed to effectuate the orderly sale of the Subject Assets in arms-length transactions through the retention of nationally recognized brokers. The Subject Assets would be sold through an auction process or such other process as recommended by such brokers, and all sales of the Subject Assets would be subject to the approval of Newco's managing member. Cerberus' commitment is subject to customary closing conditions, including the consummation of ResCap's private debt tender and exchange offers. This transaction is expected to close by June 5, 2008. (d) Cerberus has committed to purchase certain assets of ResCap at ResCap's option consisting of performing and non- performing mortgage loans and mortgage-backed securities for net cash proceeds of $300 million. ResCap will commence identifying the assets proposed to be sold to Cerberus. If Cerberus disputes that the fair market value of such identified assets is at least $300 million, ResCap may designate additional performing and non-performing mortgage loans and mortgage-backed securities for sale to Cerberus. If requested by ResCap within 10 days following the sale of such assets to Cerberus, Cerberus would then sell such assets pursuant to an auction process, which in ResCap's discretion may be on an "As Is, Where Is" basis, and the auction sale of such assets will be consummated within 30 days following the asset sale to Cerberus. To the extent that such assets are sold pursuant to such auction process for more than $300 million in net cash proceeds, Cerberus will make an equity contribution to ResCap of the excess amount, less the costs and expenses and net of taxes, if any, incurred by Cerberus in connection with such auction sale. Cerberus' commitment is subject to customary conditions, including the receipt by ResCap of a fairness opinion from a nationally recognized investment banking, accounting or appraisal firm. In addition, ResCap intends, but is not obligated, to undertake an orderly sale of certain assets of ResCap consisting of performing and non-performing mortgage loans and mortgage-backed securities in arms-length transactions through the retention of nationally recognized brokers. Cerberus has committed to make firm bids to purchase the Auction Assets for net cash proceeds of $650 million. ResCap will commence identifying the Auction Assets. If Cerberus disputes that the fair market value of such identified assets is at least $650 million, ResCap may designate additional performing and non-performing mortgage loans and mortgage-backed securities as Auction Assets. The Auction Assets would be sold pursuant to an auction process on an "As Is, Where Is" basis and such auction process would be conducted in such manner as recommended by such brokers. If ResCap elects to undertake auction sales of the Auction Assets, ResCap will conduct an auction on or prior to July 31, 2008 for certain of the Auction Assets and another auction on or prior to Aug. 31, 2008 for the remaining Auction Assets. Cerberus' commitment is subject to customary conditions, including the consummation of the sale of the Auction Assets on or prior to Aug. 31, 2008. ResCap has no obligation to undertake either of the "As Is, Where Is" auctions. The assets subject to such auction sales may or may not be primary collateral securing the proposed senior secured credit facility with GMAC and the new notes being offered in ResCap's private exchange offers. To the extent that such assets are primary collateral, the proceeds from the sale of such assets would then be applied in compliance with the proposed indentures governing the new notes. ResCap believes that each of the transactions complies with the proposed indentures governing the new notes being offered in ResCap's private exchange offers as if such indentures were in effect and governing such transactions. The consummation of each of the transactions is subject to a number of conditions; accordingly, there is no assurance that all of the transactions will be consummated or that they will be consummated within the timeframes. About Residential Capital Headquartered in Minneapolis, Minnesota, Residential Capital LLC -- http://www.rescapholdings.com/-- is the home mortgage unit of GMAC Financial Services, which is in turn wholly owned by GMAC LLC. About GMAC LLC GMAC LLC -- http://www.gmacfs.com/-- formerly General Motors Acceptance Corporation, is a global, diversified financial services company that operates in approximately 40 countries in automotive finance, real estate finance, insurance and other commercial businesses. GMAC was established in 1919 and employs approximately 26,700 people worldwide. Cerberus Capital Management LP bought 51% GMAC LLC stake from General Motors Corp. on December 2006. * * * As reported in yesterday's Troubled Company Reporter, Fitch Ratings has downgraded the long-term Issuer Default Rating of GMAC LLC and related subsidiaries to 'BB-' from 'BB'. Fitch has also downgraded GMAC's unsecured long-term ratings to 'B+' from 'BB-', reflecting the potential for reduced recovery in a default scenario should the company encumber assets. Additionally, Fitch has affirmed the 'B' short-term ratings. The Rating Outlook remains Negative. As reported in the Troubled Company Reporter on April 25, 2008, Moody's Investors Service downgraded GMAC LLC's senior rating to B2 from B1; the rating remains on review for further possible downgrade. This action follows Moody's rating downgrade of ResCap LLC, GMAC's wholly owned residential mortgage unit, to Caa1 from B2. GMAC LLC: Cerberus Denies Reports on Sale of Equity Stake --------------------------------------------------------- Mark Neporent, Cerberus Capital Management's senior managing director, chief operating officer, and general officer, responds to a report in the Financial Times disclosing that the firm had sold most of its holdings in Chrysler LLC and GMAC LLC amid the downturn in the U.S. economy and woes in the lending industry. "Cerberus has not reduced or made any changes to its equity stakes in GMAC or Chrysler since the closing of either transaction. Cerberus continues to have voting control over both investments. It is common knowledge, and has been widely reported, that Cerberus made these investments side-by-side with its co-investors at the time of closing. As a general rule, Cerberus does not commit more than 5% of the capital of any of its funds to any single investment." Cerberus has sold "significantly" more than half its equity to 90 investors, Henry Sender at The Financial Times reported on Monday, citing people familiar with the situation. Those who bought the stakes include some of Cerberus' own investors, the report said. Unnamed sources told FT that the buying group included Citigroup's private equity arm, Cerberus-controlled Aozora Bank of Japan, Avenue Capital, Cyrus Capital Partners, DB Zwirn, Franklin Templeton Investments, Oak Hill Advisors, Oak Hill Capital Partners, Satellite Capital, Seneca Capital and York Capital. Other investors including Golden Tree Asset Management and Oaktree Capital Management declined to participate, FT said. FT said investors paid as much as $1 billion for stakes in one or both companies. "By selling equity to others soon after winning control of the two companies, Cerberus reduced its risks and earned fees from investors," Mr. Sender reported. One investor who acquired a small stake in GMAC told FT there was no time for due diligence. "It was a 'trust me' kind of trade," he said. But investors believe it was a hot deal. "Everbody wanted in as part of the gang," that investor told FT. According to the Troubled Company Reporter on February 21, 2008, Cerberus said Chrysler was bound to surpass its recovery plan "on virtually all key metrics." Cerberus expressed confidence on its capital infusion in Chrysler and complimented on the leadership of chief executive Robert Nardelli and co-presidents Tom LaSorda and Jim Press. The hedge fund said Chrysler will "fare just fine" with its $8 billion cash but continue to warn investors of the risks. Cerberus also said that GMAC LLC has "strong long-term prospects." These compliments came amid the financial pressures that Chrysler and GMAC are facing due to the crisis in the U.S. economy. The Troubled Company Reporter related on Feb. 18, 2008, that Cerberus founder Stephen Feinberg warned investors of possible "substantial difficulty" in GMAC. GMAC struggled with the decline in the U.S. housing industry and financial markets and reported a $724 million loss during the last quarter of 2007. Mr. Feinberg wrote in a Jan. 22 letter to investors that while Cerberus has "detailed contingency plans in a continuing worsening environment . . . if the credit markets continue to decline and we find ourselves in a prolonged environment of capital market shutdown, GMAC could run into substantial difficulty." The letter outlines worst-case scenarios for investors, according to Cerberus partner Tim Price. About Cerberus Capital Cerberus Capital Management LP -- http://www.cerberuscapital.com/-- is a private investment firms that provides both financial resources and operational expertise to undervalued companies. Cerberus is headquartered in New York City with affiliates and advisory offices in Atlanta, Chicago, Los Angeles, London, Baarn, Frankfurt, Tokyo, Osaka and Taipei. Cerberus holds controlling or significant minority interests in companies around the world, including 80.1% stake in Chrysler LLC bought in 2007 from Daimler AG. Cerberus was also the lead investor of a group that acquired 51% of GMAC, the financing arm of General Motors. In aggregate, these companies currently generate over US$60 billion in annual revenues. About Chrysler Headquartered in Auburn Hills, Michigan, Chrysler LLC -- http://www.chrysler.com/-- a unit of Cerberus Capital Management LP, produces Chrysler, Jeep(R), Dodge and Mopar(R) brand vehicles and products. The company has dealers worldwide, including Canada, Mexico, U.S., Germany, France, U.K., Argentina, Brazil, Venezuela, China, Japan and Australia. * * * As reported in the Troubled Company Reporter on May 9, 2008, Fitch Ratings downgraded the Issuer Default Rating of Chrysler LLC to 'B' from 'B+', with a Negative Rating Outlook. Fitch has also downgraded the senior secured bank facilities, including senior secured first-lien bank loan to 'BB/RR1' from 'BB+/RR1'; and senior secured second-lien bank loan to 'CCC+/RR6' from 'BB+/RR1'. The recovery rating on the second lien was also downgraded from 'BB+/RR1' to 'CCC+/RR6' based on lower asset value assumptions and associated recoveries in the event of a stress scenario. GMAC LLC -- http://www.gmacfs.com/-- formerly General Motors Acceptance Corporation, is a global, diversified financial services company that operates in approximately 40 countries in automotive finance, real estate finance, insurance and other commercial businesses. GMAC was established in 1919 and employs approximately 26,700 people worldwide. Cerberus Capital Management LP bought 51% GMAC LLC stake from General Motors Corp. on December 2006. * * * As reported in yesterday's Troubled Company Reporter, Fitch Ratings has downgraded the long-term Issuer Default Rating of GMAC LLC and related subsidiaries to 'BB-' from 'BB'. Fitch has also downgraded GMAC's unsecured long-term ratings to 'B+' from 'BB-', reflecting the potential for reduced recovery in a default scenario should the company encumber assets. Additionally, Fitch has affirmed the 'B' short-term ratings. The Rating Outlook remains Negative. As reported in the Troubled Company Reporter on April 25, 2008, Moody's Investors Service downgraded GMAC LLC's senior rating to B2 from B1; the rating remains on review for further possible downgrade. This action follows Moody's rating downgrade of ResCap LLC, GMAC's wholly owned residential mortgage unit, to Caa1 from B2. GMAC LLC: Increases Rescap Funding to $1,200,000,000 ---------------------------------------------------- On June 1, 2008, GMAC LLC and Residential Capital, LLC, entered into an amendment to the Loan and Security Agreement, dated as of April 18, 2008, among GMAC LLC, as lender, and Residential Funding Company, LLC and GMAC Mortgage, LLC, as borrowers. The amendment to the MSR Facility increases the maximum facility amount from $750 million to $1.2 billion and increases the advance rate from 50% to 85%. The other terms and provisions of the MSR Facility will remain unchanged. The collateral securing the MSR facility is not part of the primary collateral securing the proposed senior secured credit facility with GMAC or the new notes being offered in ResCap's private exchange offers. ResCap was expected to draw approximately $450 million under the amended MSR Facility on June 3, 2008. As reported in the Troubled Company Reporter on May 7, 2008, ResCap disclosed that it is highly leveraged relative to its cash flow, and its liquidity position has been declining. According to a Securities and Exchange Commission filing, ResCap said there is a significant risk that the company will not be able to meet its debt service obligations, be unable to meet certain financial covenants in its credit facilities, and be in a negative liquidity position in June 2008. As previously reported, ResCap anticipates that its new debt agreements will include covenants to maintain minimum cash balances. To comply with these covenants and to satisfy its liquidity needs, ResCap expects that it will be required, even if it successfully implements all of the proposed actions, to generate capital in the near term through asset sales or other actions in addition to its normal mortgage finance activities, to obtain additional cash of approximately $600 million by June 30, 2008. This additional cash requirement is an estimate based upon ResCap's internal monthly cash forecasts targeting sufficient cash surpluses to prudently operate its business and remain in excess of anticipated cash covenants. TCR previoulsy disclosed that if ResCap is unsuccessful in executing the financing transactions, including additional liquidity actions, it would have a material adverse effect on GMAC, which could result in a further impairment of GM's investments in GMAC and could disrupt GMAC's ability to finance GM's dealers and customers. According to a U.S. Securities & Exchange Commission filing, GMAC Financial Services and its wholly-owned mortgage subsidiary, ResCap, have outlined a series of initiatives aimed at stabilizing the liquidity position of the mortgage unit and pursuing sufficient funding to operate the business to comply with covenants in its finance agreements. The initiatives include extending near-term debt maturities, refinancing credit facilities, extending new facilities and the sale of assets. GMAC and ResCap have been working with their banking partners on plans to refinance various credit lines at both companies. The companies are currently in the process of finalizing the credit facilities and expect to announce details shortly. About GM 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. About ResCap Headquartered in Minneapolis, Minnesota, Residential Capital LLC -- http://www.rescapholdings.com/-- is the home mortgage unit of GMAC Financial Services, which is in turn wholly owned by GMAC LLC. About GMAC LLC GMAC LLC -- http://www.gmacfs.com/-- formerly General Motors Acceptance Corporation, is a global, diversified financial services company that operates in approximately 40 countries in automotive finance, real estate finance, insurance and other commercial businesses. GMAC was established in 1919 and employs approximately 26,700 people worldwide. Cerberus Capital Management LP bought 51% GMAC LLC stake from General Motors Corp. on December 2006. * * * As reported in yesterday's Troubled Company Reporter, Fitch Ratings has downgraded the long-term Issuer Default Rating of GMAC LLC and related subsidiaries to 'BB-' from 'BB'. Fitch has also downgraded GMAC's unsecured long-term ratings to 'B+' from 'BB-', reflecting the potential for reduced recovery in a default scenario should the company encumber assets. Additionally, Fitch has affirmed the 'B' short-term ratings. The Rating Outlook remains Negative. As reported in the Troubled Company Reporter on April 25, 2008, Moody's Investors Service downgraded GMAC LLC's senior rating to B2 from B1; the rating remains on review for further possible downgrade. This action follows Moody's rating downgrade of ResCap LLC, GMAC's wholly owned residential mortgage unit, to Caa1 from B2. GRAMPA'S BARGAIN OUTLET: Halts Operations, Mulls Chapter 7 Filing ----------------------------------------------------------------- The Taunton (Mass.) Daily Gazette reports that Grampa's Bargain Outlet, a discount retailer, has ceased operations on May 31, 2008. Co-owner Don Lagasse confirmed to the Taunton Daily Gazette that he and his brother Hank could no longer keep the business going. Mr. Lagasse said foot traffic had fallen off and that profit margins were such that it no longer remained a profitable venture, Daily Gazette says. The Daily Gazette relates that the discount retailer also has fallen behind on rent to CGI Management Inc., owner of the Raynham Crossing plaza at 59 New State Highway. Mr. Lagasse and his brother also owe money to vendors. The store owners have contacted a bankruptcy attorney to consider their options, including filing for chapter 7 bankruptcy, the report says. The Daily Gazette relates that Grampa's Bargain Outlet took the place of the former Big Value Outlet Stores, a family-owned business known for closeouts and discount lines. BVOS filed for chapter 7 in 2005. GREEKTOWN CASINO: Bankruptcy Filing Done to Protect Tribe Assets ---------------------------------------------------------------- Chairman Aaron Payment of the Sault Ste. Marie Tribe of Chippewa Indians noted in a press release that "we have filed for Chapter 11 to protect our assets from the unfair covenants placed upon Greektown Casino by the Michigan Gaming Board, a standard that the other two casinos in Detroit do not have to follow," the Sault Ste. Evening News quoted. The Sault Tribe is the majority owner of Greektown Casino. According to Mr. Payment, a dispute arose with respect to a Greek partnership entered into by Greektown Casino and a $268 million liability under the partnership agreement, the Sault Ste. Evening News reports. Details of the agreement were not elaborated. Mr. Payment noted that he wasn't convinced the Greek partnership was a good deal and thus, previously pushed for buying out the Greek partners. He notes, the newspaper pointed out, that the Greek partners seemed to seek more of a percentage ownership but didn't have the capital to invest and did not submit the required paperwork with the Michigan Gaming Control Board. The report adds that Mr. Payment believes the bankruptcy filing of Greektown Casino could help the company avoid a "forced sale" covenant that the Gaming Board can impose. He says the bankruptcy petition could also stay a $50 million liability the company owes to the Greek partners until it can improve its cash flow sources. About Greektown Holdings Based in Detroit, Michigan, Greektown Holdings, LLC and its affiliates -- http://www.greektowncasino.com/-- operate world- class casino gaming facilities located in Detroit's historic Greektown district featuring over 75,000 square feet of casino gaming space with more than 2,400 slot machines, over 70 tables games, a 12,500-square foot salon dedicated to high limit gaming and the largest live poker room in the metropolitan Detroit gaming market. Greektown Casino employs approximately 1,971 employees, and estimates that it attracts over 15,800 patrons each day, many of whom make regular visits to its casino complex and related properties. In 2007, Greektown Casino achieved a 25.6% market share of the metropolitan Detroit gaming market. Greektown Casino has also been rated as the "Best Casino in Michigan" and "Best Casino in Detroit" numerous times in annual readers' polls in Detroit's two largest newspapers. The company and seven of its affiliates filed for Chapter 11 protection on May 29, 2008 (Bankr. E.D. Mich. Lead Case No. 08- 53104). Daniel J. Weiner, Esq., Michael E. Baum, Esq., and Ryan D. Heilman, Esq., at Schafer and Weiner PLLC, represent the Debtors in their restructuring efforts. Judy B. Calton, Esq., at Honigman Miller Schwartz and Cohn LLP, represents the Debtors as their special counsel. The Debtors chose Conway MacKenzie & Dunleavy as their financial advisor, and Kurtzman Carson Consultants LLC serves as the Debtors' claims, noticing, and balloting agent. When the Debtor filed for protection from its creditors, it listed consolidated estimated assets and debts of $100 million to $500 million. (Greektown Casino Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). GREEKTOWN CASINO: Wants to Use Cash Collateral of its Lenders ------------------------------------------------------------- Greektown Casino LLC and its debtor-affiliates inform the Honorable Walter Shapero of the U.S. Bankruptcy Court for the Eastern District of Michigan that they need to use the cash collateral of their prepetition lenders to supplement their cash on hand in order to pay operating expenses, including payroll; and to pay vendors in ensure a continued supply of goods essential to their continued viability. Prepetition Indebtedness Pursuant to a Credit Agreement dated Dec. 2, 2005, as amended, Debtors Greektown Holdings, LLC, and Greektown Holdings II, Inc., borrowed money and obtained letters of credit from these secured lenders: * The Bank of New York * Bear Stearns Securities Corp. * BNP Paribas Securities Corp./Fixed Income * Brown Brothers Harriman & Co. * Citibank, N.A. * Dresdner Kleinwort Wasserstein Securities LLC * Jefferies & Company, Inc. * JPMorgan Chase Bank, N.A. * Mellon Trust of New England, N.A. * Merrill Lynch, Pierce, Fenner & Smith Incorporated * The Northern Trust Company * PNC Bank, National Association * State Street Bank and Trust Company * Investors Bank and Trust Company * U.S. Bank, N.A. * Wells Fargo Bank, National Association The agents for the Prepetition Secured Lenders are Merrill Lynch, Pierce, Fenner and Smith Incorporated; Merrill Lynch Capital Corporation; Wachovia Securities; National City Bank of the Midwest; Wells Fargo Bank, National Association; and Fifth Third Bank. The Prepetition Obligations are secured by a lien and security interest in substantially all of the Debtors' personal property assets as well as mortgages on substantially all of their real estate interests -- the Prepetition Cash Collateral. As of the date of bankruptcy, the Debtors' books and records showed that the outstanding principal balance of the obligations owing to the Prepetition Lenders was at least $44,626,000, plus accrued interest, according to Mr. Weiner. The Debtors also obtained, before the bankruptcy filing, financing pursuant to the Taxable Economic Development Revenue Bonds and the Tax-Exempt Economic Development Revenue Bonds issued by the Economic Development Corporation of the City of Detroit. The Bonds are backed by a $49,360,000 letter of credit issued under the Prepetition Loan Agreement. The Bonds are not secured by any collateral other than the right to draw under the Bond Letter of Credit if the conditions set forth are met. As of the bankruptcy filing date, the Debtors' books and records showed that the outstanding principal balance owing with respect to the Bonds was $49,350,000, plus accrued but unpaid interest and all costs, expenses and attorneys' fees owing in accordance with the terms of the Bond Documents, Mr. Weiner adds. Lenders' Consent & Adequate Protection The Prepetition Lenders have agreed to the use of Cash Collateral by the Debtors, Mr. Weiner tells Judge Shapero, contingent on, among other things, their receipt of the adequate protection provided in the DIP Facility. All of the Debtors' construction expenditures and cash flow will be set forth in a budget prepared on a rolling 13-week basis, as may be modified from time to time. A copy of the budget the Debtors prepared for the period 13-week period from June 2, 2008, through Aug. 31, 2008, is available for free at: http://researcharchives.com/t/s?2d4c The Debtors propose to grant the prepetition lenders adequate protections including, among other things: (a) granting replacement liens on all assets of the Debtors, subject only to the Carve-Out under the DIP Facility; (b) granting superpriority status to the adequate protection obligations, subject to the payment of the Carve-Out); (c) satisfaction of the Exit Milestones; and (d) periodic cash payments to the Prepetition Secured Parties. The Exit Milestones to be accomplished by the Debtors are: Target Date Task ----------- ---- 60 days after the Delivery by the Debtors to the Petition Date Administrative Agent under the Proposed DIP Facility a business plan Dec. 31, 2008 Retention of an investment banker or other professional, satisfactory to the DIP Loan Agent, who will assist the Debtors in the process of (1) identifying a purchaser; (2) completing a sale of the Debtors' company assets and operations; and (3) soliciting exit financing. Feb. 28, 2009 Establishment of a data room with company and financial information regarding the Debtors' operations. Feb. 28, 2009 Completion of an offering memorandum and circulation of that offering memorandum to potential buyers. Feb. 28, 2009 The Court should have entered an order approving the bidding procedures pursuant to the offering memorandum. Apr. 30, 2009 The Debtors will have received (1) initial indications of interest from potential buyers and/or (2) a preliminary term sheet with respect to exit financing of all Postpetition Obligations and the Prepetition Obligations. Jun. 1, 2009 The Debtors will have either (1) received all final bids from potential buyers or (2) filed a reorganization plan acceptable to the DIP Lenders and the Prepetition Lenders with the Court. June 15, 2009 If the Debtors accept a final bid, that bid should be filed with the Court. If the Debtors file a reorganization plan or a final bid with the Court, and no default or Event of Default has occurred, the DIP Facility Termination Date will be extended from June 1, 2009 to September 1, 2009. Sept. 1, 2009 Completion of a sale of the Debtors' assets and operations or consummation of a plan of reorganization. About Greektown Holdings Based in Detroit, Michigan, Greektown Holdings, LLC and its affiliates -- http://www.greektowncasino.com/-- operate world- class casino gaming facilities located in Detroit's historic Greektown district featuring over 75,000 square feet of casino gaming space with more than 2,400 slot machines, over 70 tables games, a 12,500-square foot salon dedicated to high limit gaming and the largest live poker room in the metropolitan Detroit gaming market. Greektown Casino employs approximately 1,971 employees, and estimates that it attracts over 15,800 patrons each day, many of whom make regular visits to its casino complex and related properties. In 2007, Greektown Casino achieved a 25.6% market share of the metropolitan Detroit gaming market. Greektown Casino has also been rated as the "Best Casino in Michigan" and "Best Casino in Detroit" numerous times in annual readers' polls in Detroit's two largest newspapers. The company and seven of its affiliates filed for Chapter 11 protection on May 29, 2008 (Bankr. E.D. Mich. Lead Case No. 08- 53104). Daniel J. Weiner, Esq., Michael E. Baum, Esq., and Ryan D. Heilman, Esq., at Schafer and Weiner PLLC, represent the Debtors in their restructuring efforts. Judy B. Calton, Esq., at Honigman Miller Schwartz and Cohn LLP, represents the Debtors as their special counsel. The Debtors chose Conway MacKenzie & Dunleavy as their financial advisor, and Kurtzman Carson Consultants LLC serves as the Debtors' claims, noticing, and balloting agent. When the Debtor filed for protection from its creditors, it listed consolidated estimated assets and debts of $100 million to $500 million. (Greektown Casino Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). GREEKTOWN CASINOS: Gets Permission to Access $51 Million in Loan ---------------------------------------------------------------- Greektown Casino LLC and its debtor-affiliates sought and obtained authority from the U.S. Bankruptcy Court for the Eastern District of Michigan in Detroit to borrow up to $51,300,000 in postpeittion financing, on an interim basis, The Detroit News reports. The Debtors need the money to pay contractors building the expanded gaming floor and 400-room resort-style hotel, as well as interest and other costs owed to their lender. The Debtors have secured around $150 million in postpetition financing from Merrill Lynch and certain other lenders. At Wednesday's hearing, the Debtors advised the Court they need to borrow up to $5,633,000 from the DIP Lenders with respect to a Tranche A loan and up to $39,993,000 with respect to a Tranche B loan on an interim basis. The Court will convene another hearing to consider whether to grant the Debtors authority to borrow the entire amount. The Debtors relate that they generate sufficient cash on a day- to-day basis to fund its general operations. This cash flow, however, is insufficient to service all debt obligations and continue the ongoing construction of an expanded hotel and casino resort complex in Detroit, Daniel J. Weiner, Esq., at Schafer and Weiner, PLLC, in Bloomfield Hills, Michigan, informs the Court. The Debtors maintain that completion of the Expanded Complex is necessary to allow them to be more competitive in attracting customers to their casino and hotel resort facility. Moreover, the Debtors have these outstanding debt obligations as of the date of bankruptcy, according to Mr. Weiner: Category Amount -------- ------ Prepetition Credit Facility with Merrill Lynch and certain lenders $44,626,000 plus interest Prepetition Financing pursuant to Taxable/Tax-Exempt Economic Development Revenue Bonds $49,350,000 plus interest Jenkins/Skanska Venture LLC, contractor for the Expanded Complex, for work done in March and April 2008 $24,000,000 Hnedek Bobo, architect for the Expanded Complex $600,328 Other contractors, consultants, architects and suppliers for the Expanded Complex $3,229,288 Assuming Jenkins/Skanska continues to perform under its contract with the Debtors, another $12,000,000 will be due to the firm on June 30, 2008, the Debtors point out. They add that in order to procure furniture and fixtures for the opening and operation of the Expanded Complex, a $1,600,000 deposit is required to be paid. In this light, the Debtors approached a group of lenders led by Merrill Lynch Capital Corporation, as agent, to provide them postpetition financing. Merrill Lynch and certain lenders have agreed to commit to the Debtors two tranches of loan: (1) Tranche A Loan - a delayed-draw, term loan to fund the ongoing construction of the Expanded Complex up to $135,000,000 (2) Tranche B Loan - an additional revolving loan of $15,000,000, which will include a $1,000,000 letter of credit sub-facility, to fund construction or operating costs The other salient terms of the proposed DIP Loan Facility are: Borrowers: Greektown Holdings LLC Greektown Holdings II, Inc. Guarantors: Greektown Casino LLC Contract Builders Corporation Trappers GC Partners, LLC Administrative Agent: Merrill Lynch Capital Corporation Co-Lead Arrangers: Merrill Lynch, Pierce, Fenner and Smith Incorporated and Wachovia Capital Markets, LLC Syndication Agent: Wachovia Capital Markets, LLC Joint Book Runners: Merrill Lynch, Pierce, Fenner and Smith Incorporated and Wachovia Capital Markets, LLC Lenders: A syndicate of lenders, which include: Commitment Amt. --------------- Merrill Lynch $50,000,000 Wachovia Bank $50,000,000 Wells Fargo Foothill $45,000,000 National City Bank $5,000,000 Priority and Liens: Subject to the Carve-Out, superpriority administrative claim status pursuant to Sections 364(c)(1), 503(b) and 507(b) of the Bankruptcy Code. Secured by a perfected security interest pursuant to Section 364(c)(2) and (c)(3) and 364(d) in the DIP Collateral, which, subject to the conditions set forth in the DIP Facility, will not include: (i) avoidance actions under Sections 502(d), 544, 545, 547, 548, 549, 550, 551 or 553; and (ii) the proceeds of any Avoidance Actions. A full-text copy of the Merrill Lynch Postpetition DIP Facility is available for free at http://ResearchArchives.com/t/s?2d39 The DIP Loan Agent is represented by Douglas L. Wisner, Esq., at Mayer Brown LLP, in New York. Negative Covenants Under the DIP Facility, the Debtors are required to report Consolidated Earnings Before Interest, Taxes, Depreciation, Amortization and Restructuring Costs of no less than: Consolidated EBITDAR Consolidated EBITDAR on a cumulative basis, Month ending on on a monthly basis since Effective Date --------------- --------------------- ---------------------- July 31, 2008 $3,620,000 N/A August 31, 2008 $5,145,000 N/A September 30, 2008 $4,621,000 $14,223,000 October 31, 2008 $5,299,000 $19,854,000 November 30, 2008 $4,843,000 $24,999,000 December 31, 2008 $4,520,000 $29,802,000 January 31, 2009 $4,365,000 $34,712,000 February 28, 2009 $4,665,000 $39,960,000 March 31, 2009 $6,726,000 $47,526,000 April 30, 2009 $6,567,000 $54,915,000 May 31, 2009 $5,910,000 $61,564,000 June 30, 2009 $6,174,000 $68,510,000 July 31, 2009 $6,390,000 $75,968,000 Marketing Efforts Before deciding to enter into the DIP Facility with the proposed DIP Lenders, the Debtors and their financial advisors, Conway, Mackenzie & Dunleavy, conducted vigorous and good-faith negotiations with potential new lenders. However, none of the new lenders could perform due diligence fast enough to commit a financing in time to satisfy the Debtors' urgent need for liquidity, Mr. Weiner notes. In deciding to seek financing from the proposed DIP Lenders, the Debtors tell Judge Shapero that they considered these factors: * The DIP Lenders already held secured first priority liens on the Debtors' Prepetition Collateral. * The DIP Lenders' preexisting knowledge of the Debtors' business and the existing Prepetition Collateral provided significant benefits, including the speed with which the DIP Lenders are able to close. * The DIP Lenders had been previously approved as the lenders to the Debtors by the Michigan Gaming Control Board. Thus, the Debtors aver that the Merrill Lynch DIP Facility is the most favorable financing available to them under current market condition and financial circumstances. About Greektown Holdings Based in Detroit, Michigan, Greektown Holdings, LLC and its affiliates -- http://www.greektowncasino.com/-- operate world- class casino gaming facilities located in Detroit's historic Greektown district featuring over 75,000 square feet of casino gaming space with more than 2,400 slot machines, over 70 tables games, a 12,500-square foot salon dedicated to high limit gaming and the largest live poker room in the metropolitan Detroit gaming market. Greektown Casino employs approximately 1,971 employees, and estimates that it attracts over 15,800 patrons each day, many of whom make regular visits to its casino complex and related properties. In 2007, Greektown Casino achieved a 25.6% market share of the metropolitan Detroit gaming market. Greektown Casino has also been rated as the "Best Casino in Michigan" and "Best Casino in Detroit" numerous times in annual readers' polls in Detroit's two largest newspapers. The company and seven of its affiliates filed for Chapter 11 protection on May 29, 2008 (Bankr. E.D. Mich. Lead Case No. 08- 53104). Daniel J. Weiner, Esq., Michael E. Baum, Esq., and Ryan D. Heilman, Esq., at Schafer and Weiner PLLC, represent the Debtors in their restructuring efforts. Judy B. Calton, Esq., at Honigman Miller Schwartz and Cohn LLP, represents the Debtors as their special counsel. The Debtors chose Conway MacKenzie & Dunleavy as their financial advisor, and Kurtzman Carson Consultants LLC serves as the Debtors' claims, noticing, and balloting agent. When the Debtor filed for protection from its creditors, it listed consolidated estimated assets and debts of $100 million to $500 million. (Greektown Casino Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). GREEKTOWN CASINOS: Game Board Says Loan Impinges on Its Authority ----------------------------------------------------------------- Greektown Casino LLC and its debtor-affiliates' only cash- generating business consists of the gambling operations of Debtor Greektown Casino, LLC. Under Michigan law, these operations are permitted only because Greektown Casino is licensed by the Michigan Gaming Control Board, Assistant Attorney General Donald S. McGehee tells the U.S. Bankruptcy Court for the Eastern District of Michigan. The Gaming Board opposes the Debtors' request to borrow around $150 million in post-petition financing from a lending consortium led by Merrill Lynch, Wachovia Bank, Wells Fargo Foothill, and National City Bank, to the extent it could be interpreted as impinging on the Board's regulatory authority over the casino licensee. The Board says it recognizes the important timing considerations in the Debtors' need for financing, but it asserts that it must also preserve its authority to regulate casino licensees, including its authority and duty to examine the proposed financing and consider its implications. Mr. McGeehee pointed out that: * In the event that the Board takes any action to suspend, revoke, or restrict the license held by Greektown Casino, the DIP Facility allows the DIP Lenders to, among other things, (i) terminate the DIP Facility, (ii) declare the DIP Loans to be immediately due and payable, and (iii) exercise all right and remedies under the DIP Facility. "Taken together, these provisions reflect promises that the Debtors are legally incapable of keeping and, thus, may render the presumed benefits of the DIP Facility meaningless in the short term," Mr. McGeehee contends. * To the extent Greektown Casino intends to grant the DIP Lenders an interest in its license, it is acting in violation of Gaming Control and Revenue Act. * Any intent under the DIP Facility for a sale of Greektown Casino would violate applicable Michigan law, which vests the Board with exclusive authority to approval all similar transfers. With respect to the Debtors' contention that Merrill Lynch has previously been approved by the Board, Mr. McGeehee argues that the subject Board approval was too limited in scope to apply to the newly contemplated financing. The Board, he elaborates, granted Merrill Lynch exemptions from the supplier-licensing requirements, but only "for the limited purpose of engaging in the Debt Transaction" that was the subject of the Board's November 2005 Transaction Order. About Greektown Holdings Based in Detroit, Michigan, Greektown Holdings, LLC and its affiliates -- http://www.greektowncasino.com/-- operate world- class casino gaming facilities located in Detroit's historic Greektown district featuring over 75,000 square feet of casino gaming space with more than 2,400 slot machines, over 70 tables games, a 12,500-square foot salon dedicated to high limit gaming and the largest live poker room in the metropolitan Detroit gaming market. Greektown Casino employs approximately 1,971 employees, and estimates that it attracts over 15,800 patrons each day, many of whom make regular visits to its casino complex and related properties. In 2007, Greektown Casino achieved a 25.6% market share of the metropolitan Detroit gaming market. Greektown Casino has also been rated as the "Best Casino in Michigan" and "Best Casino in Detroit" numerous times in annual readers' polls in Detroit's two largest newspapers. The company and seven of its affiliates filed for Chapter 11 protection on May 29, 2008 (Bankr. E.D. Mich. Lead Case No. 08- 53104). Daniel J. Weiner, Esq., Michael E. Baum, Esq., and Ryan D. Heilman, Esq., at Schafer and Weiner PLLC, represent the Debtors in their restructuring efforts. Judy B. Calton, Esq., at Honigman Miller Schwartz and Cohn LLP, represents the Debtors as their special counsel. The Debtors chose Conway MacKenzie & Dunleavy as their financial advisor, and Kurtzman Carson Consultants LLC serves as the Debtors' claims, noticing, and balloting agent. When the Debtor filed for protection from its creditors, it listed consolidated estimated assets and debts of $100 million to $500 million. (Greektown Casino Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). HIGH GRADE CDO 2007-1: Moody's Cuts Rating on Notes --------------------------------------------------- Moody's Investors Service has downgraded the rating on these notes issued by High Grade Structured Credit CDO 2007-1: Class Description: Up to $3,240,000,000 Class A-1A Floating Rate Extendible Notes/CP Notes -- Prior Rating: P-2, on review for possible downgrade -- Current Rating: NP Class Description: Up to $3,240,000,000 Class A-1B Notes -- Prior Rating: Baa2, on review for possible downgrade -- Current Rating: Caa3 Class Description: $200,000,000 Class A-2 Senior Secured Floating Rate Notes Due 2052 -- Prior Rating: B1, on review for possible downgrade -- Current Rating: Ca Class Description: $300,000,000 Class A-3 Senior Secured Floating Rate Notes Due 2052 -- Prior Rating: Caa1, on review for possible downgrade -- Current Rating: Ca Class Description: $115,000,000 Class B Senior Secured Floating Rate Notes Due 2052 -- Prior Rating: Caa3, on review for possible downgrade -- Current Rating: Ca Moody's also announced that it has downgraded and left on review for possible downgrade these notes: Class Description: $27,900,000 Class X Senior Secured Notes Due 2017 -- Prior Rating: Aaa -- Current Rating: A2, on review for possible downgrade The rating downgrades taken reflect the increased deterioration of the credit quality and the loss of overcollateralization of the collateral pool comprised of collateralized debt obligations. The A/B Overcollateralization Test as reported by the Trustee on April 28, 2008, was 83.47% with the covenant for this test being 101.25%. The Coverage Test failure reflects the ongoing deterioration of the underlying portfolio that includes a number of CDOs that are currently in event of default. In addition, the credit deterioration of the underlying portfolio has increased the likelihood of payment default on the CP Notes and it has also increased the likelihood that the Put will not be available if it is required. These factors result in a level of risk to the CP note that is no longer consistent with a Prime rating. High Grade Structured Credit CDO 2007-1 is a collateralized debt obligation backed primarily by a portfolio of structured finance securities. I/OMAGIC CORP: Posts $812,663 Net Loss in 2008 First Quarter ------------------------------------------------------------ I/OMagic Corp. reported a net loss of $812,663, on net sales of $5,531,933, for the first quarter ended March 31, 2008, compared with a net loss of $506,535, on net sales of $7,691,165, in the same period in 2007. The decrease in net sales primarily reflects a 65% decrease in sales of magnetic data storage products, partially offset by an increase in net sales of HDTVs. At March 31, 2008, the company's consolidated balance sheet showed $10,091,467 in total assets, $9,002,777 in total liabilities, and $1,088,690 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?2d40 Going Concern Doubt As reported in the Troubled Company Reporter on April 23, 2008, Swenson Advisors, LLP, in San Diego, Calif., expressed substantial doubt about I/OMagic Corp.'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 significant operating losses, has serious liquidity concerns, and may require additional financing in the foreseeable future. At March 31, 2008, the company had cash and cash equivalents of $357,042 and as of May 16, 2008, the company had only $827,524 of cash on hand. Accordingly, the company is presently experiencing a lack of liquidity and may have insufficient liquidity to fund its operations for the next twelve months. If the company's net losses continue or increase, the company said it could experience significant additional shortages of liquidity and its ability to purchase inventory and to operate its business may be significantly impaired, which could lead to further declines in its results of operations and financial condition. About I/OMagic Corp. Headquartered in Irvine, California, I/OMagic Corp. (OTC BB: IOMG) -- http://www.iomagic.com/-- sells data storage products, televisions, most of which are high-definition televisions, or HDTVs, utilizing liquid crystal display, or LCD, technology, and other consumer electronics products. IAC/INTERACTIVECORP: Sees Tax Benefit From $15 Million EPI Sale --------------------------------------------------------------- IAC/InterActiveCorp and MH Equity Investors, a subsidiary of MHE Private Equity Fund LLC, an Indianapolis-based private equity firm, said that MH Equity Investors has acquired Entertainment Publications Inc., a provider of discounts and promotions, from IAC. The anticipated value of the sale and accompanying tax benefit to IAC is approximately $135 million. Additional terms of the transaction were not disclosed. "The sale of EPI to MH Equity Investors better positions EPI to compete and allows IAC to strengthen its core focus on our interactive brands," said Barry Diller, Chairman and CEO of IAC. EPI provides promotions and discounts, best known for the popular Entertainment(R) book membership, and its savings site, Entertainment.com. Under the new ownership structure, EPI's strategic direction and management team will remain in place with MaryAnn Rivers continuing in her role as Chief Executive Officer. "We are excited to complete the acquisition of Entertainment Publications as it reflects our commitment to invest in companies with a solid vision, strong brands and talented management teams," said Stephen C. Hilbert, CEO of MH Equity Investors. "We welcome Entertainment's 800 plus employees to the MH Equity family of companies." "The MH Equity team has a proven track-record driving growth and innovation for its portfolio companies," said Rivers. "We look forward to building our leading market positions in 'best in class' discounts and promotions to consumers; providing fundraising solutions for charitable organizations; and increasing revenues for our many business partners." Evercore Group LLC served as financial adviser to IAC. The transaction closed on May 30, 2008. About MH Equity Investors MH Equity Investors, a large private equity fund based in Indianapolis, was formed in August 2005 and since its inception has invested a pproximately $600 million in the equity of its portfolio companies. MH Equity Investors focuses on mid-market companies, with strong management teams and leading market shares. The MH Equity team has substantial operating experience and joins with management to promote the organic and acquisition- orientated growth of its portfolio companies. About Entertainment Publications Entertainment Publications Inc. provides discounts and promotions. EPI helps people improve their quality of life by providing them with billions of dollars in discounts every year. EPI's best-in-class offers can be found in the Entertainment(R) membership book, on Entertainment.com, through its business partner's private label savings programs, and via various local search partner Web sites. Annually, EPI generates over $7 billion in revenue for its 60,000 local and national business partners representing 200,000 merchant locations throughout North America. Over the last five years, the company helped raise over $450 million for the charities it serves. The company's other fundraising product lines including Sally Foster(R) gift wrap and gift products and cookie dough. About IAC IAC/InterActiveCorp (Nasdaq: IACI) -- http://iac.com/-- operates a portfolio of specialized and global brands in the sectors: Retailing, which includes the United States and International segments; Services, which includes the Ticketing, Lending, Real Estate, Teleservices and Home Services reporting segments; Media & Advertising, and Membership & Subscriptions, which includes the Vacations, Personals and Discounts reporting segments. * * * As reported in the Troubled Company Reporter on Feb. 1, 2008, Standard & Poor's Rating Services said its ratings on IAC/InterActiveCorp, including the 'BB' corporate credit rating, remain on CreditWatch with negative implications, where they were initially placed on Nov. 5, 2007, following IAC's announcement that it plans to divide itself into five publicly traded companies. JAYHAWK ENERGY: Posts $210,897 Net Loss in Quarter Ended March 31 ----------------------------------------------------------------- JayHawk Energy Inc. reported a net loss of $210,897, on revenue of $258,557, in the second quarter ended March 31, 2008, compared with a net loss of $44,790, on zero revenue, in the same period ended March 31, 2007. In April 2007, the company discontinued the operations related to its jewelry business. On July 25, 2007, the company entered into an Asset Purchase and Sale Agreement with Armstrong Investments Incorporated, pursuant to which the comany acquired the Uniontown Project, which includes gas and mineral leases and other mineral rights and interests located in Bourbon County, Kansas in exchange for $2,200,000 in cash. The acquisition of the Uniontown Project is the initial step of the company's new business plan to acquire oil and gas properties for exploration and development. Over the next twelve months, the company intends to engage in the exploration, acquisition, development, production and sale of natural gas, crude oil and natural gas liquids primarily from conventional reservoirs within North America. Balance Sheet At March 31, 2008, the company's consolidated balance sheet showed in $9,748,306 in total assets, $61,630 in total liabilities, and $9,686,676 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?2d53 Going Concern Doubt JayHawk Energy Inc. has incurred operating losses since inception and previously incurred a loss on its discontinued retail jewelry business. As of March 31, 2008, the company has limited financial resources. These factors raise substantial doubt about the company's ability to continue as a going concern. About JayHawk Energy Based in Broomfield, Colorado, JayHawk Energy Inc. (OTC BB: JYHW) -- http://www.jayhawkenergy.com/-- is engaged in the exploration, acquisition, development, production, and sale of natural gas, crude oil, and natural gas liquids primarily from conventional reservoirs in North America. It owns interest in the Uniontown project covering 35,000 gross acres of non-producing coal bed methane natural gas reserves located in Bourbon County, Kansas. The company was founded in 2004 as Bella Trading Company Inc. and changed its name to JayHawk Energy Inc. in June 2007. JED OIL: March 31 Balance Sheet Upside-Down by $14.4 Million ------------------------------------------------------------ JED Oil Inc.'s consolidated balance sheet at March 31, 2008, showed $90.5 million in total assets, $76.4 million in total liabilities, and $28.5 million in convertible redeemable preferred shares, resulting in a $14.4 million total stockholders' deficit. At March 31, 2008, the company's consolidated balance sheet also showed strained liquidity with $15.2 million in total current assets available to pay $72.0 million in total current liabilities. The company reported a $927,800 net loss, on $7.2 million of revenue, after royalties, in the first quarter ended March 31, 2008, compared with a $3.5 million, on $2.8 million of revenue, after royalties, in the same period in 2007. Included in the net loss during the three months ended March 31, 2008, was a gain on sale of $2.3 million from the sale of the company's petroleum and natural gas properties in the Candak Prospect area of North Dakota, U.S.A., to an arms-length third party. The company's production for the first quarter of 2008 averaged 1,537 barrels of oil equivalent per day (BOE/d), compared to 914 BOE/d in the first quarter of 2007. Exit production for the quarter was 1,472 BOE/d compared to 1,150 BOE/d in the same period in 2007. The increase in production is due mainly to the acquisition of Caribou's Northern Alberta properties. Going Concern Doubt At March 31, 2008, the company had a consolidated working capital deficiency of $56.8 million and a stockholder's deficiency of $14.4 million. The company requires additional funds to maintain operations and discharge liabilities as they become due. These conditions raise substantial doubt about the company's ability to continue as a going concern. The company does not currently have a loan facility. About JED Oil Inc. Headquartered in Didsbury, Alberta, JED Oil Inc. (AMEX: JDO) -- http://www.jedoil.com/ -- is an oil and natural gas company that commenced operations in the second quarter of 2004 and has begun to develop and operate oil and natural gas properties principally in western Canada and the United States. JEFFERSON COUNTY: $47MM Debt Payment Deadline Extended to Aug. 1 ---------------------------------------------------------------- Birmingham News reports that the Jefferson County Commission has unanimously approved an agreement to extend to Aug. 1 a $47 million sewer debt payment due to eight banks. After several extensions, the county was scheduled to pay $47 million of its sewer debt on June 1 and another payment of $53 million due on July 1. Under the new agreement, the county will pay $10.6 million toward the principal owed to banks including Regions Bank and Bank of America Corp. The county's bond insurers would also pay $10.6 million of the debt. "The county continues to pay interest but this is the first payment toward principal," said Patrick Darby, a lawyer with Bradley Arant Rose and White, which represents the county. Melinda Dickinson of Reuters reports that Mr. Darby clarified the total figure as $21.25 million divided into two lumps of $10.6 million each after earlier giving totals as $11 million to be paid by both the county and insurers. Jefferson County has $4.6 billion in overall debt, including $3.2 billion in sewer bonds. The county was required to post a collateral on interest-rate swaps tied to the bonds after a series of downgrades on the debt. Two of the firms that guarantee to make the payments on Jefferson County's sewer bonds in the event of default were FGIC Corp. and XL Capital Assurance Inc. FGIC insured $1.56 billion of Jefferson County auction-rate securities, and XL Capital backed $397 million of the bonds. Jefferson County attorneys and the bond insurers are in negotiations to reset the county's debt structure. Without restructuring, annual payments could soar to $250 million, Reuters reports. About Jefferson County Jefferson County has its seat in Birmingham. It has a population of 660,000. It ended its 2006 fiscal year with a $42.6 million general fund balance, according to Standard & Poor's. Patrick Darby, a lawyer with the Birmingham firm of Bradley Arant Rose & White, represents Jefferson County. Porter, White & Co. in Birmingham is the county's financial adviser. A bankruptcy by Jefferson County stands to be the largest municipal bankruptcy in U.S. history. * * * As reported by the TCR on March 28, 2008, Moody's Investors Service downgraded to Caa3 from B3 the rating on the $3.2 billion outstanding sewer revenue warrants. Moody's said the county has not presented a concrete plan that would prevent a default on its sewer obligations. The county has publicly proposed using excess funds generated by a countywide 1% sales and use tax, currently securing the outstanding school warrants. The tax generated an additional $27 million in fiscal 2007 over the school warrant debt service; the initial intention was to use the excess for early redemption of debt. This proposal would require state legislation and it is unclear that the additional funds would provide enough revenue to cover the county's sewer obligations. As reported by the TCR on April 2, 2008, Standard & Poor's Ratings Services lowered its underlying rating on Jefferson County's series 2003 B-2 through 2003 B-7 sewer revenue refunding warrants to 'D' from 'CCC' due to the sewer system's failure to make a principal payment on the warrants when due on April 1, 2008, in accordance with the terms of the standby warrant purchase agreement. As reported by the TCR on April 10, 2008, Moody's Investors Service downgraded the rating on $800,000 of outstanding Jefferson County Assisted Housing Corporation, First Mortgage Refunding Housing Revenue Bonds (Spring Gardens Project) Series 1999 to Ba2 from Baa1. The outlook has been revised to negative from stable. The downgrade is based on a significant decline in debt service coverage, resulting from an increase in property expenses and a lack of rental rate increases. JOHN REYNEN: Owes $973,000,000 in Personally Guaranteed Loans ------------------------------------------------------------- John Reynen, co-owner of Reynen & Bardis Communities, Inc., owes $973,000,000 in various personally guaranteed loans taken out during the housing boom, the Sacramento Business Journal reported, citing court documents. Reynen & Bardis spokesperson Michele McCormick told Builder Online Mr. Reynan filed a personal chapter 11 petition in April to spare the company. Ms. McCormick disclosed to Builder that the company has renegotiated and restructured about $200,000,000 in loans to the business, and has a number of other restructuring processes with lenders in the documentation phase right now. "There's no question about it, but at this point, the outlook is significantly brighter than it was several months ago," Builder quotes Ms. McCormick as saying. "The financial restructuring and the votes of confidence from a number of lenders paint a far more positive picture." Builder reports that Reynen & Bardis has reduced its workforce between 40% and 45% -- which is currently down to roughly 80 full- time employees. Ms. McCormick told Builder that Mr. Reynan's bankruptcy filing allowed the company to reopen a number of subdivisions and try to sell its homes. According to Builder, the company is only operating the subdivisions for which it has reached agreements with its creditors, and is not building in many of its communities. Reynen & Bardis Communities Inc. -- http://www.rbcommunities.com/ -- has more than 35 years of experience in land planning and homebuilding process relating to community amenities and home design. It employs about 180 workers. The company controls about 23,500 home lots on 9,215 acres of real property in Sacramento. The partners of the company are John D. Reynen, an attorney and developer, and Christo Bardis, a real estate broker. Messrs. Reynen and Bardis co-founded the company in 1969. John D. Reynen filed for chapter 11 bankruptcy on April 23, 2008, before the U.S. Bankruptcy Court for the Eastern District of California in Sacramento (Case No. 08-25145). Howard S. Nevins, Esq., at Hefner, Stark & Marols, LLP, in Sacramento. When he filed for bankruptcy, he disclosed $50,000,001 to $100,000,000 in estimated assets, and $500,000,001 to $1,000,000,000 in estimated debts. KENT FUNDING: Moody's to Review Notes Rating for Possible Cut ------------------------------------------------------------- Moody's Investors Service announced that it has downgraded and left on review for possible further downgrade the ratings on these notes issued by Kent Funding II, Ltd.: Class Description: $1,100,000,000 Class A-1A Senior Secured Floating Rate Notes Due 2046 -- Prior Rating: Aaa -- Current Rating: Baa1, on review for possible downgrade Class Description: $63,000,000 Class A-2 Senior Secured Floating Rate Notes Due 2046 -- Prior Rating: Aa3, on review for possible downgrade -- Current Rating: Caa3, on review for possible downgrade Additionally, Moody's downgraded these notes: Class Description: $51,700,000 Class B Senior Secured Floating Rate Notes Due 2046 -- Prior Rating: A2, on review for possible downgrade -- Current Rating: Ca Class Description: $16,700,000 Class C Secured Floating Rate Deferrable Notes Due 2046 -- Prior Rating: Baa3, on review for possible downgrade -- Current Rating: C Class Description: $8,250,000 Class D Floating Rate Deferrable Notes Due 2046 -- Prior Rating: Ba3, on review for possible downgrade -- Current Rating: C Class Description: $3,100,000 Class E Floating Rate Deferrable Notes Due 2046 -- Prior Rating: Caa1, on review for possible downgrade -- Current Rating: C According to Moody's, the rating actions are the result of deterioration in the credit quality of the transaction's underlying collateral pool, which consists primarily of structured finance securities. KNESEBECK LLC: Case Summary & 11 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: Knesebeck LLC 249 N. Rocky River Drive Berea, OH 44017 Bankruptcy Case No.: 08-13767 Type of Business: The debtor operates a franchised pizza shop. Chapter 11 Petition Date: May 19, 2008 Court: Northern District of Ohio (Cleveland) Judge: Hon. Arthur I. Harris Debtor's Counsel: Kenneth A Blech (kenblech@ameritech.net) 10850 Pearl Rd #D3 Strongsville, OH 44136-3305 Telephone (440) 238-7887 Fax (440)238-9532 Estimated Assets: $100,001 to $500,000 Estimated Debts: $100,001 to $500,000 A copy of Debtor's petition and its list of 11 unsecured creditors is available for free at http://bankrupt.com/misc/ohnb08-13767.pdf LAKE MATHEWS: Case Summary & Nine Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Lake Mathews Venture, LLC 362.44 Undeveloped Acres Arlington Heights Riverside, CA 92504 Tel: (949) 715-9993 Bankruptcy Case No.: 08-16554 Chapter 11 Petition Date: June 3, 2008 Court: Central District Of California (Riverside) Judge: Peter Carroll Debtor's Counsel: Franklin C. Adams, Esq. Email: franklin.adams@bbklaw.com Best Best & Krieger, LLP 3750 University Ave. 4th Fl. Riverside, CA 92501 Tel: (951) 686-1450 Fax: (951) 686-3083 http://www.bbklaw.com/ Total Assets: $27,444,307 Total Debts: $12,379,881 Debtor's Nine Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Hunsaker & Associates trade debt $149,851 Attn: Paul Huddleston 3 Hughes Irvine, CA 92618 Tel: (951) 509-7031 Blaine A. Womer trade debt $19,815 Civil Engineer 41555 E. Florida Ave. Hemet, CA 92544 Van Dyke Landscape Architects trade debt $15,978 2970 Fifth Ave., Ste. 240 San Diego, CA 92103 Leighton & Associates, Inc. trade debt $5,269 ACDY Corp. trade debt $1,785 Development Planning & trade debt $723 Financing Urban Crossroads, Inc. trade debt $508 Gresham, Savage, Nolan & trade debt $490 Tilden PCR Services Corp. trade debt $144 LAUNCH COAST: Case Summary & 20 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: Launch Coast Services, Inc. 8505 Baltimore Avenue College Park, MD 20740 Bankruptcy Case No.: 08-16880 Type of Business: The debtor operates a full service building and grounds maintenance and management business. Chapter 11 Petition Date: May 20, 2008 Court: District of Maryland (Greenbelt) Judge: Hon. Wendelin I. Lipp Debtor's Counsel: Alan S. Kerxton, Esq. (akerxton@steinsperling.com) 25 W. Middle Ln. Rockville, MD 20850 Telephone (301) 838-3213 Estimated Assets: $100,001 to $500,000 Estimated Debts: $1,000,001 to $10 million A copy of the debtor's list of 20 largest unsecured creditors is available for free at http://bankrupt.com/misc/mdb.pdf LEGACY CAPITAL: Seeks Bankruptcy Protection in Sherman, Texas ------------------------------------------------------------- Dallas-based real estate developer Legacy Capital Investments LLC and two other affiliates -- KG Legacy Premier and LMI LBL -- filed for chapter 11 bankruptcy protection before the U.S. Bankruptcy Court for the Eastern District of Texas in Sherman. The bankruptcy filing followed a similar filing by the company's manager, Kenneth Marston Good, who sought Chapter 11 protection on April 15. Mr. Good listed assets of $209.3 million and debt of $144.3 million, Bloomberg News says. KG Legacy Ozarks, owned by Legacy Capital, sought chapter 11 protection on May 5, according to Bloomberg. LEGACY CAPITAL: Case Summary & 42 Largest Unsecured Creditors ------------------------------------------------------------- Lead Debtor: Legacy Capital Investments, LLC 12720 Hillcrest Rd., Ste. 720 Dallas, TX 75230 Bankruptcy Case No.: 08-41449 Debtor-affiliates filing separate Chapter 11 petitions: Entity Case No. ------ -------- LMI LBL, LLC 08-41452 KG Legacy Premier, LLC 08-41453 Debtor-affiliates filing separate Chapter 11 petitions May 5, 2008: Entity Case No. ------ -------- KG Legacy Ozarks, LLC 08-41177 Debtor-affiliates filing separate Chapter 11 petitions April 15, 2008: Entity Case No. ------ -------- Kenneth Marston Good 08-40955 Type of Business: The Debtors are real estate developers. Chapter 11 Petition Date: June 3, 2008 Court: Eastern District of Texas (Sherman) Debtors' Counsel: Frank J. Wright, Esq. Email: bankruptcy@wgblawfirm.com Wright Ginsberg Brusilow P.C. 600 Signature Place 14755 Preston Rd. Dallas, TX 75254 Tel: (972) 788-1600 http://www.wgblawfirm.com Legacy Capital Investments, LLC's Financial Condition: Total Assets: $63,000,000 Total Debts: $55,088,217 A. Legacy Capital Investments, LLC's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ JNC Enterprises $100,000 Attn: John Lau 2050 N. Plano Rd., Ste. 100 Richardson, TX 75082 Tel: (972) 231-9791 Fax: (972) 690-0479 Wallace E. Good $70,000 P.O. Box 262247 San Diego, CA 92196 Tel: (619) 252-3140 Fax: (858) 566-3140 Silveron Association property management $65,752 Attn: Steve Hunt Paragon Property Management, Inc. P.O. Box 1471 Frisco, TX 75034 Grassland Mowing & Commercial mowing $46,756 Farming Overland Partners, Inc. $45,608 Kenneth M. Good employee $40,000 Reflection Fine Art art work $37,752 Greg Williams employee $16,266 George McElroy & Associates $13,800 MESA Design Associates, Inc. design services $13,630 Jacklyn Perry employee $7,870 Dowdey, Anderson & Associates, $3,255 Inc. Twist Solutions computer services $2,382 Jones & Ridenour, Inc. $2,300 Riemer Insurance Group, Inc. insurance $1,967 Buddy Martin Erosion Control, $1,830 LP Centric Voice $1,063 Matthews & Freeland, LLC attorney fees $1,057 Standerfer Farms $900 Email Cleaners, Inc. $360 B. Kenneth Marston Good's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Graham Mortgage Corp. Guaranty $30,422,776 Attn: Joe Graham & Grant Morrow 3838 Oak Lawn, Suite 1500 Dallas, TX 75219 Tel: (214) 522-6400 Fax: (214) 522-6103 First National Bank Guaranty $23,683,212 Attn: David Wood 2045 Forest Lane, Suite 150 Garl&, TX 75042 Tel: (972) 485-7053 Fax: (972) 485-7089 Century Bank, N.A. Guaranty $15,408,411 Attn: Michael Becker 5151 Beltline Road, Suite 200 Dallas, TX 75254 Fax: (972) 588-6400 Tel: (972) 588-6430 Charter FL, L.P. Guaranty $12,934,261 Attn: Ray Washburne & Phil Scheble 1845 Woodall Rogers Freeway, Suite 1700 Dallas, TX 75201 Tel: (214) 999-1010 Fax: (214) 999-0130 PNL Parkway, L.P. Guaranty $12,350,000 Attn: John Willlingham & Jerod Miller 2100 Ross Avenue, Suite 2900 Dallas, TX 7520112 Tel: (214) 379-2226 Fax: (214) 379-9003 Hilliard Crews Note $9,219,716 10001 Holmes Road Collierville, TN Tel: (901) 202-6304 Fax: (901) 854-4014 RMR Investments, Inc. Guaranty $7,760,000 Attn: Ronald Hsueh 212 S. Palm Avenue, Suite 200 Alhambra, CA 91901 Fax: (626) 282-6588 Tel: (626) 282-0900 Southwest Securities, FSB Guaranty $6,232,507 Attn: Brent Taylor 1201 Elm St., Suite 101 Dallas, TX 75270 Tel: (214) 859-5204 Fax: (214) 859-5220 PNL Josey, L.P. Guaranty $5,500,000 Attn: John Willingham & Jerod Miller 2100 Ross Avenue, Suite 2900 Dallas, TX 75201 Fax: (214) 379-9003 Tel: (214) 379-2226 Wildcard Family Trust Ltd. Note $3,650,000 Attn: Ron Crosby 5500 W. Plano Pkwy., Suite 200 Plano, TX 75093 Tel: (972) 380-5500 Fax: (972) 380-9570 Gregg Schnurr Note $3,000,000 P.O. Box 341239 Austin, TX 78734 Fax: (512) 299-9242 Tel: (512) 299-9550 Ray Baldwin Note $2,800,000 107 W. Lufkin Avenue, Suite 318 Lufkin, TX 75902 Tel: (936) 639-2201 Fax: (936) 634-8677 El& Energy, Inc. Guaranty $2,530,000 Attn: Terry Landry 13455 Noel Road Suite 2000 Dallas, TX 75240 Tel: (214) 265-9174 Fax: (214) 265-7008 First Community Bank Guaranty $1,860,000 Attn: Gordon Roberts 17120 North Dallas Parkway, Suite 101 Dallas, TX 75248 Tel: (972) 407-5404 Fax: (469) 828-4642 Roach, et al. Guaranty $1,814,791 Attn: Paul Sewell 1755 Wittington Place, Suite 300 Dallas, TX 75234 Tel: (972) 484-7780 Fax: (972) 484-7743 Doug Urquhart, Trustee Loan $600,000 5964 Meletio Lane Dallas, TX 75230 Tel: (214) 435-4555 Fax: (972) 774-0559 Wallace E. Good Loan $200,000 Curtis Hawley Loan $150,000 JNC Enterprises Loan $100,000 Century Bank Cardmember Credit Card $21,587 C. KG Legacy Ozarks, LLC did not file a list of its largest unsecured creditors. D. LMI LBL, LLC's Largest Unsecured Creditor: Entity Nature of Claim Claim Amount ------ --------------- ------------ George McElroy & Associates $1,000 Attn: David Pauling 1349 Empire Central, Ste. 600 Dallas, TX 75247 Tel: (214) 905-3712 Fax: (214) 905-3777 E. KG Legacy Premier, LLC's Largest Unsecured Creditor: Entity Nature of Claim Claim Amount ------ --------------- ------------ George McElroy & Associates $2,000 Attn: David Pauling 1349 Empire Central, Ste. 600 Dallas, TX 75247 Tel: (214) 905-3712 Fax: (214) 905-3777 LEGACY COMMS: March 31 Balance Sheet Upside-Down by $3,565,115 -------------------------------------------------------------- Legacy Communications Corp.'s consolidated balance sheet at March 31, 2008, showed in $1,268,647 in total assets and $4,833,762 in total liabilities, resulting in a $3,565,115 total stockholders' deficit. The company reported a net loss of $212,985 for the first quarter ended March 31, 2008, compared with net income of $996,941 in the same period in 2007. The company did not generate any revenues from continuing operations in both periods, as the company has reflected all present operations of the company as discontinued operations, as explained below. Total revenue from discontinued operations for the three months ended March 31, 2008, decreased to $3,500 compared to $1,886,934 for the three months ended March 31, 2007. There were no sales of radio stations or permits during the first three months of fiscal 2008 and revenue for discontinued operations consisted of broadcast revenue received from stations held for sale by the company. Total revenue from discontinued operations for the first three months of fiscal 2007 consisted primarily of the gain on the sale of AM radio station KBET(AM), Winchester, Nevada, which generated $1,886,349 in revenue. Subsequent Events On April 28, 2008, the company signed a letter of intent with Three Irons, LLC. Subject to various conditions, the letter of intent provides for the issuance by the company of 185,000 shares of preferred stock for $185,000 and the exchange of approximately 13,400,000 shares of common stock held by the officers of the company for all of the issued shares of Legacy Media Corporation. If and when all shares of preferred stock are issued, the preferred stock would be convertible into an aggregate of 37,000,000 shares of the company's common stock and would result in a change in control of the company. As a result, the company has reflected all present operations of the company as discontinued operations. 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?2d43 Going Concern Doubt If the transaction with Three Irons, LLC closes as contemplated, the company believes it will be able to continue operations until it is able to arrange for the sale of some or all of its assets in an orderly manner. Any delay in closing this transaction will adversely affect the company's ability to continue as a going concern. The company added that revenues have not been sufficient to cover its operating costs and to allow it to continue as a going concern. About Legacy Communications Headquartered in St. George, Utah, Legacy Communications Corp. (OTC BB: LGCC) -- http://www.legacycomm.com/-- is a holding company that acquires radio station licenses and permits for development, operation and sale. The company seeks out broadcast properties that have significant upside potential when provided proper management, engineering, programming and marketing. LE-NATURE'S INC: Amended Plan Confirmation Hearing Set on June 12 ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Western District of Pennsylvania will convene a hearing on June 12, 2008, at 1:30 p.m. to consider confirmation of Le-Nature's Inc. and its debtor-affiliates' Second Amended Joint Chapter 11 Plan of Liquidation. The hearing will be before the Hon. M. Bruce McCullough at 54th Floor, Courtroom B, US Steel Tower, in Pittsburgh, Pennsylvania. The deadline for submitting ballots and filing objections to the confirmation of the Plan was June 2, 2008. About Le-Nature's Inc. Headquartered in Latrobe, Pennsylvania, Le-Nature's Inc. -- http://www.le-natures.com/-- makes bottled waters, teas, juices and nutritional drinks. Its brands include Kettle Brewed Ice Teas, Dazzler fruit juice drinks and lemonade, and AquaAde vitamin-enriched water. Four unsecured creditors of Le-Nature's filed an involuntary chapter 7 petition against the company on Nov. 1, 2006 (Bankr. W.D. Pa. Case No. 06-25454). On Nov. 6, 2006, two of Le-Nature's subsidiaries, Le-Nature's Holdings Inc., and Tea Systems International Inc., filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code. Judge McCullough converted Le Nature's Inc.'s case to a chapter 11 proceeding. The Debtors' cases are jointly administered. The Debtors' schedules filed with the Court showed $40 million in total assets and $450 million in total liabilities. Douglas Anthony Campbell, Esq., Ronald B. Roteman, Esq., and Stanley Edward Levine, Esq., at Campbell & Levine, LLC, represents the Debtors in their restructuring efforts. The Court appointed R. Todd Neilson as Chapter 11 Trustee. Dean Z. Ziehl, Esq., Richard M. Pachulski, Esq., Stan Goldich, Esq., Ilan D. Scharf, Esq., and Debra Grassgreen, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub LLP, represent the Chapter 11 Trustee. David K. Rudov, Esq., at Rudov & Stein, and S. Jason Teele, Esq., and Thomas A. Pitta, Esq. at Lowenstein Sandler PC, represent the Official Committee of Unsecured Creditors. Edward S. Weisfelner, Esq., Robert J. Stark, Esq., and Andrew Dash, Esq., at Brown Rudnick Berlack Israels LLP, and James G. McLean, Esq., at Manion McDonough & Lucas represent the Ad Hoc Committee of Secured Lenders. Thomas Moers Mayer, Esq., and Matthew J. Williams, Esq. at Kramer Levin Naftalis & Frankel LLP, represent the Ad Hoc Committee of Senior Subordinated Noteholders. LENNOX INT'L: $300MM Repurchase Program Won't Affect S&P's Rating ----------------------------------------------------------------- Standard & Poor's Ratings Services said that its ratings and outlook on Lennox International Inc. (BB+/Stable/--) remain unchanged following the company's announcement of a new $300 million share repurchase program. This program will commence immediately as Lennox recently completed the repurchase of 14 million shares under its $500 million repurchase program established in July 2007, which was completed ahead of the previously announced target date of the end of September 2008. Despite the incremental share repurchase program, S&P expect Lennox to maintain relatively conservative financial policies, with debt to EBITDA of 1.6x, funds from operations to debt of 51%, and free cash flow of more than $150 million. The company also had $155 million in cash at March 31, 2008. LINENS N THINGS: Court Approves $700 Million DIP Financing ---------------------------------------------------------- The United States Bankruptcy Court for the District of Delaware approved the $700 million Debtor-in-Possession financing by General Electric Capital Corp. for Linens 'n Things and its debtor-affiliates. The approval of the DIP facility ensures that the Debtors' business and stores will continue to operate without interruption. Additionally, it allows for normalized relations with vendors in preparation for the busy back-to-school season. "We are pleased with the Court's approval of our financing as it is an important step in our restructuring efforts,"said Michael Gries, Chief Restructuring Officer and Interim CEO. "It reinforces our commitment to the vendor community and to providing our guests with the assortment of merchandise and quality of service they have come to expect from Linens 'n Things." The Debtors filed to reorganize under Chapter 11 on May 2 in the United States Bankruptcy Court for the District of Delaware. Interim approval of the DIP financing was granted on the same day. As of the close of business on May 29, 2008, the Debtors had excess availability of $140.7 million under the DIP facility. This amount reflects an increase of $44.1 million over the excess availability projected by them for the end of May in the DIP financing budget referred to in the order granting the interim approval of the DIP financing. The Debtors also announced that approximately 83% of the dollar amount of all product orders from domestic vendors for May and June delivery have been or are being shipped on terms. Clifton, New Jersey-based Linens Holding Co., which does business through its operating subsidiary Linens 'N Things Inc.-- http://www.lnt.com/-- is the second largest specialty retailer of home textiles, housewares and home accessories in North America operating 589 stores in 47 U.S. states and seven Canadian provinces as of December 29, 2007. The company is a destination retailer, offering one of the broadest and deepest selections of high quality brand-name well as private label home furnishings merchandise in the industry. Linens 'N Things and 11 affiliates filed separate voluntary petitions under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware on May 2, 2008 (Lead Case No. 08-10832). The Canadian operations are not included in the filings. Linens 'N Things has secured a $700 million debtor-in-possession financing from General Electric Capital Corp. The company plans to be out of chapter 11 by the end of the year, on this timetable: 09/14/2008 DIP Facility Deadline for Filing a Chapter 11 Plan 10/14/2008 DIP Facility Deadline for Disclosure Statement Approval 11/18/2008 DIP Facility Deadline for Soliciting Votes on Plan 11/28/2008 DIP Facility Deadline for Entry of a Confirmation Order Linens 'N Things is represented by Richards, Layton & Finger, P.A., and Morgan, Lewis & Bockius LLP. Conway, Del Genio, Gries & Co., LLC will serve as the retailer's restructuring advisor until substantial consummation of a chapter 11 plan. Conway Del Genio's Michael F. Gries acts as the Debtors' chief restructuring officer and interim CEO. Kurtzman Carson Consultants LLC acts as the Debtors' claims agent. A Noteholder Committee has been formed and is represented by Kasowitz, Benson, Torres & Friedman LLP, and Pachulski Stang Ziehl & Jones. (Linens 'n Things Bankruptcy News, Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) LIZ CLAIBORNE: Weak Credit Measures Cue S&P to Lower Ratings ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its long-term corporate credit and unsecured debt ratings on Liz Claiborne Inc. to 'BB+' from 'BBB'. At the same time, Standard & Poor's lowered its short-term corporate credit and commercial paper ratings on the company to 'B-2' from 'A-3', and removed all ratings from CreditWatch, where they were placed with negative implications on May 14, 2008, following weak first quarter results for the period ended April 5, 2008. In addition, Standard & Poor's assigned a '3' recovery rating to Liz Claiborne's $750 million senior unsecured revolving credit facility, indicating the expectation for meaningful (50%-70%) recovery in the event of a payment default. Also, Standard & Poor's assigned a '4' recovery rating to the company's EUR350 million 5% notes due 2013, indicating the expectation of average (30%-50%) in the event of a payment default. The outlook is stable. The New York City-based apparel company had about $989 million in debt outstanding at April 5, 2008. "The downgrade reflects the company's much weaker-than-expected credit measures for the 12 months ended April 5, 2008," said Standard & Poor's credit analyst Susan Ding. "In particular, leverage has increased significantly in recent periods, to as high as 4.5x at April 5, 2008, from historical levels of 2x or below." Liz Claiborne's substantially higher leverage is a result of both higher debt to finance a $300 million share repurchase completed in 2007, and a lower EBITDA base due to higher markdowns and investments in the company's key brands. However, leverage should trend to below 4x by fiscal year-end 2008. Other factors driving the downgrade include execution risk associated with the company's relatively new business model that now focuses on four key brands (Juicy Couture, Lucky Brands, MEXX and Kate Spade), and the difficult retail environment. Standard & Poor's ratings reflect Liz Claiborne's exposure to the inherent cyclicality and fashion risk of the apparel industry and the challenging retail environment, as well as its high debt leverage. These factors are partially offset by the company's diversified portfolio of well-recognized brands across various price points and distribution channels. LUBBOCK MEDICAL: Counsel Says Offer for Assets Seen This Week ------------------------------------------------------------- The Lubbock Avalanche-Journal reports that Shiloh Health Services Inc. in Louisville, Ky., the owner of Highland Community Hospital in Lubbock, Texas, may sell the business. Max Ralph Tarbox, Esq., the healthcare facility's counsel, said an offer for the hospital by another medical group with possible local participation could come later this week, the report says. "It's a reorganization, but not in the typical sense," Mr. Tarbox said, alluding to a possible offer for the hospital, Chris Van Wagenen at Lubbock Avalanche-Journal says. Shiloh is a hospital management company formed in 2005. It serves as the general partner for Highland, according to Lubbock Avalanche-Journal. Shiloh bought the 123-bed facility as its base of operations in March 2006 from Community Health Systems, which had operated the property for 20 years, the report adds. Lubbock, Texas-Highland Medical Center, L.P., doing business as Highland Community Hospital and Highland Medical Center -- http://www.highlandcommunityhospital.com-- provides general medical and surgical care for inpatient, outpatient, and emergency room patients, and participates in the Medicare and Medicaid programs. Highland employs about 100 workers. The Debtor filed for chapter 11 bankruptcy protection on May 31, 2008, before the U.S. Bankruptcy Court for the Northern District of Texas (Case No. 08-50202). Max Ralph Tarbox, Esq., at McWhorter, Cobb & Johnson, LLP, in Lubbock, Texas, represents the Debtor. When it filed for bankruptcy, the Debtor disclosed $10 million to $50 million in estimated assets and debts. LUMINENT MORTGAGE: March 31 Balance Sheet Upside-Down by $223.2 MM ------------------------------------------------------------------ Luminent Mortgage Capital Inc.'s consolidated balance sheet at March 31, 2008, showed $3.8 billion in total assets, $4.0 billion in total liabilities, and $148,000 in minority interest, resulting in a $223.2 million total stockholders' deficit. The company reported net income of $128.2 million for the first quarter ended March 31, 2008, compared with net income of $14.4 million in the same period in 2007. Net income for the three months ended March 31, 2008, was mainly comprised of $7.8 million of net interest income and $135.2 million of net gains on instruments carried at fair value mainly due to the decrease in the fair value of borrowings. Net income for the three months ended March 31, 2007, included $30.4 million of net interest income and gains on instruments carried at fair value of $15.3 million offset by losses on the sales of mortgage backed securities of $15.5 million. Interest income decreased $68.8 million, or 47.3%, to $76.8 million from $145.6 million for the three months ended March 31, 2008 and 2007, respectively. The average balance of the company's interest earning investment portfolio decreased $4.3 billion, or 49.4%, to $4.4 billion from $8.7 billion. Interest expense decreased $46.2 million, or $40.1%, to $69.0 million from $115.2 million for the three months ended March 31, 2008 and 2007, respectively. Average borrowings decreased $3.5 billion, or 41.2%, to $4.8 billion from $8.3 billion. During the three months ended March 31, 2007, realized losses on the sale of mortgage-backed securities and other-than-temporary impairment losses were partially offset by realized and unrealized gains on derivative instruments that were structured to economically hedge credit risk. Shift of Financing From Short-Term to Long-Term Beginning in August 2007, the company has entered into a number of financing transactions with Arco Capital Corporation Ltd., or Arco, and issued a warrant to Arco enabling it to acquire a 51% economic interest in the company. Currently, the company is continuing to shift financing from short-term arrangements that are subject to margin calls to long-term financing and financing provided by related parties. As of March 31, 2008, the company had $182.3 million of short-term financing remaining with non- related parties. Conversion to a Publicly-Trade Partnership On March 28, 2008, the company announced its intention, subject to shareholder approval, to restructure the company from a corporation qualified as a Real Estate Investment Trust (REIT) to a publicly-traded partnership, or PTP. The PTP structure will permit the company to offer fee-based services including credit- risk management services, asset management advisory services and sub-manager services without the restrictive asset and income rules to which companies qualified as a REIT must adhere. An additional advantage of this structure is the flexibility it would provide related to income distribution in that management would have more discretion to conserve capital or distribute capital to stockholders than is allowed under REIT requirements. In anticipation of the conversion to this structure, the company is actively marketing its services, including the formation of a joint venture to perform credit risk management services. The company believes that over time fee income will provide a more significant source of income for the company. 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?2d3c Going Concern Doubt As reported in the Troubled Company Reporter on April 8, 2008, Grant Thornton LLP, in Philadelphia, expressed substantial doubt about Luminent Mortgage Capital Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the year ended Dec. 31, 2007. Grant Thornton said Luminent Mortgage has lost $721.0 million for the year ended Dec. 31, 2007, which included $481.7 million in impairment losses on mortgage-backed securities. The company also recorded $21.3 million in corporate, state and U.S. federal income taxes due to its inability to meet the threshold for tax benefit recognition as it related to its qualification as a REIT. As a result of these losses the company had a stockholders' deficit of $223.2 million at March 31, 2008. About Luminent Mortgage San Francisco-based Luminent Mortgage Capital Inc. (OTC: LUMC) -- http://www.luminentcapital.com/-- is a Real Estate Investment trust, or REIT, which, together with its subsidiaries, has historically invested in two core mortgage investment strategies. Under its Residential Mortgage Credit strategy, the company invests in mortgage loans purchased from selected high-quality providers within certain established criteria as well as subordinated mortgage-backed securities and other asset-backed securities that have credit ratings below AAA. Under its Spread strategy, the company invests primarily in U.S. agency and other highly-rated single-family, adjustable-rate and hybrid adjustable-rate mortgage-backed securities. On March 28, 2008, the company announced its intention, subject to shareholder approval, to restructure the company from a REIT to a publicly-traded partnership, or PTP. MARILYN EPPERSON: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Marilyn I. Epperson dba Powerhouse Gym & Fitness Center dba Powerhouse Gym & Sports Complex dba Powerhouse Gym of Santa Clarita dba Powerhouse Gym of Canyon County 24640 Wiley Canyon Road Newhall, CA 91321 Bankruptcy Case No.: 08-13607 Chapter 11 Petition Date: May 30, 2008 Court: Central District of California (San Fernando Valley) Judge: Geraldine Mund Debtor's Counsel: Ron Bender 10250 Constellation Blvd Ste 1700 Los Angeles, CA 90067 Tel (310) 229-1234 Email rb@lnbrb.com Estimated Assets: $1,000,001 to $10 million Estimated Debts: $1,000,001 to $10 million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ VEDC $300,000 5121 Van Nuys Blvd. Van Nuys, CA 91403 Hamilton - SCAC $274,511 24152 Lyons Ave. Box 219 Newhall, CA 91321 Ron Casella $247,333 1131 N. Florence St. Burbank, CA 91505 National Fitness $105,776 Bank of America $45,000 Cananwill - Hartford $25,950 Chase Bank - AARP $24,000 American Express $23,051 Chase Bank $16,000 AFCO - WC & CC GL/Prop Ins. $13,869 HFC $11,174 Burbank Water & Power $7,903 McCalla Janitorial $4,264 Cananwill - Bur GL/Prop Ins. $3,773 Wildcat $2,871 Andrea Pugliese Ins. $2,300 Burrtec $1,859 AT&T $1,700 Gas Company $1,479 Comfort Control Corp. $1,369 MARMION INDUSTRIES: March 31 Balance Sheet Upside-Down by $952,418 ------------------------------------------------------------------ Marmion Industries Corp.'s consolidated balance sheet at March 31, 2008, showed $2,874,307 in total assets and $3,826,724 in total liabilities, resulting in a $952,418 total stockholders' deficit. At March 31, 2008, the company's consolidated balance sheet also showed strained liquidity with $2,324,263 in total current assets available to pay $3,338,784 in total current liabilities. The company reported a net loss of $75,895, on revenues of $1,882,167, for the first quarter ended March 31, 2008, compared with a net loss of $517,861, on revenues of $1,627,935, in the same period in 2007. 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?2d42 Going Concern Doubt Sherb & Co., LLP, in New York, expressed substantial doubt about Marmion Industries Corp.'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'srecurring losses from operations and working capital deficiency. About Marmion Industries Headquartered in Houston, Marmion Industries Corp. (OTC BB: MMIO)-- http://www.marmionind.com/-- manufactures and modifies heating, ventilation and air conditioning (HVAC) equipment for the petrochemical industry, specifically for hazardous location applications. The company also sells custom engineered systems for strategic industrial environments and providing commercial HVAC construction services. The explosion-proof market includes industries such as oil and gas exploration and production, chemical plants, granaries and fuel storage depots. MARVIN ROBERTSON: Voluntary Chapter 11 Case Summary --------------------------------------------------- Debtors: Marvin R. Robertson Jane C. Robertson Post Office Box 821 Waynesboro, GA 30830-0821 Bankruptcy Case No.: 08-11055 Chapter 11 Petition Date: June 2, 2008 Court: Southern District of Georgia (Augusta) Judge: Susan D. Barrett Debtors' Counsel: Jesse C. Stone, Esq. Merrill & Stone, LLC P.O. Box 129 Swainsboro, GA 30401 Tel: (478) 237-7029 Fax: (478) 237-9211 bkymail@merrillstonehamilton.com Total Assets: $3,619,038 Total Debts: $1,937,386 The Debtors did not file a list of their 20 largest unsecured creditors. MBIA INC: Credit Profile Concerns Cue Moody's Rating Review ----------------------------------------------------------- Moody's Investors Service has placed the Aaa insurance financial strength ratings of MBIA Insurance Corporation and its affiliated insurance operating companies on review for possible downgrade. In the same rating action, Moody's also placed the surplus note rating of MBIA Insurance Corporation (Aa2-rated) and the ratings of the holding company, MBIA, Inc. (senior debt at Aa3), on review for possible downgrade. The rating action reflects Moody's growing concern that MBIA's credit profile may no longer be consistent with current ratings given the company's diminished new business prospects and financial flexibility, coupled with the potential for higher expected and stress losses within the insurance portfolio. Moody's noted that the most likely outcome of the ratings review would be a downgrade, with MBIA's insurance financial strength rating likely to fall within the Aa range, although a downgrade to the single-A rating category is also possible. Prior to today's rating action, the rating outlook for MBIA was negative. As a result of this review, the Moody's-rated securities that are guaranteed or "wrapped" by MBIA are also placed under review for possible downgrade, except those with higher public underlying ratings. Moody's said that recent mortgage performance data, and MBIA's own reported first quarter results, are indicative of continued deterioration within the guarantor's insured portfolio. As part of its review, Moody's will evaluate the effect that mortgage- related stress, particularly with respect to MBIA's second lien mortgage and ABS CDO exposures, could have on the firm's risk- adjusted capital adequacy position. Moody's said that it will also review other areas of the portfolio that may be susceptible to economic slowdown. Moody's prior analysis from February of this year indicated that MBIA's capital position was above the minimum "Aaa" capital standard but short of the target ratio by approximately $2.8 billion (excluding the proceeds from the company's $1.1 billion 1Q08 equity raise that still remain at the holding company.) Moody's noted that MBIA continues to work on certain capital strengthening measures that are intended to enhance its capital profile, and that MBIA's management has indicated its intent to downstream $900 million in holding company equity proceeds to the insurance company. The rating agency added, however, that the significant decline in MBIA's stock price since February is making it increasingly challenging for MBIA to economically address capital shortfalls by raising new equity. According to Moody's, the review for downgrade is also prompted by concerns about MBIA's ability to reestablish market confidence in the near term, which is critical to the company's franchise value and financial flexibility going forward. MBIA's new business volume has been severely hampered by heightened uncertainty surrounding mortgage-related portfolio losses and the impact that such losses could have on the company's claims-paying ability. MBIA's financial flexibility has also suffered, as evidenced by the continuing decline in the company's market capitalization and widening CDS spreads. Together, these factors are placing meaningful pressure on the firm's Aaa insurance financial strength rating. During its review, Moody's will also evaluate potential changes to MBIA's business strategy, capital management philosophy and franchise value should the company be downgraded. Moody's expects to complete its review of MBIA in the next few weeks. These ratings have been placed on review for possible downgrade: * MBIA Insurance Corporation -- insurance financial strength at Aaa, and surplus notes at Aa2; * MBIA Insurance Corporation of Illinois -- insurance financial strength at Aaa; * Capital Markets Assurance Corporation -- insurance financial strength at Aaa; * MBIA UK Insurance Limited -- insurance financial strength at Aaa; * MBIA Assurance S.A. -- insurance financial strength at Aaa; * MBIA Mexico S.A. de C.V.'s -- insurance financial strength at Aaa (the firm's Aaa.mx -- national scale rating -- is affirmed); * MBIA Inc. -- senior unsecured debt at Aa3, provisional senior debt a (P) Aa3, provisional subordinated debt at (P) A1, and provisional preferred stock at (P) A2; * North Castle Custodial Trusts I-VIII -- contingent capital securities at Aa3; Established in 1974, MBIA provides financial guarantees to issuers in the municipal and structured finance markets in the United States, as well as internationally. MBIA also offers various complementary services, such as investment management and municipal investment contracts. MBIA INC: Disagrees with Moody's Move to Put Ratings Under Review ----------------------------------------------------------------- MBIA Inc. issued a statement in response to the decision by Moody's Investors Service to place the ratings of MBIA Inc. and MBIA Insurance Corporation on review for possible downgrade. The specific ratings affected are the Aaa insurance financial strength ratings of MBIA Insurance Corporation and its insurance affiliates, the Aa2 ratings of MBIA's Surplus Notes, and the Aa3 ratings of the junior obligations of the Insurance Company and the senior debt of MBIA Inc., each with a negative outlook. "We disagree with Moody's decision today," said Jay Brown, MBIA Chairman and Chief Executive Officer. "When Moody's affirmed our rating with a negative outlook in February, we believed that it would refrain for six to 12 months from taking additional ratings actions unless the environment or MBIA's position changed materially. Since then, there have been no material adverse changes in the environment, and we believe our capital position has improved. Thus, we are surprised by both the timing and direction of this action and can only conclude that the requirements for a Triple-A rating continue to change. "Our policyholders and shareholders should understand that Moody's decision to review our ratings is not motivated by concerns over our solvency or our ability to pay claims as they come due," Mr. Brown said. "There is no question about our ability to cover all policyholder claims, from a regulatory or any other standpoint. "Further, we are steadfast in our commitment to protect our policyholders and deliver solid long term returns to our shareholders," said Mr. Brown. "As a result we will study all of our options and consult with our Board about the most effective ways to achieve these objectives. As we indicated on May 12, our intent was to downstream $900 million of cash currently held at the holding company to MBIA Insurance Corporation if it would support its Triple-A ratings. This cash was never needed to pay claims, but rather to support the rating agencies' capital requirements for a Triple-A, and it remains available for that purpose. However, in light of Moody's action today, we will continue to hold the cash at the holding company level pending our strategy review and consultation with our Board. "We share Moody's concerns regarding our new business production, but we are in no way reliant on new business production to satisfy our insurance obligations or our capital requirements. In addition, the upside to slower business is a strengthening capital base," said Mr. Brown. "The single biggest impediment to greater new business volume has been the instability surrounding our ratings and ongoing changes in rating agency requirements for a Triple-A. Our business volume had been slowly building since the affirmation of our ratings by S&P and Moody's in late February. However, when Moody's announced on May 13th its intent to revise its assumptions on 2005-2007 vintage subprime second lien mortgage products, our new business production again dropped precipitously. "Over the past five months, our capital raising accomplishments have contributed to our sound and flexible financial position, which we believe is consistent with Triple-A ratings requirements," said Mr. Brown. "We have successfully raised over $2.6 billion in debt and equity, the most in our industry, and further improved our capital position by approximately $400 million in the first quarter through the retirement of insured exposures and ratings upgrades within our existing insurance portfolio. "While the US housing market and our housing-related insured credits have weakened, their performance has been consistent with the expectations underlying our loss reserve calculations," said Mr. Brown. "As we stated in our first quarter financial results, we have assumed further deterioration in the performance of the housing market and, while we appreciate Moody's concerns, we do not foresee any major additions to loss reserves unless the housing market performs significantly worse than our expectations. "We believe the actions we have taken to date make a review of our ratings unnecessary at this time," Mr. Brown continued. "Nonetheless we will work closely with Moody's analysts to address their concerns." About MBIA Inc. Headquartered in Armonk, New York, MBIA Inc. (NYSE:MBI) -- http://www.mbia.com-- provides financial guarantee insurance, investment management services, and municipal and other servicesto public finance and structured finance clients on a globalbasis. The company conducts its financial guarantee business through its wholly owned subsidiary, MBIA Insurance Corporation and provides investment management products and financial services through its wholly owned subsidiary MBIA Asset Management, LLC. MBIA manages its activities primarily through two principal business operations: insurance and investment management services. In February 2007, MBIA Corp. formed a new subsidiary, MBIA Mexico, S.A. de C.V. During the year ended Dec. 31, 2006, MBIA discontinued its municipal services operations. These operations included MBIA MuniServices Company. On Dec. 5, 2006, the company completed the sale of MBIA MuniServices Company. * * * As reported in the Troubled Company Reporter on March 26, 2008, Fitch Ratings has decided to maintain its Insurer Financial Strength and debt ratings on MBIA Inc. and its subsidiaries for the foreseeable future. Fitch expects to maintain the MBIA ratings as long as Fitch believes that it can maintain a clear, well-supported credit view without access to certain non-public details concerning MBIAs insured portfolio, to which Fitch will no longer have access. As reported in the Troubled Company Reporter on Jan. 21, 2008, Moody's Investors Service placed the Aaa insurance financial strength ratings of MBIA Insurance Corporation and its affiliated insurance operating companies on review for possible downgrade. In the same rating action, Moody's also placed the surplus note rating of MBIA Insurance Corporation (Aa2-rated) and the ratings of the holding company, MBIA, Inc. (senior debt at Aa3), on review for possible downgrade. This rating action reflects Moody's growing concern about the potential volatility in ultimate performance of mortgage and mortgage-related CDO risks, and the corresponding implications for MBIAs risk-adjusted capital adequacy. Prior to this rating action, the rating outlook for MBIA was negative. MCWATTERS MINING: Uses Part of Share Issuance to Remedy Default --------------------------------------------------------------- The Superior Court of Quebec approved an arrangement involving McWatters Mining Inc., its shareholders and CFT Capital, Inc., a subsidiary of Financial Solutions Inc. The Arrangement was completed and became effective on June 2, 2008. Pursuant to the terms of the Arrangement: (a) a new class of preferred shares was created and all outstanding common shares of the share capital of McWatters were exchanged, on a one-for-one basis, for Preferred Shares representing approximately 80% of the voting rights attached to the outstanding shares of the share capital of McWatters immediately following the completion of the Arrangement; (b) a new class of common shares of the share capital of McWatters was created; (c) CFT Capital subscribed for a number of New Common Shares representing approximately 20% of the voting rights attached to the outstanding shares of the share capital of McWatters immediately following the completion of the Arrangement, for a subscription price of $200,000 in the aggregate. The proceeds from such subscription, in the amount of C$200,000, are intended to be used in order to cover for the legal and other costs and expenses to be incurred by McWatters in connection with its potential acquisition of a business and a reasonable portion thereof is intended to be set aside for the purpose of remedying McWatters' default under securities legislation and seeking full revocation of the applicable cease trade orders; and (d) McWatters' share capital was amended to delete the authorized Common Shares from McWatters' share capital. The Court also approved an amended proposal made to the creditors of McWatters under the Bankruptcy and Insolvency Act (Canada) whereby CFT Capital will pay to Raymond Chabot Inc. for distribution to the Creditors, an aggregate amount of C$1,000,000. >From the aforementioned aggregate amount of C$1,000,000, an amount of C$500,000 is intended to be paid to Investissement Quebec and the remaining amount of C$500,000 is intended to be paid to the Creditors of McWatters other than IQ. In consideration thereof, the unsecured Creditors (excluding specifically IQ, Revenu Quebec and Revenu Canada) absolutely and irrevocably assign to CFT Capital all of the claims filed by them with Raymond Chabot as trustee to the proposal of McWatters (such claims excluding specifically any and all claims by IQ, Revenu Quebec and Revenu Canada), including their claims in respect of the Gold-Linked Convertible Debentures of McWatters currently outstanding. Robert Friesen, Douglas Proctor and Ray W. Jenner have been appointed as directors of McWatters pursuant to the terms of the Arrangement. Robert Friesen has been appointed as President and Secretary of McWatters. Financial Solutions Inc. is a privately held corporation specializing in structuring financial transactions and consulting firm. MERITAGE HOMES: Remains Strong Amid Industry Crisis, Execs Insist ----------------------------------------------------------------- Meritage Homes Corp. executives Steve Hilton and Larry Seay are confident the company will survive the current slump in the home building industry because their company is backed by public shareholders, generates consistent revenue and makes itself right with today's market realities, J. Craig Anderson of The Arizona Republic reports. The declarations are in response to some stock-market analysts' prediction of a possible Chapter 11 filing of the company. But, according to the report, most, such as UBS analyst David Goldberg, have maintained a neutral stance on Meritage. "Despite the complexities of corporate finance, Meritage's future success hinges on something very simple: its continued ability to build - and sell - homes," the report says. As reported by the Troubled Company Reporter on May 21, 2008, Scott Weitz, the Chief Market Strategist for Courtroom Traders, a Wall Street investment newsletter, named Tarragon Corp., WCI Communities, Inc., and Meritage Homes in his list of homebuilders that are close to bankruptcy. 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. The Builder Magazine lists WCI as the 40th biggest homebuilder in terms of total closings in 2006. Data for 2007 is yet unavailable. The largest is D.R. Horton with 53,410 in closings and revenue of $15.0 billion. WCI recorded 2,215 closings and revenues of $2.0 billion in 2006. Meritage is ranked 12th with 10,487 closings and revenue of $3.4 billion. Tarragon is not included in the list. Mr. Seay, executive vice president and chief operating officer, said Meritage is on pace to sell 5,500 to 6,000 homes this year, a significant decrease from the 10,487 homes it sold in 2006, the Arizona Republic reports. 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. It is the only publicly held home builder based in Arizona. 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. MERRILL LYNCH: Fitch Cuts 'BBB-' NIM Notes Rating to 'CC/DR4' ------------------------------------------------------------- Fitch Ratings has taken rating actions on Merrill Lynch Mortgage Investors Net Interest Margin Trust 2007-RFC1. MLMI NIM Trust, Series 2007-RFC1: -- $5.3 million class N-1 downgraded to 'CC/DR4' from 'BBB-'. Underlying transaction: Residential Asset Securities Corp. 2007-KS1 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. METROMEDIA COMPANY: Owner in Talks with GE to Avoid Bankruptcy -------------------------------------------------------------- Billionaire John Werner Kluge, who owns Metromedia Restaurant Group and Metromedia Company, is presently negotiating with major lender, GE Capital Solutions, to prevent a bankruptcy filing, The Wall Street Journal reports, citing sources knowledgeable of the matter. GE Capital Solutions is a unit of GE Commercial Finance. WSJ relates that early this year, Metromedia Company failed to meet some of its obligations under a loan deal with GE. As a result, GE declared Metromedia in default and demanded immediate payment of the debt, WSJ quotes sources as saying. According to the sources, Metromedia, though hopeful to "find a last-minute workout plan," has mulled a bankruptcy filing. Months earlier, the company engaged Jeff Reisner, Esq., as its bankruptcy counsel, WSJ says. A week ago, Clay Dover resigned as Metromedia Restaurant president and chief executive officer and pointed to differing ideas with owners over the company's strategic direction, WSJ relates. WSJ commented that Metromedia's woes reflect the challenges -- discrete consumer spending, high food prices and debt load -- that casual restaurants are facing. WSJ says that Metromedia, when it decides to file for bankruptcy, would be one of the largest restaurant operators to go bankrupt in years. About Metromedia John Werner Kluge is a German-American entrepreneur and a billionaire. He is best known as a television industry mogul in the United States. Mr. Kluge's major move into media was by purchasing stock in the Metropolitan Broadcasting Company in the mid-1950s. Mr. Kluge is chairman, CEO and president of holding company, Metromedia. East Rutherford, New Jersey-based Metromedia Restaurant Group -- http://www.metromediarestaurants.com/-- is part of Metromedia Company -- a multi-concept, table-service restaurant group. -- is a multi-concept table-service restaurant group, with more than 800 Bennigan's(R), Bennigan's SPORT(TM), Steak and Ale(R), Ponderosa Steakhouse(R) and Bonanza(TM) Steakhouse restaurants in the U.S. and abroad. Its restaurants, representing four of the most well- known brands in the restaurant industry, serve more than 160 million guests a year. The company operates nearly 1,000 restaurants in the United States and abroad, which are comprised of Bennigan's, Steak and Ale, Ponderosa Steakhouse and Bonanza Steakhouse. Bennigan's restaurants are based on the taverns of Ireland. Steak and Ale restaurants are inspired by old-fashioned English country inns. Ponderosa Steakhouse and Bonanza Steakhouse operate together as one large restaurant concept. The company franchises its Bennigan's, Ponderosa Steakhouse and Bonanza Steakhouse restaurants. MINNEAPOLIS STAR: Asks Forbearance from Creditors ------------------------------------------------- Zachery Kouwe of the New York Post reports that Minneapolis Star Tribune, known locally as The Strib, has asked creditors for a six-month delay in debt payments. The Strib's owner Avista Capital Partners has hired the Blackstone Group to negotiate with creditors, the report said. Sources say creditors want the owners to inject $50 million of new equity into the company before it agrees on anything, according to the report. The Strib is planning to save $20 million in expenses by June 30, partly by cutting $2.5 million of its newsroom budget. The amount is 10 percent of the newsroom budget. Avista Capital bought The Strib for $530 million about 15 months ago. Avista told its investors last month it has written down its $100 million equity investment in The Strib by 75 percent. The Strib has disputed published reports that it is near bankruptcy. The Star Tribune Company -- http://www.startribune.com/-- is a newspaper company serving the Minneapolis-St. Paul area and readers around the state of Minnesota. Its Star Tribune newspaper boasts a weekday circulation of about 320,000 and is one of the nation's top 20 daily metropolitan newspapers. The company also publishes news on its Web site. In addition to its news operations, Star Tribune Company provides direct marketing services and publishes niche publications. MISTRAL PHARMA: Receives Notice of Default from MMV Financial ------------------------------------------------------------- Mistral Pharma Inc. (TSX VENTURE:MIP) has received a notice of default and a notice to enforce security from MMV Financial Inc., a senior secured creditor of the company. Pursuant to a credit agreement announced on October 16, 2006, Mistral obtained a US$1.5 million secured loan from MMV. As per the notice of default received, MMV requests the immediate payment of US$1.3 million, on the basis that Mistral has failed to effect a principal and interest payment due on May 31, 2008. As per the notice to enforce security, MMV advised the Corporation that it reserves its rights to enforce its security, which can be effected only after the expiry of the 10-day period following the transmission of MMV's notice. Mistral's financial position does not currently allow it to effect the payment of US$1.3 million as requested by MMV. MKP CBO: Moody's Cuts Notes Ratings, to Undertake Review -------------------------------------------------------- Moody's Investors Service has downgraded the ratings of five classes of notes issued by MKP CBO VI, Ltd., and left on review for possible further downgrade rating of one of these classes of notes as: Class Description: $184,000,000 Class A-1 First Priority Senior Secured Floating Rate Notes due 2051; -- Prior Rating: A2, on review for possible downgrade -- Current Rating: Caa3, on review for possible downgrade Class Description: $41,000,000 Class A-2 First Priority Senior Secured Floating Rate Notes due 2051; -- Prior Rating: Ba3, on review for possible downgrade -- Current Rating: Ca Class Description: $46,000,000 Class B Third Priority Senior Secured Floating Rate Notes due 2051; -- Prior Rating: Caa3, on review for possible downgrade -- Current Rating: Ca Class Description: $4,000,000 Class C Mezzanine Secured Deferrable Floating Rate Notes due 2051; -- Prior Rating: Ca -- Current Rating: C Class Description: $10,000,000 Class D Mezzanine Secured Deferrable Floating Rate Notes due 2051. -- Prior Rating: Ca -- Current Rating: C MKP CBO VI, Ltd. is a collateralized debt obligation backed primarily by a portfolio of structured finance securities. On Nov. 15, 2007 the transaction experienced an event of default caused by a failure of the of the Net Outstanding Portfolio Collateral Balance minus the Overcollateralization Haircut Amount divided by the Aggregate Outstanding Amount of the Class A-1 Notes and Class A-2 Notes to be greater than or equal to the required amount set forth in Section 5.1(i) f the Indenture dated Aug. 31, 2006. That event of default is continuing. The rating actions taken reflect continuing deterioration in the credit quality of the underlying portfolio and the increased expected loss associated with the transaction. Losses are attributed to diminished credit quality on the underlying portfolio. As provided in Article V of the Indenture during the occurrence and continuance of an Event of Default, the Controlling Class may be entitled to direct the Trustee to take particular actions with respect to the Collateral. The severity of losses may depend on the timing and choice of remedy to be pursued by the Controlling Class. Because of this uncertainty, the rating of Class A-1 Notes issued by MKP CBO VI, Ltd. is on review for possible further action. MOHAMMAD GHARBI: Case Summary & 14 Largest Unsecured Creditors -------------------------------------------------------------- Debtors: Mohammad H Gharbi aka Mike H Gharbi Fatemeh Gharbi 9009 O'Connor Dr. Austin, TX 78717 Bankruptcy Case No.: 08-11023 Chapter 11 Petition Date: June 2, 2008 Court: Western District of Texas (Austin) Judge: Craig A. Gargotta Debtor's Counsel: Joseph D. Martinec, Esq. Martinec, Winn, Vickers & McElroy, P.C. 600 Congress Avenue, Suite 500 Austin, TX 78701 Tel: (512) 476-0750 Fax: (512) 476-0753 e-mail: martinec@mwvmlaw.com Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $1,000,001 to $10,000,000 A list of its 14 largest unsecured creditors with claims less than $51,000 is available for free at: http://bankrupt.com/misc/twb08-11023.pdf MOSAIC CO: Fitch Upgrades Ratings to BBB from BB+ ------------------------------------------------- Fitch has upgraded these ratings of The Mosaic Company and its subsidiaries, with a Stable Outlook: The Mosaic Company -- Issuer Default Rating to 'BBB' from 'BB+'; -- Senior secured revolver to 'BBB+' from 'BBB-'; -- Senior secured term loan to 'BBB+' from 'BBB-'; -- Senior unsecured notes to 'BBB' from 'BB+'. Mosaic Global Holdings -- IDR to 'BBB' from 'BB+'; -- Senior unsecured notes and debentures to 'BBB' from 'BB+'. The ratings for Phosphate Acquisition Partners LP and Mosaic Colonsay ULC are withdrawn, as no material indebtedness remains outstanding. The worldwide demand for wheat, soybeans and corn, working its way back through the supply chain, has increased the demand for phosphate and potassium based fertilizers. This increased demand has combined with a weak U.S. dollar to produce strong revenues for Mosaic. In year-over-year comparisons of average product prices in the company's third quarter, the prices for diammonium phosphate almost doubled while muriate of potash jumped 53%. Revenues for the first nine months increased 55% year over year, operating profits before taxes soared more than six-fold, and fertilizer prices are even higher on current spot markets. Mosaic has put these fortunes to good use, reducing debt by $707 million over the first nine months of its current fiscal year while increasing cash by $714 million. A poor start to the spring growing season may push the sales of some product into the fall, but nothing is likely to stand in the way of increased near-term profits and cash flow. The next headwinds, if they appear, may come in 2010 when increased production capacities come on-stream in the Middle East, Canada, Belarus and Russia - these could deflate prices. However, what has already occurred will likely not be undone, and Mosaic is using a portion of its cash flow to reinvest in its competitive positions through low-cost production. By the end of Mosaic's fiscal 2009, Fitch projects that the company will have accumulated cash reserves in excess of $3 billion. Cargill, Incorporated (Cargill and Mosaic's 64% shareowner) has seen its investment grow more than three and one-half times over the past year. So far Cargill has made no moves to capitalize on its investment. Mosaic supplies Cargill a small amount of fertilizer, and the companies are linked in a few marketing ventures. In late October 2008, standstill provisions will expire, and Cargill will be free to petition for increased Board membership. In and of itself this will not warrant a change in Mosaic's debt ratings. However, moves to monetize Cargill's investment through the use of leverage in Mosaic's capital structure would have ratings' implications. Mosaic is the No. 1 producer of phosphate fertilizers and the No. 2 producer of potassium based fertilizers in the world. Mosaic earned approximately $2.37 billion in operating EBITDA on $8.03 billion in sales over the latest 12 months ending Feb. 29, 2008; the company had $1.65 billion in debt and $1.13 billion in cash at that time. MOVIE GALLERY: Outlines Consummated Transactions Under Ch. 11 Plan ------------------------------------------------------------------ In light of Movie Gallery Inc. and its debtor-affiliates' emergence from bankruptcy on May 20, 2008, the Reorganized Debtors consummated the transactions contemplated by their Second Amended Joint Plan of Reorganization, which was confirmed by the Court on April 10. In a regulatory filing with the U.S. Securities and Exchange Commission dated May 28, 2008, the Reorganized Debtors disclosed that on the Plan Effective Date: (a) Movie Gallery's old common stock and other equity interests existing immediately prior to the Effective Date were canceled. The Reorganized Debtors will issue: -- 7,544,460 shares of common stock, par value $0.001 per share to holders of 11% Senior Note Claims; -- 8,251,498 shares to Sopris Capital Advisers LLC; -- 5,000,000 shares to Rights Offering participants; -- 115,000 shares to Sopris as its fee for providing the Backstop Commitment; and -- 60,000 shares of New Common Stock to Imperial Capital, LLC, for services rendered on behalf of the Official Committee of Unsecured Creditors. Movie Gallery will reserve (i) 2,395,540 shares of New Common Stock for future issuance to holders of allowed claims in Classes 7A, 7B and 7E under the Plan; and (ii) 2,828,226 shares for future issuance as grants of equity, restricted stock or options under a Management and Directors Equity Incentive Plan; (b) Movie Gallery will issue warrants to purchase: -- an aggregate of 1,229,815 shares of New Common Stock to 11% Senior Note Claimholders and for future issuance to holders of allowed Claims; -- an aggregate of 86,250 shares to Sopris pursuant to the Seasonal Overadvance Facility; and