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/raid1/www/Hosts/bankrupt/TCR_Public/080724.mbx T R O U B L E D C O M P A N Y R E P O R T E R Thursday, July 24, 2008, Vol. 12, No. 175 Headlines A21 INC: Amends Employment Agreement with CEO John Ferguson AINSWORTH LUMBER: Names 7 Members to Post-Recapitalization Board AIRPLANES PASS-THROUGH: Fitch Holds 'BB' Rating on Cl. A-8 Notes AMERICHIP INTERNATIONAL: Report for May 31 Quarter to be Delayed AMPEX CORP: Court Okays Modifications to Plan, D/S Supplement AMR CORP: Files Quarterly Report for Period Ended June 30 APPLICA PET: Sale Termination Cues Moody's to Withdraw Ratings APOLLO DRILLING: Inks Securities Purchase Agreement ASARCO LLC: Wants September 19 Set as Admin. Claims Bar Date ASARCO LLC: Seeks Appointment of Official Asbestos Committee ASARCO LLC: Wants Robert Pate as Future Asbestos Claimants Rep. ASG CONSOLIDATED: Moody's Rates $55MM Discount Notes B3 ATRIUM CORP: Inks Forbearance and Lockup Contracts with Creditors AVETA INC: Amends Credit Agreement, Repays $50 Million Term Loan AVIATION CAPITAL: Fitch Puts Two Low-B Ratings Under Neg. Watch BALLY TECHNOLOGIES: S&P Raises Rating to 'BB'; Off CreditWatch BAYTEX ENERGY: S&P Upgrades Rating to 'BB-' on Strong Performance CAPITAL RESERVE: Child Van Wagoner Expresses Going Concern Doubt CARROLS CORP: S&P Affirms 'B+' Corporate Credit Rating CDO VI: Moody's Rates $12.3MM Class E Floating Rate Notes Ba2 COMMISSARY OPERATIONS: Files for Bankruptcy in Tennessee COMMISSARY OPERATIONS: Voluntary Chapter 11 Case Summary DANKA BUSINESS: Ernst & Young Expresses Going Concern Doubt DELTA AIR: Edward Bastian Disposes of 18,000 Common Shares DERECKTOR SHIPYARDS: Bankruptcy Case Won't Affect 250 Workers DISTRIBUTED ENERGY: Arent Fox Approved as Committee's Counsel DRIGGS FARMS: Taps Chikol Equities as Consultant EAGLE CREEK: Waccamaw Bank Presses for Loan Usage Examination EL PASO CHILE: Has Interim Court Nod to Use Cash Collateral ENHANCED MORTGAGE-BACKED SECURITIES: Moody's Junks Rating on Notes ERIK BENHAM: Wants to Employ Vaughn Taus as Counsel FOCUS ENHANCEMENTS: Rule Violation Prompts Nasdaq to Delist Stocks FORD MOTOR: Edward Altman's Z-score Model Predicts Bankruptcy GE COMMERCIAL: S&P Puts Loan Trust Ratings on Watch Negative GENCORP INC: Files Form S-8 to Register 5MM Shares for Stock Fund GENERAL MOTOR: Edward Altman's Z-score Model Predicts Bankruptcy GOLD TOE: Moody's Junks Ratings on Covenant Non-compliance Worry GREEKTOWN CASINO: Has Court Nod to Assume NRT Corp. Contracts HARRINGTON HOLDINGS: Moody's Puts Stable Outlook to B2 Ratings HOMEBANC CORP: Has Until Oct. 6 to Solicit Votes for Ch. 11 Plan ICTS INTERNATIONAL: Mahoney Cohen Expresses Going Concern Doubt INTERLINE RESOURCES: HJ & Associates Raises Going Concern Doubt INTERPUBLIC GROUP: Secures $335 Million Revolving Credit Facility IPS CORP: S&P Revises Outlook to Neg, Affirms 'B' Credit Rating JETBLUE AIRWAYS: Moody's Cuts Corporate Family Rating to Caa2 JHT HOLDINGS: Taps Pepper Hamilton as Delaware Counsel JUNIPER GENERATION: S&P Cuts Rating on $206MM Notes to 'BB-' LEASE INVESTMENT: Fitch Downgrades Ratings on Five Note Classes LIBERTAS PREFERRED FUNDING: Moody's Junks Ratings on Eight Notes MATTHEW LEASING: Case Summary & 20 Largest Unsecured Creditors MEDICAL: 10th Cir. Affirms Carl Zeiss' Non-Insider Status MERGE HEALTHCARE: Inks Employment Agreements with Key Officers MERVYN'S LLC: Cerberus Sold Stake to Sun Last Year, NY Post Says M FABRIKANT: Bankruptcy Fees and Expenses Total More Than $8 Mil. MNJ USED CARS: Owner Nazer Haidar to Serve 33 Months in Jail MRS. FIELDS: Stephen Russo Decides to Terminate Employment NATIONAL DRY: Gets Initial OK to Use Prudential's Cash Collateral NATIONAL DRY: Wants Court to Approve Proposed Bidding Procedures NETWOLVES CORP: Plan Confirmation Hearing to Continue August 20 NEUMANN HOMES: Has Until December 31 to File Chapter 11 Plan NORTHSTAR NEUROSCIENCE: Liquidation May Yield More Value, Says RCA NUTRITIONAL SOURCING: Has Until August 1 to File Chapter 11 Plan OCCULOGIX INC: Restates Annual and Quarterly Financial Reports ORAGENICS INC: Kirkland Russ Expresses Going Concern Doubt OSYKA CORP: Judge Isgur Approved Amended Disclosure Statement PALM HARBOR: Earns $1.6 Million in Fiscal 2009 First Quarter PARADIGM MEDICAL: Amends Report to Adjust Derivatives & Warrants PEGASUS AVIATION: Fitch Cuts Ratings to 'CCC/DR2' on Two Classes PLASTECH ENGINEERED: Wants to Employ Groom Law as Benefits Counsel PLASTECH ENGINEERED: Wants 503(b)(9) Claims Resolution Rules Set PRB ENERGY: Michael Purfield Resigns as Chief Operating Officer PREFERRED VOICE: Losses Prompt Philip Vogel's Going Concern PROXYMED INC: Files Chapter 11 Petition, DIP and Sale Motions PROXYMED INC: Case Summary & 20 Largest Unsecured Creditors RG GLOBAL: McKennon Wilson Expresses Going Concern Doubt SCOTTISH RE: Ernst & Young Expresses Going Concern Doubt SEMGROUP ENERGY: Posts $12.9 Million Net Loss for FY 2007 SIMDAG-ROBEL: Partners Face Breach Suit Filed by Donald Trump SIRIUS SATELLITE: XM Satellite Merger Gets FCC Votes SIRIUS SATELLITE: Moody's to Review Ratings on Pending Merger SIRVA INC: Withdrawal of Triple Net's Appeal on DIP Financing OK'd SOUTHERN LUMBER II: Case Summary & Five Largest Unsec. Creditors SPECTRUM BRAND: Sale Failure Cues Moody's to Confirm Junk Rating SPEIGHT FAMILY: Case Summary & Largest Unsecured Creditor SPHERE DRAKE: PRO Insurance Invokes Chapter 15 SPHERE DRAKE: Chapter 15 Case Summary STURGIS IRON: Closes Sale of Scrap Yards to Steel Dynamics TAHERA DIAMOND: Court Orders C$2 Mil. Reserve for Miners' Liens TELKONET INC: Promotes Jeff Sobieski to Chief Operating Officer TELKONET INC: Registers 19.5MM Shares Issued to YA Global TORRENT ENERGY: Gets Bid Price Non-compliance Notice from Nasdaq TRIBUNE COMPANY: Moody's Junks Corporate Family Rating to Caa2 TRITON AVIATION: Fitch Keeps 'C/DR6' Ratings on Four Note Classes TRONOX INC: Lenders Waive Leverage Ratio Financial Covenant UAL CORP: Reports $2.7 Billion Net Loss in Second Quarter 2008 UAL CORP: Demands Payment of $4.5 Million Damages Under T8 Lease UAL CORP: Deloitte Audits Statements on Four Incentive Plans UAL CORP: Ends Some Int'l Flights; Defers Moscow Flight Debut UAL CORP: Lays Off 485 Jobs From Illinois and Colorado US AIRWAYS: Moody's Junks Corporate Family Rating; Outlook Neg US CONCRETE: 'B+' Corporate Credit Rating On CreditWatch Negative U.S. ENERGY: Has Until August 22 to File Chapter 11 Plan WASHINGTON MUTUAL: $3.3BB Loss Cues Moody's to Review Ratings WCI COMMUNITIES: Amends Exchange Offer for $125MM of 4% Sr. Notes XERIUM TECH: Names CEO Stephen R. Light as Chairman of the Board XM SATELLITE: Sirius Merger Wins Approval of Two FC Commissioners ZVUE CORP: Has Until August 1 to Comply with Nasdaq Listing Rules * Chapter 11 Cases with Assets & Liabilities Below $1,000,000 ********* A21 INC: Amends Employment Agreement with CEO John Ferguson ----------------------------------------------------------- a21 Inc. entered on July 10, 2008, into an amended and restated employment agreement with John Ferguson, the company's chief executive officer, pursuant to which Mr. Ferguson will be entitled to receive, in addition to the compensation specified in his original employment agreement: (i) a special bonus of up to $125,000, in the event that the company undergoes a change of control and a greater than $9,000,000 reduction in the amount of the company's outstanding promissory notes occurs; and (ii) an increase in the severance payments to be received in the event that Mr. Ferguson is terminated by the company without cause after a change in control of the company from an amount equal to six (6) months salary, or $125,000, to an amount equal to twelve (12) months' salary, or $250,000, payable over a period of one year. About a21 Inc. a21 Inc. (OTC BB: ATWO) -- http://www.a21group.com/-- is an online digital content company. a21, through its subsidiary SuperStock, with offices in Florida, Iowa, and London, aggregates visual content from photographers, photography agencies, archives, libraries, and private collections and licenses the visual content to its customers. As reported in the Troubled Company Reporter on May 22, 2008, a21 Inc.'s consolidated balance sheet at March 31, 2008, showed $28.6 million in total assets, $30.2 million in total liabilities, and $553,000 in minority interest, resulting in $2.1 million capital deficit. Going Concern Doubt As reported in the Troubled Company Reporter on April 22, 2008, BDO Seidman LLP, in West Palm Beach, Fla., expressed substantial doubt about a21 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 from operations and net capital deficiency. AINSWORTH LUMBER: Names 7 Members to Post-Recapitalization Board ---------------------------------------------------------------- Ainsworth Lumber Co. Ltd., in a regulatory filing with the U.S. Securities and Exchange Commission, disclosed that pursuant to its recapitalization, these individuals will be appointed to serve on the company's new Board of Directors: * Robert Chadwick, * Jay Gurandiano, * Paul Houston, * Morley Koffman, * John Lacey, * Gordon Lancaster, and * Jonathan I. Mishkin Ainsworth said the Recapitalization will become effective pursuant to the company's Plan of Arrangement. The current Board of Directors will be replaced by the New Board on the effective date of the Recapitalization, which is expected to occur by July 29, 2008. A schedule of the Proposed New Board Nominees following the effective date of the Recapitalization is available at no charge at http://ResearchArchives.com/t/s?2fe4 As reported by the Troubled Company Reporter on June 23, 2008, Ainsworth Lumber reached an agreement with its major financial creditors regarding a recapitalization transaction. The Recapitalization will accomplish a significant de-levering of Ainsworths balance sheet. Ainsworths total debt -- consisting of senior unsecured notes, term loans and equipment and financing loans -- will be reduced from US$985 million -- or C$1,012 million -- as at March 31, 2008, to roughly US$521 million or C$536 million, reducing annual interest expense from approximately C$66 million to approximately C$49 million. Under the Recapitalization, Ainsworth will also receive a substantial infusion of cash from the issuance of US$200 million aggregate principal amount of new notes. Management believes that the debt reduction and capital infusion will improve Ainsworth's ability to manage the effects of the ongoing downturn in the U.S. housing market and its ability to attract and retain employees, customers and suppliers without having to pursue other alternatives that could include the sale of core assets or non-consensual proceedings under creditor protection legislation. The successful implementation of the Recapitalization is expected to be a significant positive step in assisting the company in stabilizing its operations. If the Recapitalization or another alternative transaction to address the company's liquidity needs is not completed by the end of July 2008, the company may not be able to pay the interest on certain series of the existing notes when the interest becomes due. Under the recapitalization, the company's noteholders will collectively receive 96% of the new common shares and common shareholders will receive their pro rata share of 4% of the new common shares and cashless warrants to receive additional new common shares representing 8% of the new common shares, on a fully diluted basis, if the company's equity market capitalization exceeds USD1.2 billion before the expiry of the warrants. Pursuant to the modifications, the term of the warrants will expire after five years of the date of the recapitalization and existing common shareholders as of the effective date of the recapitalization will be given the right to receive their pro rata share of 30.2% of the net proceeds received by the company, if any, from any final adjudication or settlement of certain litigation and claims against specified third parties. Ainsworth also delivered to the U.S. Securities and Exchange Commission copies of various agreements and other documents related to the Recapitalization: -- Noteholder Support Agreement dated June 16, 2008; -- Backstop Commitment Letter dated June 16, 2008; -- Shareholder Support Agreement for D. Allen Ainsworth, dated June 16, 2008; -- Shareholder Support Agreement for Catherine E. Ainsworth, dated June 16, 2008; -- Shareholder Support Agreement for Brian E. Ainsworth, dated June 16, 2008; -- Shareholder Support Agreement for Grant Forest Products Corp., dated June 24, 2008; -- Management Proxy Circular, dated June 24, 2008; and -- Material Change Report, dated June 27, 2008 Full-text copies of the documents are available at no charge at: http://ResearchArchives.com/t/s?2fe9 Issuance of Rollover Notes Due 2015 Pursuant to the Recapitalization, Ainsworth intends to exchange, in part, US$150,000,000 aggregate principal amount of the company's 11% Senior Unsecured Notes due 2015 -- Rollover Notes -- for all of Ainsworth's outstanding: * Senior Unsecured Floating Rate Notes due October 1, 2010; * 7.25% Senior Unsecured Notes due October 1, 2012; * Senior Unsecured Floating Rate Notes due April 1, 2013; * 6.75% Senior Unsecured Notes due March 15, 2014; and * 6.75% Senior Unsecured Notes due March 15, 2014 Registration of the distribution of the Rollover Notes under the Securities Act of 1933, as amended, is not required by reason of the exemption from registration provided by Section 3(a)(10) of the 1933 Act. Ainsworth is also offering to qualifying noteholders US$200,000,000 aggregate principal amount of the company's 11% Senior Unsecured Notes due 2015 on a private placement basis for cash. A full-text copy of the Form T-3 Ainsworth filed with the Securities and Exchange Commission is available at no charge at: http://ResearchArchives.com/t/s?2fea About Ainsworth Lumber Headquartered in Vancouver, British Columbia, Ainsworth Lumber Co. Ltd. (TSX: ANS) -- http://www.ainsworth.ca/-- is a manufacturer of engineered wood products, such as oriented strand board (OSB) and specialty overlaid plywood. The company owns six OSB manufacturing facilities, three in Canada, and three in northern Minnesota. The company also has a 50% ownership interest in an OSB facility located in High Level, Alberta. Due to market conditions, the company is presently operating three OSB facilities in Canada and one OSB facility in Minnesota. Ainsworth Lumber Co. Ltd.'s consolidated balance sheet at March 31, 2008, showed C$1.05 billion in total assets and C$1.12 billion in total liabilities, resulting in a roughly C$75.2 million total stockholders' deficit. * * * As reported by Troubled Company Reporter on July 1, 2008, Moody's Investors Service assigned 'Caa3' ratings to Ainsworth Lumber Co. Ltd.'s proposed new senior unsecured debt and upgraded the company's corporate family rating to 'Caa2' from 'Ca'. The upgrade reflects the company's announcement of a recapitalization transaction to convert its existing unsecured notes into equity and new debt, and the issuance of new debt to enhance liquidity. Going Concern Doubt As reported by Troubled Company Reporter on June 18, 2008, the company believes that there exists reasonable doubt about the its ability to continue as a going concern because of the its current liquidity position and forecasted operating cash flows and capital requirements for the next 12 months. In addition, the decline in demand for OSB in the U.S. residential housing market and the significant appreciation of the Canadian dollar against the U.S. dollar led to negative operating margins. Under the company's existing long-term and current indebtedness, over the remainder of 2008 the company must provide for interest payments of approximately C$62.0 million and principal payments of C$8.5 million. Under these circumstances, the company has significant liquidity risk. AIRPLANES PASS-THROUGH: Fitch Holds 'BB' Rating on Cl. A-8 Notes ---------------------------------------------------------------- Fitch Ratings has taken these rating actions for Airplanes Pass- Through Trust as outlined below: -- Class A-8 notes affirmed at 'BB'; -- Class A-9 notes downgraded to 'CCC/DR3' from 'B+'; -- Class B notes remain at 'C/DR6'; -- Class C notes remain at 'C/DR6'; -- Class D notes remain at 'C/DR6'. Cash flow available to service debt in the Airplanes transaction has declined over the past year, driven by a significant increase in monthly expenses, which has further stressed the transaction structure. While the class A notes are receiving current interest payments and partial minimum principal, the reliability of full principal payment on the class A-9 notes has declined. The rating differential between the A-8 and A-9 notes accounts for the fact that the A-8 is currently receiving the full benefit of class A principal payments. In addition, the Airplanes portfolio contains significant concentrations in older generation, less fuel efficient aircraft types such as 737 Classics and MD-80s. These aircraft types are exposed to potential value and lease rate deterioration resulting from increased fuel prices, airline capacity reductions, and bankruptcies in the current environment. Fitch's analysis incorporated expected cash flow to be available to the trust over the remaining life of the transaction. This expectation is based on several factors including aircraft age, current portfolio value, potential lease rates, and perceived liquidity of the portfolio. Lease rate and portfolio value expectations have been updated to reflect Fitch's views on certain aircraft given the aviation market volatility and significantly elevated fuel prices. Airplanes originally issued $4.048 billion of notes in March 1996 followed by two refinancing trusts, one in March 1998 and the other in March 2001. Airplanes is a trust formed to conduct limited activities, including the buying, owning, leasing and selling of commercial jet aircraft. As of March 31, 2008 Airplanes' portfolio consisted of 121 aircraft compared to 193 at the time of the 2001 refinancing trust due to continuing asset sales. Primary servicing is being performed by General Electric Capital Aviation Services, GECAS (a wholly owned subsidiary of General Electric Capital Corp.), while the administrative agent role is being performed by AerCap Aviation Solutions (formerly Debis AirFinance). AMERICHIP INTERNATIONAL: Report for May 31 Quarter to be Delayed ---------------------------------------------------------------- Americhip International Inc. disclosed July 15 that it will be unable to file its report on Form 10-Q for the second quarter ended May 31, 2008, within the prescribed time because of delays in completing the preparation of its unaudited financial statements and its management discussion and analysis. The quarterly report will be filed on or before the fifth calendar day following the prescribed due date. About AmeriChip International Headquartered in Clinton Township, Mich., AmeriChip International Inc. (OTC BB: ACHI.OB) -- http://www.americhiplacc.com/-- holds a patented technology known as Laser Assisted Chip Control, which can be used to re-engineer the manufacturing process for industrial metal machining applications. According to AmeriChip International, this technology, when implemented by the customer, will eliminate dangerous ribbon-like steel chips that tangle around moving tool parts, automation devices and other components essential to the machine processing of low to medium grade carbon steels and non-ferrous metal parts. As reported in the Troubled Company Reporter on May 6, 2008, the company's consolidated balance sheet at Feb. 29, 2008, showed $7,329,077 in total assets, $6,987,585 in total liabilities, and $341,492 in total stockholders' equity. Going Concern Doubt As reported in the Troubled Company Reporter on March 13, 2008, Jewett, Schwartz, Wolfe & Associates, in Hollywood, Fla., expressed substantial doubt about Americhip International Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the year ended Nov. 30, 2007. The auditing firm pointed to the company's recurring losses from operations. At Feb. 29, 2008, the company had an accumulated deficit of $33,129,549. This compares with an accumulated deficit of $32,159,967 at Nov. 30, 2007. AMPEX CORP: Court Okays Modifications to Plan, D/S Supplement ------------------------------------------------------------- Ampex Corp. disclosed in a regulatory SEC filing Friday, that on July 14, 2008, the United States Bankruptcy Court for the Southern District of New York granted the company and certain of its U.S. subsidiaries' motion dated July 9, 2008, for an order authorizing, among other things, certain modifications to their Third Amended Joint Chapter 11 Plan of Reorganization, and approved a proposed supplement to the Disclosure Statement relating to the Plan, and other related relief. The Plan was modified, among other things, to revise certain terms relating to lump sum cash payment elections by holders of unsecured claims and certain conditions precedent to consummation of the Plan. The Supplement contains a summary of the modifications made to the Plan. The Debtors plan to distribute the Plan and Supplement to, and to resolicit the votes of, the holders of unsecured claims affected by the modifications. Also on July 9, 2008, the Debtors entered into a Plan Support Agreement (PSA) with the Official Committee of Unsecured Creditors in the chapter 11 case. Under the PSA, the Committee has agreed to support the Plan and to urge holders of unsecured claims to vote to accept the Plan, among other things. A full-text copy of the First Modified Third Amended Joint Chapter 11 Plan of Reorganization, dated July 9, 2008, is available for free at http://researcharchives.com/t/s?2fcb A full-text copy of the Supplement to Disclosure Statement with Respect to First Modified Third Amended Joint Chapter 11 Plan of Reorganization, dated July 14, 2008, is available for free at: http://researcharchives.com/t/s?2fcc A full-text copy of the Plan Support Agreement dated as of July 9, 2008, among the Debtors and the Committee is available for free at http://researcharchives.com/t/s?2fce Headquartered in Redwood City, California, Ampex Corp. -- http://www.ampex.com/-- (Nasdaq:AMPX) is a licensor of visual information technology. The company has two business segments: Recorders segment and Licensing segment. The Recorders segment primarily includes the sale and service of data acquisition and instrumentation recorders (which record data and images rather than computer information), and to a lesser extent mass data storage products. The Licensing segment involves the licensing of intellectual property to manufacturers of consumer digital video products through their corporate licensing division. On March 30, 2008, Ampex Corp. and six affiliates filed for protection under Chapter 11 of the Bankruptcy Code with the U.S. Bankruptcy Court for the Southern District of New York (Case Nos. 08-11094 through 08-11100). Matthew Allen Feldman, Esq., and Rachel C. Strickland, Esq., at Willkie Farr & Gallagher LLP, represent the Debtors in their restructuring efforts. The Debtors have also retained Conway Mackenzie & Dunleavy as their financial advisors. In its schedules of assets and liabilities filed with the Court, Ampex Corp. disclosed total assets of $9,770,089 and total debts of $82,488,054. The Debtors have nine foreign affiliates that are incorporated in seven countries -- one each in the United Kingdom, Japan, Belgium, Colombia and Brazil and two each in Germany and Mexico. With the exception of the affiliates located in the U.K. and Japan, none of the other foreign affiliates conduct meaningful business activity. As of March 30, 2008, none of the foreign affiliates have commenced insolvency proceedings. AMR CORP: Files Quarterly Report for Period Ended June 30 --------------------------------------------------------- AMR Corp. filed on July 17, 2008, its quarterly report on Form 10-Q for the second quarter ended June 30, 2008. At June 30, 2008, the company's consolidated balance sheet showed $28.9 billion in total assets, $27.2 billion in total liabilities, and $1.7 billion in total stockholders' equity. The company's consolidated balance sheet at June 30, 2008, also showed strained liquidity with $9.1 billion in total current assets available to pay $10.6 billion in total current liabilities. As reported in the Troubled Company Reporter on July 17, 2008, AMR Corp., the parent company of American Airlines Inc., reported a net loss of $1.4 billion for the second quarter of 2008, compared with net income of $317.0 million for the second quarter of 2007. Full-text copies of the company's consolidated financial statements for the quarter ended June 30, 2008, are available for free at http://researcharchives.com/t/s?2fe2 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 on July 15, 2008, the TCR said that Moody's Investors Service placed the debt ratings of AMR Corp. and its subsidiaries under review for possible downgrade. The company has an outstanding B2 corporate family rating. The review includes the ratings for certain equipment trust certificates and enhanced equipment Trust Certificates of American Airlines, Inc. Likely Bankruptcy Filing This Year Stockhouse.com has said that AMR Corp. could tumble into chapter 11 bankruptcy this year. Stockhouse.com, as quoted in a story that appeared in the Troubled Company Reporter on June 5, 2008, said 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. AMR said report of possible bankruptcy filing is unfounded. The TCR reported on May 26, 2008, that Jamie Baker, an analyst at J.P. Morgan, said U.S. airline industry stands to post a collective $7,200,000,000 in operating losses in 2008. The results would be wider than an initial forecast of $4,600,000,000 loss, the analyst said. 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. APPLICA PET: Sale Termination Cues Moody's to Withdraw Ratings -------------------------------------------------------------- Moody's Investors Service withdrew its proposed ratings on Applica Pet Products (B1 corporate family rating, B2 probability of default rating, B1 senior secured revolver and B1 senior secured term loan) assigned on June 24, 2008, following the cancellation of the sale of United Pet Group by Spectrum Brands due to the inability by Spectrum Brands to obtain the consent of its senior lenders. APOLLO DRILLING: Inks Securities Purchase Agreement --------------------------------------------------- Apollo Drilling Inc. disclosed in a regulatory SEC filing that on or about May 2, 2008, Apollo Drilling Inc. entered into a Securities Purchase Agreement, pursuant to which the company issued to certain purchasers 150,000 shares of Series A Convertible Preferred Stock, 8,750,000 restricted shares of the company's common stock and warrants to purchase 8,750,000 shares of the company's common stock at an exercise price of $.01. Apollo Drilling, Inc. is authorized to issue 15,000,000 shares of $0.001 par value preferred stock. The Board of Directors of the company has designated 150,000 shares of the Preferred Stock as Series A Preferred Stock, the number of shares designated and rights of each class are briefly described as follows: Series A Convertible Preferred Stock On May 2, 2008, the company designated 150,000 shares of Preferred Stock as Series A Convertible Preferred Stock. The Series A Preferred Stock is convertible into shares of Common Stock at a conversion price of $.001. The Series A Preferred Stock is redeemable at any time after June 1, 2008, at the sole option of the holder at a redemption price of $1.35 per share. Holders of the Series A Preferred Stock are entitled to receive dividends annually equal to $0.10 for each share of Series A Preferred Stock held. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the company, the holders of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the company available for distribution to its stockholders, before any payment shall be made to the holders of Common Stock. Holders of Series A Preferred Stock are entitled to one vote for each share of Series A Convertible Preferred Shares held, are entitled to elect up to two members to the company's Board of Directors, and, absent such election, are provided certain voting and veto rights to any vote by the Board of Directors. As of May 13, 2008, there were 150,000 shares of Series A Preferred Stock designated and 150,000 shares of Series A Preferred Stock issued and outstanding. No other shares of Preferred Stock have been designated nor issued. The company also disclosed that on May 13, 2008, the company filed a Certificate of Amendment to its Certificate of Incorporation with the Secretary of State of Delaware to amend its Certificate of Incorporation and establish the preferences, limitations and relative rights of Series A Convertible Stock. The Series A Certificate of Amendment became effective upon filing. A copy of the Securities Purchase Agreement dated May 2, 2008, is available for free at http://researcharchives.com/t/s?2fdb The terms of the Series A Preferred Stock are more fully set forth in the Articles of Amendment dated May 13, 2008, a copy of which is available for free at http://researcharchives.com/t/s?2fda About Apollo Drilling Headquartered in Dallas, Apollo Drilling Inc. (OTC: APDR) -- http://www.apollodrillinginc.com/-- is engaged in oil and natural gas exploration and production. The company derives its revenue primarily from providing oil and natural gas exploration drilling services. As reported in the Troubled Company Reporter on March 25, 2008, the company's consolidated balance sheet at Sept. 30, 2007, showed $1,787,914 in total assets, $1,660,419 in total liabilities, and $127,495 in total stockholders' equity. Going Concern Doubt De Joya Griffith & Company LLC, in Henderson, Nevada, expressed substantial doubt about Apollo Drilling Inc.'s ability to continue as a going concern following its audit of the company's consolidated financial statements for the year ended Dec. 31, 2006. The auditing firm pointed to the company's losses from operations. ASARCO LLC: Wants September 19 Set as Admin. Claims Bar Date ------------------------------------------------------------ To identify and expeditiously resolve claims for postpetition administrative expenses, ASARCO LLC and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of Texas to set Sept. 19, 2008, as the bar date for filing requests for payment of administrative expenses, including requests for payment under Sections 503(b), 365, 507(b) or 1147(e)(2) of the U.S. Bankruptcy Code, which expenses are accrued and unpaid through September 19. The Debtors will serve notice of the Administrative Bar Date substantially in the form similar to Official Bankruptcy Form No. 10. The Debtors ask that any holder of an Administrative Expense Claim that fails to file an Administrative Expense Claim on or before the Administrative Bar Date (i) be forever barred, estopped, and permanently enjoined from asserting an Administrative Expense Claim against the Debtors, their successors, or their property; and (ii) not be entitled to receive further notices regarding the Administrative Expense Claims. The Administrative Bar Date applies to all postpetition Administrative Expense Claims or requests for payment by non- debtor affiliates and insiders of the Debtors, including Americas Mining Corporation, ASARCO Inc., and ASARCO USA Inc., and necessarily includes all claims relating to, or requests for payment or reimbursement of, tax or tax-related debts arising prior to or associated with tax periods in whole or in part prior to the Administrative Bar Date, regardless of whether contingent or unliquidated as of the date. The Debtors clarify that the September 19 Bar Date excludes: (a) Administrative Claims of one Debtor against another Debtor; (b) Administrative Claims of professional persons retained pursuant to a Court order for compensation of fees and reimbursement of expenses and any administrative claims by professionals for the United Steelworkers; (c) Administrative Claims of the members of the Committees and counsel to those members for compensation of fees and reimbursement of expenses; (d) Claims for postpetition goods or services due and payable in the ordinary course of the Debtors' business; (e) Administrative Claims of current or former employees or labor unions representing those individuals or benefit plans to whom contributions are made under a collective bargaining agreement, for post-bankruptcy wages, compensation, expenses, grievances, medical benefits, retirement benefits or any other post-bankruptcy benefits under an employee benefit plan of a Debtor or court approved retention, severance or recruiting plan, including but not limited to any amounts authorized to be paid by the Debtors under the order authorizing payment of prepetition wages and benefits; (f) Administrative Claims previously allowed by Court order; (g) Administrative Claims on account of which a motion requesting allowance and payment already has been filed in the Court, against the Debtors; and (h) Administrative Claims held by the U.S. Trustee for Region 7, which arise under Section 1930(a)(6) of the Judiciary and Judicial Procedure Code. According to James R. Prince, Esq., at Baker Botts L.L.P., in Dallas, Texas, establishment of an initial administrative bar date is necessary to aid the pursuit of confirmation of a plan of reorganization of the Debtors. A bar date for administrative expenses will enable the Debtors to ascertain the value that will be available for distribution to creditors after payment of administrative and priority claims, he adds. About ASARCO LLC 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 have until Aug. 1, 2008 to file a plan of reorganization. (ASARCO Bankruptcy News, Issue No. 77; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). ASARCO LLC: Seeks Appointment of Official Asbestos Committee ------------------------------------------------------------ Pursuant to Sections 1102(a)(2) and 105(a) of the U.S. Bankruptcy Code, ASARCO LLC and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of Texas to direct the U.S. Trustee for Region 7 to appoint an official committee of asbestos claimants. The Asbestos Panel will represent the class of creditors with asbestos-related claims against ASARCO LLC, Lac d'Amiante du Quebec Ltee, Lake Asbestos of Quebec, Ltd.; LAQ Canada, Ltd., CAPCO Pipe Company, Inc., and Cement Asbestos Products Company. The Official Committee of Unsecured Creditors for the Subsidiary Debtors already serves in this capacity with respect to creditors asserting asbestos claims against the Asbestos Debtors. The Debtors ask the Court to direct the U.S. Trustee to appoint the current members of the Asbestos Subsidiary Committee and three new members, who have direct asbestos-related premises liability claims against ASARCO, to represent the entire class of asbestos creditors with asbestos claims against the Debtors. James R. Prince, Esq., at Baker Botts, LLP, in Dallas, Texas, stresses that the appointment of an official asbestos committee is necessary to assure that creditors with asbestos claims against all of the Debtors have adequate representation during the negotiation of the terms of a plan of reorganization. Mr. Prince relates that one of the key elements of the Chapter 11 plan to be proposed by the Debtors will be the protection of an asbestos claims channeling injunction under Section 524(g). All current and future asbestos claims involving the Debtors will be channeled to a trust, funded by the Debtors or non-debtor entities, for payment and satisfaction. To properly establish the trust, the interests of both current and future asbestos- related claimants should be assessed and accommodated, Mr. Prince notes. It is expected that the official asbestos committee will share professionals with the Asbestos Subsidiary Committee, Mr. Prince tells the Court. The appointment of an official asbestos committee will expedite the Debtors' journey through Chapter 11 because it will be uniquely well-suited to perform certain tasks that will benefit the Debtors and their estates, he adds. About ASARCO LLC 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 have until Aug. 1, 2008 to file a plan of reorganization. (ASARCO Bankruptcy News, Issue No. 77; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). ASARCO LLC: Wants Robert Pate as Future Asbestos Claimants Rep. --------------------------------------------------------------- ASARCO LLC and its debtor-affiliates request for the appointment of former judge Robert C. Pate as the legal representative for future claimants with asbestos-related claims against ASARCO. The Debtors insist that, to best protect the interest of future asbestos claims against ASARCO, an FCR for the ASARCO Future Claims should be appointed. In connection with prepetition services, Judge Pate received an initial retainer of $50,000 for ASARCO as security for unpaid fees and expenses. The Debtors have agreed to pay Judge Pate based on his hourly rate of $350 per hour, and reimburse him of necessary out-of-pocket-expenses. Judge Pate assures the Court that he is a disinterested person as the term is defined in Section 101(14) and modified by Section 1107(b), and otherwise qualified to serve as ASARCO FCR. About ASARCO LLC 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 have until Aug. 1, 2008 to file a plan of reorganization. (ASARCO Bankruptcy News, Issue No. 77; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). ASG CONSOLIDATED: Moody's Rates $55MM Discount Notes B3 ------------------------------------------------------- Moody's Investors Service assigned a rating of B3 to the $55 million add-on to ASG Consolidated LLC's (ASG) 11.5% senior discount notes due in 2011. Moody's also affirmed the company's existing ratings, including its corporate family rating and probability of default rating at B1. The rating outlook remains stable. Rating assigned: ASG Consolidated LLC -- $55 million add-on to 11.5% senior discount notes due in 2011 at B3 (LGD5, 85%) Ratings affirmed: ASG Consolidated LLC -- Corporate family rating at B1 -- Probability of default rating at B1 Ratings affirmed, LGD and LGD% revised ASG Consolidated LLC -- $196 million (accreted value at maturity) 11.5% senior discount notes due 2011 at B3. LGD to LGD5 from LGD6; LGD % to 85% from 90% Ratings affirmed, LGD% revised: American Seafoods Group LLC -- $75 million senior secured revolving credit expiring in 2011 at Ba3 (LGD3); LGD % to 32% from 39% -- Senior secured Term Loan A, Term Loan B-1 and Term Loan B-2 at Ba3 (LGD3); LGD % to 32% from 39% Proceeds of the add-on, net of expenses, will be distributed to members; this distribution is in addition to regular distributions for taxes and for member enhancement. The affirmation of the company's other ratings was based on ASG's stability in operating cash flow, relative to other natural products processors. Free cash flow generation before payments to members is likely to continue because ASG has the ability to raise prices, as competing proteins become more expensive and as reductions in 2007 and 2008 in the regulatory-allowed catch for Pollack reduces potential industry supply. Thus, cash generation and profitability will allow for a reduction in leverage following this large distribution in 2008. Moody's anticipates that debt to EBITDA (proforma for unrealized derivatives gains and losses and impairment charges) in fiscal 2008 will not exceed five times. ASG's ratings consider the company's relatively small size, its limited product diversification, the concentration of raw materials from a single country (the U.S.), and large periodic distributions to members. However, the company's market position is quite solid at over 40% of the catcher-processor Pollock allocation, and well in excess of the second largest player. ASG's raw material supply is fairly stable, as it is provided by its quota-protected fishing rights. Headquartered in Seattle, Washington, ASG Consolidated LLC is one of the world's largest integrated seafood companies, harvesting and processing primarily Pollock, Pacific whiting and catfish. At-sea operations are concentrated in the U.S. Bering Sea. ASG's revenues for the twelve months ended March 31, 2008 were approximately $558 million. ATRIUM CORP: Inks Forbearance and Lockup Contracts with Creditors ----------------------------------------------------------------- Atrium Corporation and its key affiliates reached an agreement with each of their major creditor groups to restructure debt. Atrium also has entered into forbearance and lockup agreements with requisite majorities of the holders of each tranche of Atrium's funded indebtedness. The transaction contemplated by these agreements is intended to restructure Atrium's balance sheet, provide an additional capital infusion to reduce leverage and consequently improve Atrium's liquidity position and operations. As part of the restructuring, holders of a majority of the 11-1/2% Senior Discount Notes due 2012 of Atrium affiliate ACIH Inc. have agreed not to exercise any remedies on account of existing defaults, including a missed interest payment, as have the holders of a majority of Atrium's bank debt, mezzanine debt and accounts receivable facility, for a forbearance period extending through the expiration or termination of the transaction lockup agreements. The bank lenders and accounts receivable lenders also have agreed to continue funding Atrium during this forbearance period. The restructuring would result in an infusion of $50 million in new equity, a permanent paydown of approximately $40 million in debt under Atrium Companies Inc.'s senior credit facility, and an exchange of the Discount Notes and the $40 million principal amount of ACI's senior subordinated notes for two new series of notes to be issued by ACI. Under the terms of the contemplated restructuring, no cash interest will be payable on either series of new notes until after the third anniversary of the consummation of the restructuring. The restructuring also would eliminate all financial covenants under ACI's senior credit facility for the first year after the closing of the transaction and impose only a minimum EBITDA covenant in following years. Finally, the restructuring contemplates the payment of increased rates of interest under the senior credit facility and the new series of notes, some of which increased interest under the senior credit facility may be payable in kind. The restructuring is subject to the satisfaction of various conditions, including the completion of documentation satisfactory to the parties and the successful completion of an exchange offer in which substantially all of the Discount Notes and all of ACI's senior subordinated notes would be tendered and exchanged for the new notes. As a result, no assurance can be given that the proposed restructuring transaction will be consummated. About Atrium Corporation Headquartered in Dallas, Texas, Atrium Corporation is a manufacturer and supplier of residential windows and doors in North America. The company has approximately 5,100 employees and 63 manufacturing facilities and distribution centers in 21 states, Canada and Mexico. AVETA INC: Amends Credit Agreement, Repays $50 Million Term Loan ---------------------------------------------------------------- Aveta Inc. disclosed that the loan agreement with its lenders covering credit facilities extended to the company and its operating subsidiaries, MMM Holdings Inc., NAMM Holdings Inc. and Preferred Health Management Corporation has been amended. Under the terms of the amended loan agreement, Aveta and its subsidiaries made a term loan repayment of $50 million. The maturity date on remaining outstanding balances of approximately $404 million after the repayment will remain unchanged at August 2011. As a result of Aveta's improved financial performance, the company is in full compliance with all covenants in its amended loan agreement. "The successful amendment of our loan agreement despite the current difficult credit market conditions reflects the continued strength of our medical management business in California and the significantly improved operational and financial performance of our Medicare Advantage business in Puerto Rico," Warren Cole, chief financial officer of Aveta Inc., said. "With this agreement, Aveta and its operating subsidiaries have in place a sustainable and conservative capital structure and the financial flexibility to continue our progress in strengthening and growing the business." About Aveta Inc. Headquartered in Fort Lee, New Jersey, Aveta Inc. is a for-profit company that focuses on Medicare Advantage and addresses the healthcare needs of the chronically ill. Aveta has operating subsidiaries in Southern California, Puerto Rico, and Illinois. Aveta is caring for over 195,000 Medicare beneficiaries. * * * As reported in the Troubled Company Reporter on June 10, 2008, Standard & Poor's Ratings Services said it raised its counterparty credit rating on Aveta Inc. to 'CCC+' from 'CCC'. At the same time, Standard & Poor's raised its senior secured debt ratings on MMM Holdings Inc. and NAMM Holdings Inc. to 'CCC+' from 'CCC'. The recovery ratings assigned to the credit facility issued through MMM and NAMM remained unchanged at '4'. Debt outstanding through March 31, 2008, consisted of a $455.6 million remaining on the term loan due August 2011 and a $20 million revolver due August 2012. The outlook is positive. AVIATION CAPITAL: Fitch Puts Two Low-B Ratings Under Neg. Watch --------------------------------------------------------------- Fitch Ratings takes these rating actions on notes issued by the Aviation Capital Group Trusts as outlined below: Aviation Capital Group Trust (ACG I) These classes are place on Rating Watch Negative: -- Class A-1 notes 'BBB+'; -- Class B-1 notes 'BB+'; -- Class C-1 notes 'B+'. This class remains unchanged: -- Class D-1 notes 'C/DR6'. Aviation Capital Group Trust II (ACG II) This class is placed on Rating Watch Negative: -- Class B-1 notes 'A'. Aviation Capital Group Trust III (ACG III) -- Class G-1 notes are affirmed at 'AA-'; -- Class B-1 notes are affirmed at 'A'; -- Class C-1 notes are affirmed at 'BBB'. The Rating Watch Negative designations to ACG I and II reflect Fitch's view of potential cash flow deterioration in the future. While cash flow should remain relatively stable in the near term, Fitch's expectation for future lease revenue generation on certain portfolio assets has worsened in light of recent aviation market turmoil. This is particularly true for older generation, less fuel efficient aircraft types which are expected to be under significant pressure in coming years. Fitch will review available lease data and updated appraisals when made available in order to better project expected trust cash flow before resolving the rating watches. Fitch's analysis incorporated expected cash flow to be available to the trust over the remaining life of the transaction. This expectation is based on several factors including aircraft age, current portfolio value, potential lease rates, and perceived liquidity of the portfolio. Lease rate and portfolio value expectations have been updated to reflect Fitch's views on certain aircraft types given recent aviation market volatility. BALLY TECHNOLOGIES: S&P Raises Rating to 'BB'; Off CreditWatch -------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on Las Vegas, Nev.-based Bally Technologies Inc.; the corporate credit rating was raised to 'BB' from 'B+'. The ratings were removed from CreditWatch, where they were placed with positive implications Nov. 5, 2007. The rating outlook is stable. At the same time, we raised the issue-level rating on Bally's senior secured credit facilities to 'BB+' (one notch higher than the 'BB' corporate credit rating) and assigned a recovery rating of '2' to the loans, indicating that lenders can expect substantial (70% to 90%) recovery in the event of a payment default. "The rating upgrade is based on continuing robust operating performance demonstrated over the past several quarters, coupled with a significant improvement in credit metrics, which we believe is sustainable," explained Standard & Poor's credit analyst Melissa Long. "We expect Bally to continue to post relatively good operating results over the intermediate term, although that growth will moderate somewhat in the coming quarters, given economic weakness, which is affecting the U.S. gaming industry." The rating on Bally reflects the company's exposure to product sales volatility, the existence of a much larger and well- established competitor (International Game Technology), and the expectation for a moderation in the operating environment during the next few quarters as a result of slower replacement sales and economic weakness. These factors are tempered by the company's No. 2 position in the North American gaming equipment market, its expanding base of gaming devices and systems, and strong credit measures for the rating, which we expect provide ample cushion in a slowdown. For the nine months ended March 31, 2008, Bally reported EBITDA of $188.2 million, up about 142% year over year. The EBITDA improvements, along with modest debt repayment, have resulted in total debt to EBITDA (adjusted for operating leases) and EBITDA coverage of interest for the 12 months ended March 31, 2008, improving to 1.2x and 8.9x, respectively. This compares with 3.3x and 3.2x, respectively, for the previous 12-month period. The credit measures are currently strong for the rating and afford some flexibility for share repurchases, acquisitions, or a weakening operating environment. BAYTEX ENERGY: S&P Upgrades Rating to 'BB-' on Strong Performance ----------------------------------------------------------------- Standard & Poor's Ratings Services raised its long-term corporate credit rating on Calgary, Alta.-based Baytex Energy Trust (Baytex or the trust) to 'BB-' from 'B+', and its subordinated debt rating to 'B+' from 'B', following a review of the company's current and prospective business risk and financial risk profiles The outlook is stable. "The upgrade reflects the trust's continued strong operating performance, ability to generate stable profit margins, and relatively moderate financial policies and continued solid financial measures for the rating," said Standard & Poor's credit analyst Jamie Koutsoukis. These factors have contributed to an overall stronger credit profile. "We also view the trust's demonstrated ability to largely fund its capital expenditures and its cash distributions through internally generated cash flow as a strong credit positive," Ms. Koutsoukis added. The ratings on Baytex reflect the company's midsize reserve base, its concentration of production and regional focus, and the cyclical nature of the exploration and production industry. These factors, which hamper the ratings, are tempered by the relatively low-risk nature of the trust's reserve base, the good development opportunities associated with Baytex's existing portfolio of assets, and moderate capital structure for the ratings category. Standard & Poor's expects that the trust's near-term business strategy will focus on drill bit-related reserve replacement as it works to develop its sizable proved undeveloped and probable reserves. The stable outlook reflects our expectation that Baytex will continue to largely pay for its capital spending program and distributions through internally generated funds, while maintaining a stable production and reserve profile. The trust's credit profile continues to strengthen, based on its consistently strong netbacks and largely internal growth focus, supplemented with acquisitions. Furthermore, Baytex's cost structure should allow the trust to withstand some deterioration in profitability due either to falling hydrocarbon prices or capital expenditure increases. A positive rating action is possible if the trust can increase both its product and geographic diversification while adhering to its existing financial policies. Alternatively, although unlikely in the near term, we could lower the ratings if Baytex materially ramps up its spending or distributions above operating cash flow, while increasing debt levels. CAPITAL RESERVE: Child Van Wagoner Expresses Going Concern Doubt ---------------------------------------------------------------- Salt Lake City-based Child, Van Wagoner & Bradshaw raised substantial doubt about the ability of Capital Reserve Canada Limited to continue as a going concern after auditing the company's financial statements for the year ended Dec. 31, 2007. The auditor pointed to the company's current cash flow constraints and accumulated deficit. As of Dec. 31, 2007, the company has negative working capital of $101,061, as compared with positive working capital of $314,184 on Dec. 31, 2006. The company posted a net loss of $854,288 on total revenues of $1,021,818 for the year ended Dec. 31, 2007, as compared with a net loss of $188,745 on total revenues of $1,714,925 in the prior year. The decrease in revenues in 2007 can be attributed to a slow-down in the oil and gas industry in Alberta for that year. The increase in revenues for 2006 can be predominantly attributed to the availability of additional equipment for operations in its wholly owned subsidiary KCP Innovative Services Ltd. and increased marketing efforts of management. For the year ended Dec. 31, 2007, the company incurred operating losses of $854,288 as compared with operating losses of $188,745 for the fiscal year ended Dec. 31, 2006. Cost of sales for the year ended Dec. 31, 2007, decreased to $789,137 from cost of sales of $846,090 for the year ended Dec. 31, 2006. This was mainly due to a corresponding decrease in sales. Expenses for the year ended Dec. 31, 2007, remained steady at $1,086,969 as compared with expenses of $1,057,580 for the year ended Dec. 31, 2006. Salaries and benefits decreased to $213,345 in 2007 from $236,671 in 2006. General and administrative expenses increased to $637,196 in 2007 from $530,381 in 2006. This is due to higher administrative costs and a need to retain management and consulting services to maintain the public listing. Amortization decreased to $213,782 in 2007 from $261,042 in 2006. Because of operating losses of the past two periods, the company's continuance as a going concern is dependent upon its ability to obtain adequate financing and to reach profitable levels of operation. Management believes actions planned and presently being taken provides the opportunity for the company to continue as a going concern. At Dec. 31, 2007, the company's balance sheet showed $6,460,892 in total assets, $548,588 in total liabilities, and $5,912,304 in total stockholders' equity. The company's consolidated balance sheet at Dec. 31, 2007, showed strained liquidity with $294,297 in total current assets available to pay $395,358 in total current liabilities. A full-text copy of the company's 2007 annual report is available for free at http://ResearchArchives.com/t/s?2fbf About Capital Reserve Based in Edmonton, Alberta, Capital Reserve Canada Ltd. (OTC BB: CRSVF) -- http://capitalreservecanada.com/-- is an oil and gas services company. Through its wholly owned subsidiary, KCP Innovative Services, Inc., the company provides testing and development services, measurement of existing wells' productivity, well abandonment services, and through its proprietary hardware and software technologies, determination of the profitability of coal bed methane deposits, which may be developed and sold as natural gas. The company has a second wholly owned subsidiary, Two Hills Environmental, to assist with problem waste from oil & gas companies, and provide underground storage. CARROLS CORP: S&P Affirms 'B+' Corporate Credit Rating ------------------------------------------------------ Standard & Poor's Ratings Services revised the outlook on Syracuse, N.Y.-based Carrols Corp. to negative from stable. We also affirmed the 'B+' corporate credit rating on the company. "The outlook revision reflects the fact that we are no longer comfortable with Carrols' weakening credit metrics," said Standard & Poor's credit analyst Jackie E. Oberoi, "given the current very poor environment for restaurant companies." High commodity prices are leading to margin deterioration and consumers hurt by high gasoline prices and a weak housing market have been reducing restaurant spending as evidenced by declining traffic trends. "We do not expect significant improvement in these factors over the near term," added Ms. Oberoi, "and therefore are concerned that Carrols' performance could weaken further, leading to cash flow protection measures no longer appropriate for the 'B+' rating." CDO VI: Moody's Rates $12.3MM Class E Floating Rate Notes Ba2 ------------------------------------------------------------- Moody's Investors Service assigned these ratings to Notes issued by CDO VI: -- Aaa to the $344,250,000 Class A Senior Secured Floating Rate Notes due 2020; -- Aa2 to the $24,525,000 Class B Senior Secured Floating Rate Notes due 2020; -- A2 to the $19,800,000 Class C Senior Secured Deferrable Floating Rate Notes due 2020; -- Baa2 to the $12,150,000 Class D Senior Secured Deferrable Floating Rate Notes due 2020; and -- Ba2 to the $12,375,000 Class E Secured Deferrable Floating Rate Notes due 2020. The Moody's ratings of the Notes address the ultimate cash receipt of all required interest and principal payments, as provided by the Notes' governing documents, and are based on the expected loss posed to Noteholders, relative to the promise of receiving the present value of such payments. The ratings reflect the risks due to the diminishment of cash flow from the underlying portfolio consisting of leveraged loans due to defaults, the transaction's legal structure and the characteristics of the underlying assets. GSO will manage the selection, acquisition and disposition of collateral on behalf of the Issuer. COMMISSARY OPERATIONS: Files for Bankruptcy in Tennessee -------------------------------------------------------- Commissary Operations Inc., a unit of COI Acquisition Co., filed a voluntary petition under Chapter 11 of the Bankruptcy Code before the U.S. Bankruptcy Court in Nashville, Tennessee, blaming declining demand and rising fuel costs, Erik Larson of Bloomberg News reports. According to Bloomberg, the company listed assets and debts of both more than $100 million. The company filed a list of largest unsecured creditors, which include Ryder Trans Services asserting a $2.3 million claim; New City Packing Co., $1.8 million; and Coca-Cola Co., $1.6 million, the report says. The company is seeking to obtain up to $22 million in financing from Bank of America Corp. to fund operational costs as it restructures, the report relates. The company owes at least $17.8 million to the bank, Bloomberg notes. Bloomberg citing papers filed with the Court, says the company lost money in May when Roadhouse Grill Inc. started winding down in bankruptcy court. The company stated that six other distribution agreements also were terminated, the report says. The company tells the Court that it can not file its schedules of assets and liabilities until Aug. 25, 2008. Headquartered in Nashville, Tennessee, Commissary Operations Inc. manufactures and distributes food products and supplies. The company provides transportation and custom cleaning services. Its clientele include Shoney's, Fifth Quarter Steakhouse, and Applebee's restaurants. The company has more than 700 employees. COMMISSARY OPERATIONS: Voluntary Chapter 11 Case Summary -------------------------------------------------------- Debtor: Commissary Operations, Inc. dba COI Foodservice dba Chairman's Choice Foods Attn: Glenn B. Rose Harwell Howard Hyne Gabbert & Manner, PC 315 Deaderick St. Ste. 1800 Nashville, TN 37238 Tel: (615) 256-0500 Bankruptcy Case No.: 08-06279 Type of Business: The Debtor sells groceries in wholesale. It also provides food or agriculture organization services, common fund for commodities services, international fund for agricultural development services, food distribution services and food supply services. See http://www.coifoodservice.com/ Chapter 11 Petition Date: July 22, 2008 Court: Middle District of Tennessee (Nashville) Judge: Marian F. Harrison Debtor's Counsel: Barbara Dale Holmes, Esq. Email: bdh@h3gm.com David Phillip Canas, Esq. Email: dpc@h3gm.com Glenn Benton Rose, Esq. Email: gbr@h3gm.com Tracy M. Lujan, Esq. Email: tml@h3gm.com Harwell Howard Hyne Gabbert & Manner, PC 315 Deaderick St. Ste. 1800 Nashville, TN 37238 Tel: (615) 256-0500, (615) 251-1071 Fax: (615) 251-1058, (615) 251-1059 http://www.h3gm.com/ Estimated Assets: $50,000,000 to $100,000,000 Estimated Debts: $50,000,000 to $100,000,000 The Debtor did not file its list of largest unsecured creditors. DANKA BUSINESS: Ernst & Young Expresses Going Concern Doubt ----------------------------------------------------------- Ernst & Young LLP in Tampa, Fla., raised substantial doubt about Danka Business Systems PLC's ability to continue as a going concern after auditing the company's financial statements for the year ended March 31, 2008. The auditing firm stated that the company has incurred recurring operating losses, has a working capital deficit and has not complied with certain covenants of loan agreements with a bank. In addition, on June 27, 2008, the company sold its remaining operations to Konica Minolta Business Solutions U.S.A., Inc. The company posted a net loss of $35.7 million on total revenues of $418.2 million for the year ended March 31, 2008, as compared with a net loss of $29.2 million on total revenues of $450.2 million in the prior year. At March 31, 2008, the Company has net operating losses and interest carryforwards relating to U.S. operations of approximately $366.4 million, which will begin to expire if not used by March 31, 2025. Additionally, the company's U.S. operations have an alternative minimum tax credit carryforward of $3.4 million, which is available indefinitely, and capital loss carryforwards of $7.9 million. The company has U.K. net operating loss carryforwards of around $96.5 million. All net operating losses have been offset by a full valuation allowance reflecting uncertainty as to future realization. Revenue includes customer purchases of office peripherals; supplies; software and related support products; professional, consulting and maintenance services; and leasing arrangements. For the fiscal year 2008, the company's revenue decreased by $32.0 million or 7.1% from fiscal year 2007 with retail equipment, supplies and related sales declining $10.5 million or 5.3% to $189.6 million. Retail service revenue declined $19.0 million or 8.0% to $217.1 million and rental revenue was down $2.5 million or 17.8% to $11.5 million for fiscal year 2008. Indebtedness On June 18, 2007, the company's U.S. operating subsidiary, Danka Office Imaging Company entered into new financing agreements with GECC pursuant to which Danka Office may borrow up to $145.0 million including $40.0 million in revolving loans. Proceeds from this financing were used in conjunction with the proceeds of the previously completed sale of the company's European businesses to redeem the senior notes and the subordinated notes, to reduce and refinance the company's existing debt, to pay fees and expenses in connection therewith and for working capital and general corporate purposes. The credit agreements governing Danka Office's financing agreements contain customary financial covenants that the company must comply with on a quarterly basis relating to its leverage ratios, fixed charge coverage ratio, cumulative EBITDA and an annual capital expenditure threshold. On Nov. 14, 2007, the First Lien Credit Agreement was amended to extend the Consolidated First Lien Leverage Ratio to 3.7 to 1 from 3.5 to 1 to Dec. 15, 2007, and to increase the applicable interest rate margin on the term loan by 1%. The Second Lien Credit Agreements was amended to increase the applicable interest rate margin on the term loan by 1%. On Dec. 14, 2007, the First Lien Credit Agreement was further amended to extend the Consolidated First Lien Leverage Ratio of 3.7 to 1 to Jan. 31, 2008, and was further extended on Jan. 31, 2008, to March 31, 2008. On March 31, 2008, the First Lien Credit Agreement was amended to increase the Consolidated First Lien Leverage Ratio to 4.5 to 1 upon the execution of the Share Purchase Agreement with Konica Minolta Business Solutions U.S.A, Inc. In addition, the applicable interest rate margin on the term loan was increased by 1%. Also on March 31, 2008, the company entered into a fee letter agreement with General Electric Capital Corporation whereby the company agreed to pay to GECC a non-refundable amendment fee in the amount of $2.5 million upon the execution of the Share Purchase Agreement and a non-refundable ticking fee of $0.1 million per week until the re-payment of the term loan. As of March 31, 2008, the borrowing base for the revolving credit facility was $24.3 million and Danka Office had $20.8 million of borrowings under the revolver. In addition, Danka Office had $2.9 million reserved on the revolver for various letters of credit issued on its behalf. The borrowing base fluctuates each month and is generally highest at the end of the quarter. The borrowing base is subject to certain multiples of adjusted EBITDA as more fully described in the credit agreements and therefore, the cash availability that it has under the financing arrangements is reliant on the company meeting these adjusted EBITDA multiples. The company's liquidity is dependent upon cash on hand, cash generated from operations and the availability of funding under the credit agreements with GECC. The borrowing base under the GECC credit agreements is limited to certain multiples of the company's adjusted EBITDA, as described in the agreements. The company's availability of financing under the credit agreements is also dependent upon the satisfaction of a number of other conditions including meeting leverage and other financial covenants. If the company is unable to meet these covenants, GECC could declare it in default, among other possible courses of action. The company is not in compliance with these covenants at March 31, 2008, and therefore reclassified all its debt with GECC to current. Danka Office incurred $6.9 million in debt issuance costs relating to its new credit facilities with GECC and is amortizing these costs straight line over the remaining terms of the facilities, which approximates the effective interest method. The remaining balance of the unamortized costs was $5.4 million at March 31, 2008. Sale of Danka Office On June 27, 2008, Danka Business Systems PLC completed the sale of its U.S. operating subsidiary, Danka Office. Pursuant to the Stock Purchase Agreement, the company sold its U.S. operations to Konica Minolta in a sale of all Danka Office's outstanding capital stock for a purchase price of $240 million in cash, subject to an upward or downward adjustment of $10 million. The purchase price adjustment cannot exceed $10 million. In addition, Konica Minolta held back the sum of $10 million from the amount paid at closing as security for the company's purchase price adjustment obligations. About $25 million of the purchase price paid by Konica Minolta at closing will be held in escrow for a period of four years following closing to satisfy any and all claims by Konica Minolta, which may be made under the Stock Purchase Agreement. After the repayment of the company's outstanding indebtedness, including repayment of around $146 million under its credit facilities provided by GECC, including additional borrowings of $15 million since March 31, 2008, and early termination fees and accrued and unpaid interest of around $6 million, the payment of certain change-of-control and severance obligations and the fees and expenses incurred in connection with the sale transaction and minus the holdback and escrow amounts set forth above, the net sale proceeds received by the company were approximately $40 million. In connection with the sale of Danka Office, the credit facilities provided by GECC were repaid and terminated. The company's board of directors is also evaluating the alternatives available with respect to the net proceeds from the sale of Danka Office to Konica Minolta -� primarily how such proceeds may be distributed to Danka shareholders. There is no guarantee that any future alternative chosen by the board will result in any return to holders of Danka's ordinary shares, including holders of American Depositary Shares. In addition, there is no guarantee that the holders of the company's 6.50% senior convertible participating shares will not take action available to them under applicable law, for example seeking a winding up of the company, to recover amounts to which they are entitled pursuant to its articles of association. Such amounts exceed the amount of the net proceeds from the sale of Danka Office. Balance Sheet Total assets as of March 31, 2008, decreased $194.9 million from March 31, 2007. This decrease was due primarily to the use of cash received on the sale of its European operations during fiscal year 2007 to repay its outstanding senior and subordinated notes. In addition, accounts receivable decreased by $6.5 million due to better collections and lower revenues, and inventory decreased by $4.5 million due to reduced purchasing resulting from better forecasting of inventory needs. Fixed assets decreased $5.7 million due to continuing depreciation of assets and decreased capital spending during fiscal year 2008. Total liabilities decreased $159.8 million from March 31, 2007, or 41.1%. This decrease was due to the payoff of its senior and subordinated notes offset by a new financing arrangement with GECC. In addition, accounts payable and accrued expenses decreased $33 million due to the payout of restructuring accruals and professional fees and the paydown of vendor balances. Working capital decreased $91.4 million or 243.0% from March 31, 2007. This decrease was the result of decreased restricted cash balances at March 31, 2008, and the repayment of the company's outstanding senior and subordinated notes, which were partially offset by borrowings under its new financing arrangement with GECC. At March 31, 2008, the company's balance sheet showed $222.1 million in total assets, $229.2 million in total liabilities, and $368.9 in senior convertible participating shares, resulting in a $375.9 million stockholders' deficit. The company's consolidated balance sheet at March 31, 2008, also showed strained liquidity with $89.3 million in total current assets available to pay $218.1 million in total current liabilities. A full-text copy of the company's 2008 annual report is available for free at http://ResearchArchives.com/t/s?2fcd About Danka Business Systems Headquartered in St. Petersburg, Florida, Danka Business Systems PLC (LON: DNK) -- http://www.danka.com/-- offers document solutions including office imaging equipment: digital and color copiers, digital and color multifunction peripherals printers, facsimile machines, and software in the United States. It also provides a range of contract services, including professional and consulting services, maintenance, supplies, leasing arrangements, technical support and training, collectively referred to as Danka Document Services. The company's revenue is generated from two primary sources: new retail equipment, supplies and related sales, and service contracts. Danka sells Canon products, as well as Kodak, Toshiba and Hewlett-Packard. On Aug. 31, 2006, the company sold its subsidiary, Danka Australasia PTY Limited to Onesource Group Limited. In January 2007, the company disposed of its European businesses to Ricoh Europe B.V. DELTA AIR: Edward Bastian Disposes of 18,000 Common Shares ---------------------------------------------------------- Edward H. Bastian, Delta Air Lines, Inc.'s president and chief financial officer, disclosed in a regulatory filing with the Securities and Exchange Commission dated July 18, 2008, that he disposed of 18,000 shares of Delta common stock at $6.6 per share on July 17. Mr. Bastian's shares were sold in open market transactions through a broker-dealer at prices ranging from $6.59 to $6.63 per share. Mr. Bastian undertakes to provide, upon request, details regarding the number of shares sold at each separate price to the staff of the SEC, Delta, or a security holder of Delta. Following the transaction, Mr. Bastian beneficially owned 258,762 shares of common stock. 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. 104; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). DERECKTOR SHIPYARDS: Bankruptcy Case Won't Affect 250 Workers ------------------------------------------------------------- Bankrupt Derecktor Shipyards Connecticut, LLC, said Monday that it won't terminate its 250 employees at its Bridgeport headquarters, Rob Varnon of the Connecticut Post reports. In March 2008, the Planning & Zoning Commission allowed the Debtor to build three buildings at its 23-acre lot at 837 Seaview Avenue in Bridgeport, ConnPost says. In April 2008, the U.S. Maritime gave the Debtor $863,515 grant for an acquisition of a new welding equipment, ConnPost adds. Bridgeport Mayor Bill Finch said he was assured by the Debtor's officers that the bankruptcy case is meant to resolve a dispute with an undisclosed customer, ConnPost reveals. Mayor Finch, who met with the Debtor's officers Monday, indicated that the bankruptcy case won't "have any impact" on Derecktor's operations, ConnPost says. He added that the city of Bridgeport will continue to support the Debtor's plan to expand and add 100 jobs, according to ConnPost. ConnPost says that the Debtor asked the U.S. Bankruptcy Court for the District of Connecticut for authority to continue paying salaries for its 250 employees. Company president, Paul Derecktor, said that the Debtor is in settlement talks with its customer over a contract to deliver a vessel, ConnPost relates. He said that the dispute couldn't be resolved outside the bankruptcy process. Mr. Derecktor added that the bankruptcy filing will preserve the company's value, ConnPost reports. Bridgeport Port Authority executive director, Joseph Riccio, Jr., said that Mr. Derecktor assured him the bankruptcy case centered on the contract under dispute, ConnPost states. The BPA is the Debtor's landlord. About Derecktor Shipyards Bridgeport, Connecticut-based Derecktor Shipyards Connecticut, LLC, dba Derecktor Shipyards, -- http://www.derecktor.com/-- builds yachts and commercial vessels. It also has operations in New York and Florida. It delivered a 350-passenger fast ferry for Bermuda in 2007. In 2006, the company won deals to build two large vessels, which are currently under construction. The Debtor filed its chapter 11 petition on July 18, 2008 (Bankr. D. Conn. Case No. 08-50643). Judge Alan H.W. Shiff presides over the case. James Berman, Esq., at Zeisler and Zeisler, represents the Debtor in its restructuring efforts. The Debtor estimated assets between $10,000,000 and $50,000,000 and debts between $10,000,000 and $50,000,000. DISTRIBUTED ENERGY: Arent Fox Approved as Committee's Counsel ------------------------------------------------------------- The United States Bankruptcy Court for the District of Delaware gave the Official Committee of Unsecured Creditors of Distributed Energy Systems Corp. and Northern Power Systems Inc. permission to retain Arent Fox LLP as its counsel. Arent Fox is expected to: a) assist, advise and represent the Committee in its consultation with the Debtors relative to the administration of these Chapter 11 cases; b) assist, and advise and represent the Committee in analyzing the Debtors' assets and liabilities, investigating the extent and validity of liens and participating in and reviewing any proposed assets sales or dispositions; c) attend meetings and negotiate with the representative of the Debtors; d) assist the Committee in the review, analysis and negotiation of the disclosure statement describing any plans of reorganization. e) assist and advise the Committee in its examination and analysis of the conduct of the Debtors' affairs; f) assist the Committee in the review, analysis, and negotiation of any financing or funding agreements; g) take all necessary action to protect and preserve the interest of the Committee, including, the prosecution of actions on its behalf, negotiations concerning all litigation in which the Debtors are involved, and review and analysis of claims filed against the Debtors' estate; h) prepare on behalf of the Committee all necessary motions, applications, answers, orders, reports and papers in support of positions taken by the Committee; i) appear, as appropriate, before the Court, the appellate court, and other courts in which matters may be heard and protect the interests of the Committee before the Court and the U.S. trustee; and j) perform all necessary legal services in these cases. The firm's professionals will bill at these rates: Designations Hourly Rates ------------ ------------ Partners $455-$790 Counsel $455-$750 Associate $290-$515 Paraprofessionals $145-$260 Andrew I. Silfen, Esq., a partner at firm, assures the Court that the firm does not hold any interest adverse to the Debtors' estate and is a "disinterested person" as defined in Section 101(14) of the Bankruptcy Code. Mr. Silfen can be reached at: Andrew I. Silfen, Esq. Arent Fox LLP 1675 Broadway New York, NY 10019 Tel: (212) 484-3900 Fax: (212) 484-3990 http://www.arentfox.com/ About Distributed Energy Based in Wallingford, Connecticut, Distributed Energy Systems (Nasdaq: DESC) -- http://www.distributed-energy.com/-- through its subsidiaries, engages in the design, development, manufacture, and sale of on-site hydrogen gas delivery systems worldwide. Distributed Energy Systems Corp. and its wholly owned subsidiary, Northern Power systems Inc., filed for Chapter 11 bankruptcy protection on May 4, 2008 (Bankr. D. Del. Lead Case No. 08-11101). Robert S. Brady, Esq. and Robert F. Poppiti, Jr., at Young, Conaway, Stargatt & Taylor represent the Debtors in their restructuring efforts. The Debtors selected Epiq Bankruptcy Solutions LLC as their claims agent. The U.S. Trustee for Region 3 appointed three creditors to serve on an Official Committee of Unsecured Creditors. The Debtors disclosed in its schedules, assets of $19,593,387 and debts of $43,558,713. DRIGGS FARMS: Taps Chikol Equities as Consultant ------------------------------------------------ Driggs Farms of Indiana Inc. asks the U.S. Bankruptcy Court for the Northern District of Indiana for authority to employ Chikol Equities Inc. to render consultant services during the pendency of its bankruptcy case. Chikol Equities will assist the Debtor with the management and operational support of its business. Ckikol Equities's professionals bill: Hourly Rate ----------- Partners $250 Senior Associates $150 Associates $125 Clarke Coccari, a consultant with Chikol Equities, assures the Court that the firm does not represent any interest adverse to the Debtor or its estate. As of the petition date, the Debtor or its affiliates had no unpaid amounts due to Chikol Equities Inc. Based in Decatur, Ind., Driggs Farms of Indiana Inc. manufactures frozen desserts & novelties and dairy products. The company filed for Chapter 11 protection on June 20, 2008 (N.D. Indiana Case No. 08-11955). Daniel J. Skekloff, Esq., at Skekloff, Adelsperger & Kleven, LLP, represents the Debtor in its restructuring efforts. Rothberg Logan & Warsco LLP is the Commitee of Unsecured Creditors' proposed counsel. When the Debtor filed for protection from its creditors, it listed estimated assets of between $10 million and $50 million and estimated debts of $10 million and $50 million. EAGLE CREEK: Waccamaw Bank Presses for Loan Usage Examination ------------------------------------------------------------- Waccamaw Bank, asked permission from Judge J. Rich Leonard of the U.S. Bankruptcy Court for the Eastern District of North Carolina (Wilson) to track how Eagle Creek Subdivision, LLC, its debtor- affiliates, and their manager, Landcraft Management LLC, use their loans, The Deal's Carolyn Okomo writes. The Debtors owe Waccamaw Bank about $14.4 million in prepetition senior mortgage loans secured by a $14.4 cash collateral, The Deal notes. Waccamaw Bank's counsel, Paul Fanning, Esq., at Ward and Smith PA, said that his client wanted to trace the Debtors' loan proceeds by reviewing their account statements, checks, insurance policies and appraisal documents, The Deal states. The Court has not scheduled a hearing on Waccamaw Bank's probe request, The Deal relates. First-Day Motions Withdrawn According to The Deal, Judge Leonard was set to hear the Debtors' first-day motions, including debtor-in-possession financing motion and cash collateral motion, on July 15, 2008. However, the Debtors withdrew their requests without prejudice, The Deal notes. The Debtors initially planned to obtain a $5 million revolving DIP fund from various lenders, The Deal reports. The DIP agreement was supposed to prime all liens, excluding Waccamaw Bank. The DIP facility earns 20% interest and matures in four years, The Deal notes. The Debtors also withdrew their motion to sell some of its Brunswick County property, The Deal relates. Based on a separate motion, the Debtors are privately selling 165 lots to Eastwood Coastal Carolina LLC for between $49,500 and $56,794 per lot, The Deal notes. Judge Leonard directed the Debtors to return to Court to seek approval to sell each of the lot, The Deal quotes a case administrator as saying. About Eagle Creek Charlotte, North Carolina-headquartered Eagle Creek Subdivision, LLC, and its debtor-affiliates are real estate developers managed by Landcraft Management LLC. Eagle Creek owns 489 lots worth about $24.5 million. The companies are also known as Landcraft Properties or Landcraft Communities. Eagle Creek, Eagles Trace, LLC, Aumond Glen, LLC, Back Creek Farms Subdivision, LLC, and Saddlebrook Subdivision, LLC, filed their chapter 11 petition on June 27, 2008 (Bankr. E.D.N.C. Case Nos. 08-04292 through 08- 04296). Judge J. Rich Leonard presides over the case. Trawick H. Stubbs, Jr., Esq., at Stubbs & Perdue, P.A., represents the Debtors in their restructuring efforts. Eagle Creek estimated assets between $10 million and $50 million and debts between $10 million to $50 million. EL PASO CHILE: Has Interim Court Nod to Use Cash Collateral ----------------------------------------------------------- El Paso Chile Company Inc. and its debtor-affiliate obtained interim permission from the U.S. Bankruptcy Court for the Western District of Texas to use the cash collateral of its prepetition secured lenders: 1. Sovereign Business Capital asserts a first priority lien and security interest in substantially all of the Debtors' assets including real property in El Paso, Texas, among others, on account of a $2,500,000 promissory note payable to Sovereign. As of the date of bankruptcy, the Debtors owed Sovereign approximately $2,539,000 plus accrued unpaid interest. 2. CIT Small Business Lending asserts a first priority lien and security interest in an El Paso real property and all of its rents, based on a $750,000 promissory note effective since September 2003. The Debtors currently owe CIT not less than $645,883 plus unpaid interest. The Debtors need immediate use of the cash collateral to continue the operation of their business and to preserve the value of their estates. The cash collateral consists of the Debtors' account receivables, account and contract rights, contracts and proceeds, and other general intangibles. The Debtors believe that Sovereign and CIT are oversecured. The Debtors, however, informed the Court that at this time the amount of the equity cushion that exists is uncertain. In its order, the Court permitted the Debtor to provide adequate protection to the lenders in the form of valid and perfected liens on, and security interests in, any and all of the Debtors' rights, titles, and interests in property and assets. These liens and security interests will have the same seniority and priority as those of the liens that were asserted before the date of bankruptcy. Based in El Paso, Texas, El Paso Chile Company Inc. and its affiliate Desert Pepper Trading Co. -- http://www.elpasochile.com/ -- pack and process food spices, condiments, and drinks. El Paso Chile filed for Chapter 11 protection on June 25, 2008 (Bankr. W.D. Tex. Case Nos. 08-30948 and 08-30949). Bernard R. Given, II, Esq., at Beck & Given P.C., represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed estimated assets of $1 million to $100 million, and estimated debts of $1 million to $100 million. ENHANCED MORTGAGE-BACKED SECURITIES: Moody's Junks Rating on Notes ------------------------------------------------------------------ Moody's Investors Service downgraded the ratings of three classes of notes issued by Enhanced Mortgage-Backed Securities Fund III, Ltd., a market value CDO issuer. The rating action is: $130,000,000 Class A-1 Senior Notes Due August 2008 -- Current Rating: A2, on review for downgrade -- Prior Rating: Aa2, on review for downgrade $14,000,000 Class A-2 Senior Subordinated Notes Due August 2008 -- Current Rating: Ba1, on review for downgrade -- Prior Rating: Baa2, on review for downgrade $20,000,000 Class A-3 Subordinated Notes Due August 2008 -- Current Rating: Caa1, on review for downgrade -- Prior Rating: B2, on review for downgrade The negative rating action reflects continued deterioration in the credit enhancement levels for the rated notes due to: 1) continued price declines in the market value of the collateral portfolio in recent weeks, and 2) increased disparity between the marked-to- market values of the underlying assets and realized sales prices. In addition, Moody's noted that current market turmoil makes asset valuation highly uncertain. ERIK BENHAM: Wants to Employ Vaughn Taus as Counsel --------------------------------------------------- Erik Benham seeks the authority of the U.S. Bankruptcy Court for the Central District of California to employ Vaughn C. Taus, Esq., as counsel, effective June 23, 2008. The Debtor selected Mr. Taus because of his more than 20 years of experience with business litigation and transactional matters and extensive experience representing developers of real property and debtors holding real property interests. Mr. Taus will mainly provide legal advice with respect to the Debtor's powers and duties as a debtor-in-possession and in the continued operation of his business and management of his property, as well as perform other necessary legal services related to his bankruptcy case. Mr. Taus received a pre-petition retainer in the amount of $26,225.25 to be applied as initial payment for his pre-petition representation of Mr. Benham. Mr. Taus bills at $325 per hour and time for paralegal work at $100 per hour. Vaughn C. Taus, Esq., assures the Court that he does not represent any interest materially adverse to the Debtor of his estate and has no connection to or interest in any of the creditors of the estate, or their legal counsel. Erk Benham, with residence at 309 East Tunnel Street, Santa Maria, Calif., filed for Chapter 11 on June 24, 2008 (C.D. Calif. Case No. 08-11432). When Mr. Benham filed for protection from his creditors, he listed estimated assets of between $10,000,000 and $50,000,000, and estimated debts of between $10,000,000 and $50,000,000. FOCUS ENHANCEMENTS: Rule Violation Prompts Nasdaq to Delist Stocks ------------------------------------------------------------------ Focus Enhancements Inc. received a staff determination letter from the NASDAQ Stock Market Inc. stating the company's common stock is subject to delisting from the NASDAQ Capital Market for not meeting the market value of publicly held shares requirement for continued listing. Focus Enhancements will submit a request by July 28, 2008, for a hearing with the NASDAQ Listing Qualifications Panel. This request will stay the delisting of the company's securities pending the hearing and determination by the panel. During this stay, the company's securities will continue to trade under the ticker symbol "FCSE" on the NASDAQ board. There can be no assurance that the panel will grant the company's request for continued listing. "Last week, we completed the acquisition of digital wireless audio technology that significantly enhances our wireless portfolio," Brett Moyer, president and chief executive officer, said. "This new technology is just one way we are working diligently to return the company to compliance. We look forward to presenting our plan to achieve compliance and maintain a continued listing." If the company fails in its efforts to retain its listing on the Nasdaq Stock Market, its shares may be quoted on the OTC Electronic Bulletin Board or some other quotation medium, as the pink sheets, depending on its ability to meet the specific listing requirements of the specific quotation system and market makers' willingness to quote the company's shares on either of these mediums. On June 20, 2008, the company received notice indicating that it had failed to comply with Marketplace Rule 4310(c)(3)(B), 310(c)(3)(A) and 4310(c)(3)(C), requiring the company maintain a market value of listed securities of at least $35,000,000. Therefore, in accordance with Marketplace Rule 4310(c)(8)(C), the company was provided until July 16, 2008, to regain compliance with the Rule. About Focus Enhancements Inc. Headquartered in Campbell, California, Focus Enhancements Inc. (NASDAQ: FCSE) -- http://www.Focusinfo.com/-- designs solutions in advanced, proprietary video and wireless video technologies. The company's Semiconductor Group develops wireless IC chip set based on WiMedia UWB standard and design well as markets portable ICs to the video convergence, portable media, navigation systems and smartphone markets. The company's System Group develops video products for the digital media markets, with customers in the broadcast, video production, digital signage and digital asset management markets. Going Concern Doubt The Troubled Company Reporter reported on April 8, 2008, Burr, Pilger & Mayer LLP in San Jose raised substantial doubt about Focus Enhancements 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 from operations, net capital deficiency and accumulated deficit. At March 31, 2008, the company's balance sheet showed total assets of $29,726,000 and total liabilities of $30,479,000, resulting in a stockholders' deficit of $753,000. FORD MOTOR: Edward Altman's Z-score Model Predicts Bankruptcy ------------------------------------------------------------- Edward Altman, a finance professor at New York University's Stern School of Business, sees a 46% chance that General Motors Corp. and Ford Motor Co. will default within five years, Bloomberg News' Greg Miles and Caroline Salas report. Mr. Altman, in 2005, had said GM had a 47 percent chance of default within five years. Mr. Altman, who created the Z-score mathematical formula that measures bankruptcy risk, said in an interview with Bloomberg Television that his model shows that these companies are "on the verge of bankruptcy." Basing on the companies' finances at the end of the first quarter, the Z-scores for GM and Ford give both a bond rating equivalent to a CCC ranking, he said, according to the report. "Both are in very serious shape and the markets reflect that," Mr. Altman said. GM, though, is in slightly worse condition than Ford, according to him. Ford has said it had access to $40.6 billion in funds as of March 31, including credit lines, the report noted. But still, according to Mr. Altman, he "would not put money with GM right now because the downside is so great relative to the upside, relative to the yield," according to the report. "Your downside is probably 60 percent on the debt. The risk reward ratio is pretty poor," Mr. Altman said referring to GM. The report noted that GM posted a $38.7 billion loss in 2007, the biggest in its 100-year history, and hasn't posted a profit since 2004. GM is fending off rumors that it could file for bankruptcy. GM Chief Executive Officer Rick Wagoner has assured that the company has the ability to raise cash. 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. About Ford Motor Co. Headquartered in Dearborn, Michigan, Ford Motor Co. (NYSE: F) -- http://www.ford.com/-- manufactures or distributes automobiles in 200 markets across six continents. With about 260,000 employees and about 100 plants worldwide, the company's core and affiliated automotive brands include Ford, Jaguar, Land Rover, Lincoln, Mercury, Volvo, Aston Martin, and Mazda. The company provides financial services through Ford Motor Credit Company. 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 Dec. 12, 2006, Standard & Poor's Ratings Services affirmed its 'B' bank loan and '2' recovery ratings on Ford Motor Co. As reported in the Troubled Company Reporter on Dec. 7, 2006, Fitch Ratings downgraded Ford Motor Company's senior unsecured ratings to 'B-/RR5' from 'B/RR4'. As reported in the Troubled Company Reporter on Dec. 6, 2006, Moody's Investors Service assigned a Caa1, LGD4, 62% rating to Ford Motor Company's $3-billion of senior convertible notes due 2036. GE COMMERCIAL: S&P Puts Loan Trust Ratings on Watch Negative ------------------------------------------------------------ Standard & Poor's Ratings Services placed its ratings on nine classes of notes issued by GE Commercial Loan Trust's series 2006- 1, 2006-2, and 2006-3 on CreditWatch with negative implications. iT also affirmed our ratings on nine classes from these series. The affected deals are cash flow arbitrage collateralized loan obligation (CLO) transactions (see list). The negative CreditWatch placements reflect losses the transactions experienced after triggering their "required sale assets" provisions. The triggers occurred when the market value of some of the collateral breached predetermined limits specified for each series, which then required the sale of such collateral at prevailing market rates. All three series sold some of that collateral at a loss during the past two quarters, which led to deterioration in the available credit support. Standard & Poor's will review the results of current cash flow runs generated for all classes of notes in the three transactions to determine the level of future defaults the rated notes can withstand under various stressed default timing and interest rate scenarios, while still paying all of the interest and principal due on the notes. We will compare the results of these cash flow runs with the projected default performance of the performing assets in the collateral pools to determine whether the ratings currently assigned to the notes remain consistent with the credit enhancement available. Standard & Poor's notes that the July 21, 2008, trustee report for all three series included a proposal to amend the "required sale assets" provisions. RATINGS PLACED ON CREDITWATCH NEGATIVE GE Commercial Loan Trust Series 2006-1 Rating Balance (mil. $) Class To From Original Current* B A/Watch Neg A 80.753 43.413 C BBB/Watch Neg BBB 32.123 17.269 Pref Trust BB/Watch Neg BB 37.477 20.419 GE Commercial Loan Trust Series 2006-2 Rating Balance (mil. $) Class To From Original Current* C A/Watch Neg A 56.697 26.136 D BBB-/Watch Neg BBB- 47.526 21.908 Pref Trust BB/Watch Neg BB 8.337 3.922 GE Commercial Loan Trust Series 2006-3 Rating Balance (mil. $) Class To From Original Current* C A/Watch Neg A 64.695 40.140 D BBB-/Watch Neg BBB- 44.789 27.789 Pref Trust BB/Watch Neg BB 14.431 9.037 RATINGS AFFIRMED GE Commercial Loan Trust Series 2006-1 Balance (mil. $) Class Rating Original Current* A-1 AAA 319.000 41.558 A-2 AAA 281.007 281.007 A-PT AAA 100.000 53.760 GE Commercial Loan Trust Series 2006-2 Balance (mil. $) Class Rating Original Current* A-1 AAA 358.526 7.968 A-2 AAA 291.823 291.823 B AA 30.849 14.220 GE Commercial Loan Trust Series 2006-3 Balance (mil. $) Class Rating Original Current* A-1 AAA 433.467 135.035 A-2 AAA 352.822 352.822 B AA 36.826 22.849 *Current balances are after July 21, 2008, payment date. TRANSACTION INFORMATION Asset manager: GE Commercial Financial Service Trustee: Wells Fargo Transaction type: Cash flow arbitrage CLO GENCORP INC: Files Form S-8 to Register 5MM Shares for Stock Fund ----------------------------------------------------------------- GenCorp Inc. filed with the U.S. Securities and Exchange Commission a Registration Statement on Form S-8 for the purpose of registering an additional 5,000,000 shares of the company's common stock, par value $0.10 per share, issued in the GenCorp Stock Fund pursuant to the GenCorp Retirement Savings Plan. GenCorp disclosed that the proposed maximum offering price per share is $7.44; and the proposed maximum aggregate offering price is $37,200,000. A full-text copy of the Form S-8 filed by the company is available at no charge at: http://ResearchArchives.com/t/s?2fee About GenCorp Headquartered in Rancho Cordova, Calif., GenCorp Inc. (NYSE: GY) -- http://www.GenCorp.com/-- is a leading technology-based manufacturer of aerospace and defense products and systems with a real estate segment that includes activities related to the entitlement, sale and leasing of the company's excess real estate assets. As reported by the Troubled Company Reporter on July 7, 2008, at May 31, 2008, the company's consolidated balance sheet showed $994.0 million in total assets, $1.0 billion in total liabilities, and $9.5 million in redeemable common stock, resulting in shareholders' deficit of $33.4 million. * * * As reported in the Troubled Company Reporter on March 13, 2008, Standard & Poor's Ratings Services affirmed its ratings, including the 'B+' corporate credit rating, on GenCorp Inc. At the same time, the outlook was revised to negative from stable. GENERAL MOTOR: Edward Altman's Z-score Model Predicts Bankruptcy ---------------------------------------------------------------- Edward Altman, a finance professor at New York University's Stern School of Business, sees a 46% chance that General Motors Corp. and Ford Motor Co. will default within five years, Bloomberg News' Greg Miles and Caroline Salas report. Mr. Altman, in 2005, had said GM had a 47 percent chance of default within five years. Mr. Altman, who created the Z-score mathematical formula that measures bankruptcy risk, said in an interview with Bloomberg Television that his model shows that these companies are "on the verge of bankruptcy." Basing on the companies' finances at the end of the first quarter, the Z-scores for GM and Ford give both a bond rating equivalent to a CCC ranking, he said, according to the report. "Both are in very serious shape and the markets reflect that," Mr. Altman said. GM, though, is in slightly worse condition than Ford, according to him. Ford has said it had access to $40.6 billion in funds as of March 31, including credit lines, the report noted. But still, according to Mr. Altman, he "would not put money with GM right now because the downside is so great relative to the upside, relative to the yield," according to the report. "Your downside is probably 60 percent on the debt. The risk reward ratio is pretty poor," Mr. Altman said referring to GM. The report noted that GM posted a $38.7 billion loss in 2007, the biggest in its 100-year history, and hasn't posted a profit since 2004. GM is fending off rumors that it could file for bankruptcy. GM Chief Executive Officer Rick Wagoner has assured that the company has the ability to raise cash. About Ford Motor Co. Headquartered in Dearborn, Michigan, Ford Motor Co. (NYSE: F) -- http://www.ford.com/-- manufactures or distributes automobiles in 200 markets across six continents. With about 260,000 employees and about 100 plants worldwide, the company's core and affiliated automotive brands include Ford, Jaguar, Land Rover, Lincoln, Mercury, Volvo, Aston Martin, and Mazda. The company provides financial services through Ford Motor Credit Company. 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. 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. General Motors Latin America, Africa and Middle East, with headquarters in Miramar, Florida, is one of GM's four regional business units. GM LAAM employs approximately 37,000 people in 18 countries and has manufacturing facilities in Argentina, Brazil, Colombia, Ecuador, Egypt, Kenya, South Africa and Venezuela. GM LAAM markets vehicles under the Buick, Cadillac, Chevrolet, GMC, Hummer, Isuzu, Opel, Saab and Suzuki brands. * * * As reported in the Troubled Company Reporter on June 24, 2008, DBRS has placed the ratings of General Motors Corporation and General Motors of Canada Limited Under Review with Negative Implications. The rating action reflects the structural deterioration of the company's operations in North America brought on by high oil prices and a slowing U.S. economy. Standard & Poor's Ratings Services is placing its corporate credit ratings on the three U.S. automakers, General Motors Corp., Ford Motor Co., and Chrysler LLC, on CreditWatch with negative implications, citing the need to evaluate the financial damage being inflicted by deteriorating U.S. industry conditions--largely as a result of high gasoline prices. Included in the CreditWatch placement are the finance units Ford Motor Credit Co. and DaimlerChrysler Financial Services Americas LLC, as well as GM's 49%-owned finance affiliate GMAC LLC. As related in the Troubled Company Reporter on June 5, 2008, Standard & Poor's Ratings Services said that its ratings on General Motors Corp. (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. GOLD TOE: Moody's Junks Ratings on Covenant Non-compliance Worry ---------------------------------------------------------------- Moody's Investors Service downgraded the debt ratings of Gold Toe Moretz Holdings Corp. (GTM), including its corporate family rating to Caa2 from B3, the probability of default rating to Caa3 from Caa1, the first lien revolver and term loan facilities to Caa1 from B1, and the $105 million second lien term loan to Ca from Caa2. The ratings outlook is negative. The downgrades reflect Moody's concern that GTM may not be in compliance with financial covenants contained in its credit facilities as of June 30, 2008, and that negotiations with lenders, if necessary, could be difficult in this challenging credit environment. While continuing to recognize above-average retention of enterprise value in distress, Moody's assessment of GTM's weakened liquidity profile and capital structure in this challenged environment is reflected in the downgrade of the probability of default rating to Caa3 from Caa1. GTM's weak operating performance stems mainly from soft economic conditions in the U.S., which has caused retail customers to adjust inventory levels down due to lower foot traffic. Meanwhile, GTM's liquidity has weakened due to negative free cash flow on higher inventory levels, potential covenant violations, limited availability under the $50 million revolving credit facility, and modest cash on the balance sheet. The negative ratings outlook reflects the heightened probability of default due to GTM's weak liquidity, high leverage, and expectation for a continued-challenging retail environment. The ratings would be further downgraded should liquidity erode further, through cash usage, covenant violations and difficulty negotiating a cure. The outlook could be stabilized should the company comfortably comply with, or successfully amend, financial covenants, while returning to sustained positive free cash flow generation. Ratings downgraded: Gold Toe Moretz Holdings Corp. -- Corporate Family Rating to Caa2 from B3 -- Probability of Default Rating to Caa3 from Caa1 -- First lien revolver and term loan facility to Caa1 (LGD 2, 22%) from B1 (LGD 2, 22%) -- Second lien term loan facility to Ca (LGD 4, 69%) from Caa2 (LGD 4, 69%) Headquartered in Whitsett, North Carolina, Gold Toe Moretz Holdings Corp. is a leading manufacturer, marketer and distributor of socks in the U.S. with revenue approaching $330 million for the LTM period ending March 31, 2008. The company primarily manufactures product under the "Gold Toe" brand name, as well as other owned brands such as "AURO" and "gt" lines sold exclusively at Target and Wal-Mart, respectively, licenses including "New Balance" and 'Under Armor," and private label brands. GREEKTOWN CASINO: Has Court Nod to Assume NRT Corp. Contracts ------------------------------------------------------------- Greektown Casino LLC and its debtor-affiliates obtained authority from the U.S. Bankruptcy Court for the Eastern District of Michigan to assume contracts with NRT Technology Corp. relating to the use of cash and ticketing machines. The Debtors relate that their casinos use modern slot machines and other video gaming devices that do not accept coins. Instead, those slot machines and video gaming devices accept tickets. The patrons then insert their cash into a cash and ticketing machine and receive a ticket of equal value. The Debtors are currently parties to various contracts with NRT, whereby NRT agree to supply and maintain certain cash and ticketing machines used in the Debtors' business operations. The Debtors' proposed counsel, Michael E. Baum, Esq., at Schafer and Weiner, PLLC, in Bloomfield Hills, Michigan, relates that the Debtors' contracts with NRT include: (a) A Hardware Maintenance Support Agreement dated May 10, 2005, in which NRT agrees to maintain and repair the cash and ticketing machines located at the Debtors' casino; (b) A Software License and Software Support Agreement dated May 10, 2005, in which NRT Agrees to maintain, update and support software used in the cash and ticketing machine operation; (c) A Purchase Agreement Order No. 18012 dated March 12, 2008, which was for the acquisition of eight new cash and ticketing machines; and (d) A Lease Agreement for two cash and ticketing machines, which has been extended by addendums through August 31, 2008, and requiring monthly lease payments of $1,500. Under the Contracts, the Debtors owe these amounts to NRT: Contract Amount -------- ------ Hardware & Software Agreement for 05/27/08 to 05/26/09 $169,057 for 05/26/08 to 09/06/08 3,365 Purchase Agreement 299,791 Lease Agreement 9,000 Without the use of the cash and ticketing machines, the Debtors' slot machines and video gaming devices will become practically useless and their revenue generation ability will be severely impaired, Mr. Baum contends. Accordingly, the Debtors seek the Court's authority to assume the NRT Contracts pursuant to Sections 105(a), 363, and 365 of the U.S. Bankruptcy Code. The Debtors propose to assume the Contracts under these terms: (a) NRT will accept the Debtors' offer to assume and cure the $169,057 Current Amount of the Hardware and Software Agreements; (b) The 2007 Charges of $3,365 under the Hardware and Software Agreements will remain a general unsecured claim; (c) NRT will accept the Debtors' offer to assume the Purchase Agreement and to pay 10 equal installments of $29,979 in relation to that Agreement. The Purchase Agreement will be considered assumed only after the last of the 10 monthly payments of $29,979 has been made. (d) NRT will accept the Debtors' proposal to assume the Lease Agreement, which will only be considered assumed after the last of the remaining 10 monthly payments has been made. The Debtors' assumption of the NRT Contracts is necessary and urgent because locating an alternative vendor for NRT would be a cumbersome and time consuming operation for the Debtors, Mr. Baum asserts. There would certainly be a lapse of time between when NRT would remove its machines and the new vendor would install its machines, he says. There would also be significant lost revenue during the changeover as well as the lost man hours devoted to locating and contracting with an alternative vendor of the same quality. The Debtors add that they hope to pay all vendors in full through a Chapter 11 plan and they do not want to incur the cost of rejection damages. About Greektown Casino 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. 8; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). HARRINGTON HOLDINGS: Moody's Puts Stable Outlook to B2 Ratings -------------------------------------------------------------- Moody's Investors Service affirmed Harrington Holdings, Inc. B2 corporate family rating, and revised its ratings outlook to stable from negative. The outlook revision reflects the company's favorable earnings growth that has resulted in a meaningful decline in leverage from the initial pro forma levels that followed its recapitization by The Jordan Company, L.P.'s in early 2007. The outlook revision also reflects the company's conservative posture with respect to acquisitions since the recapitalization and Moody's expectation that this will continue, although recognizing that acquisitions remain an ongoing risk. The outlook revision is also supported by the company's good liquidity, with an undrawn revolving credit facility and good cushion under the financial covenants governing its credit facilities. The stable outlook reflects Moody's expectation that Harrington will continue to organically grow its earnings and use excess cash flow for debt reduction. The stable outlook also reflects Moody's expectation that the company will not engage in any material debt funded acquisitions over the near-term. These ratings were affirmed: -- Corporate family rating at B2; -- Probability-of-default rating at B2; -- $45 million senior secured revolving credit facility due 2013 at B1 (LGD3, 42%). Point estimate revised from (LGD3, 41%); -- $174 million first lien senior secured term loan due 2014 at B1 (LGD3, 42%). Point estimate revised from (LGD3, 41%); -- $50 million second lien senior secured term loan due 2014 at Caa1 (LGD6, 90%). Point estimate revised from (LGD5, 89%). Harrington's B2 corporate family rating considers its small size and moderately high leverage that limit financial flexibility. These concerns are partially mitigated by historically steady operating cash flow generation, the retention of key management post-acquisition, healthy diversification with respect to both products and payors, and entrenched relationships with its customers. The revision to the LGD rates reflects an increased level of priority trade claims in the capital structure. Headquartered in Cleveland, Ohio, Harrington Holdings, Inc. is a leading marketer and distributor of medical supplies and equipment in the U.S. HOMEBANC CORP: Has Until Oct. 6 to Solicit Votes for Ch. 11 Plan ---------------------------------------------------------------- The United States Bankruptcy Court for the District of Delaware extended exclusive rights of HomeBanc Mortgage Corporation and its debtor-affiliates to solicit acceptances for their Joint Consolidated Liquidating Chapter 11 Plan for an additional 91 days, through and including Oct. 6, 2008. As reported in the Troubled Company Reporter on June 20, 2008, since the Debtors' bankruptcy filing, the Debtors have been working to wind-down their operations and liquidate their assets. The Debtors have sold all aspects of their mortgage loan servicing business and have been working to sell remaining loans to third parties, Joseph M. Barry, Esq., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, related. In addition, the Debtors were working through various pending lawsuits and other issues that affect their ability to consummate the Plan and make a distribution to creditors, Mr. Barry said. The hearing to consider the disclosure statement for the Debtors' Joint Consolidated Liquidating Chapter 11 Plan has been adjourned until Aug. 12, 2008. The Debtors cannot begin to solicit acceptances of the Plan until the Disclosure Statement has been approved. Thus, the Debtors need additional time to solicit acceptances to the Plan, Mr. Barry told the Court. As reported in the Troubled Company Reporter on May 7, 2008, the Debtors filed with the Court their joint consolidated liquidating plan and accompanying disclosure statement, dated April 30, 2008. Under the plan, at least $5,000,000 will be available for distribution to various creditors. A liquidating agent will be appointed to, among other things, (i) make distributions to holders of allowed claims, (ii) continue to pursue and commence various causes of action post-confirmation, and (iii) prosecute any necessary objections to administrative, priority or secured claims that are filed. A full-text copy of the Plan is available for free at http://ResearchArchives.com/t/s?2b85 A full-text copy of the Disclosure Statement is available for free at http://ResearchArchives.com/t/s?2b86 About HomeBanc Headquartered in Atlanta, Georgia, HomeBanc Mortgage Corporation -- http://www.homebanc.com/-- is a mortgage banking company focused on originating primarily prime purchase money residential mortgage loans in the Southeast United States. HomeBanc Mortgage together with five affiliates filed for chapter 11 protection on Aug. 9, 2007 (Bankr. D. Del. Case Nos. 07-11079 through 07-11084). Joel A. Waite, Esq., at Young, Conaway, Stargatt & Taylor was selected by the Debtors to represent them in these cases. The Official Committee of Unsecured Creditors selected the firm Otterbourg, Steindler, Houston and Rosen, P.C. as its counsel. The Debtors' financial condition as of June 30, 2007, showed total assets of $5,100,000,000 and total liabilities of $4,900,000,000. The Debtors' exclusive period to file a plan ends on April 7, 2008. (HomeBanc Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Services Inc. http://bankrupt.com/newsstand/or 215/945-7000). ICTS INTERNATIONAL: Mahoney Cohen Expresses Going Concern Doubt --------------------------------------------------------------- Mahoney Cohen & Company, CPA, P.C., raised substantial doubt about the ability of ICTS International N.V. to continue as a going concern after auditing the company's financial statements for the year ended Dec. 31, 2007. Mahoney Cohen pointed out that the company has suffered recurring losses from operations, net working capital and stockholders' deficit. The auditing firm also added that the company's U.S. subsidiary is in default of its loan covenants and is subject to potential contingencies. Mahoney Cohen also stated that the company's significant litigation relates to the Sept. 11, 2001, terrorist attacks in the United States, and the company's insurance carriers have canceled all its war risk policies. In addition, the company is involved in other potential contingencies including a dispute between the company and the United States Transportation Security Administration, with respect to the basis of calculation of payments for security services rendered by the company in 2002, in respect of which, the TSA might be claiming refund of material amounts. The company posted a total comprehensive loss of $1,981,000 on total revenues of $64,780,000 for the year ended Dec. 31, 2007, as compared with a total comprehensive loss of $14,365,000 on total revenues of $60,791,000 in the prior year. Losses of Associated Companies The company's share in losses of associated companies during 2007 totaled $2,500,000 compared with $132,000 in 2006. The company had 50% in the partnership ICTS Netherlands Airport Services VOF. The partnership had one contract with Schiphol airport in Amsterdam, which was to terminate on Feb. 1, 2008. The partnership is in the process of liquidation during 2008. During 2007, ICTS recognized losses of $2,200,000, which included an impairment of $332,000, compared with profit of $1,300,000 in 2006. The company recognized losses of $284,000 in 2007 from its investment in Inksure Technologies, Inc., compared with the $1,400,000 losses in 2006. ICTS's loss from continuing operations in 2007 was $8,000,000 compared with $9,800,000 in 2006. ICTS's profit from discontinued operations in 2007 totaled $5,400,000 compared with a loss of $4,200,000 in 2006. The company had net cash used in operating activities of $3,600,000 and $7,600,000 in 2007 and 2006, respectively. At Dec. 31, 2007, the company had negative equity and a working capital deficit of $11,700,000. If the company does not achieve new service contracts and profitability, its viability will be in question and its share price will likely decline. Balance sheet At Dec. 31, 2007, the company's balance sheet showed $27,103,000 in total assets and $47,713,000 in total liabilities, resulting in a $20,610,000 stockholders' deficit. The company's consolidated balance sheet at Dec. 31, 2007, also showed strained liquidity with $18,644,000 in total current assets available to pay $30,305,000 in total current liabilities. A full-text copy of the company's 2007 annual report is available for free at http://ResearchArchives.com/t/s?2fc0/ Significant Events in Operations One major event in 2001 and early 2002 significantly changed the company's business operations: the passage of the Aviation and Transportation Security Act, or TSA, by the United States Congress in response to the terrorist attacks on September 11, 2001, pursuant to which the Federal Government through the TSA took over aviation security services in the U.S. in November 2002. As a result of this event, the company had limited aviation security operations in the U.S. In February 2002, the company entered into an aviation security services contract with the TSA to continue to provide aviation security services in all of the company's current airport locations until the earlier of either the completed transition of these security services on an airport by airport basis to the U.S. Federal Government or November 2002. In connection with payments made by the TSA to Huntleigh USA Corporation, a wholly owned subsidiary of the company, for aviation security services provided in 2002, the Defense Contract Management Agency has indicated that it believed that Huntleigh should not have been paid on a fixed price basis as believed by Huntleigh, but on an actual costs plus, what the TSA would consider a reasonable profit. On that later basis, Huntleigh may be required to repay to the TSA the difference between such amount and the actual amounts paid to it. Huntleigh, however, has various claims for additional amounts it considers are due to it for the services provided to the TSA. If the TSA will claim such difference from Huntleigh and will prevail in all of its contentions, and none of Huntleigh's claims will be recognized, then the company may suffer a loss in an amount of about $59,000,000. The company is engaged in litigation with the FAA/TSA. The company has made no provisions with respect to these potential claims. Huntleigh USA's main business was providing airport security services to airlines and airports but as a result of the creation of the TSA and the requirement that the TSA take over airport security, Huntleigh has lost its principal business. Huntleigh has sued the U.S. Government for the "Taking" of its business and to protect its rights under the Fifth Amendment of the U.S. Constitution. Huntleigh sought to recover the going concern value of the lost business. The suit was brought in the U.S. Court of Federal Claims. The Court has decided against the company. The company appealed this decision, and the U.S. Court of Appeals for the Federal Circuit affirmed the lower court's ruling against the company. Potential Liability Claims As a result of the September 11 terrorist attacks, numerous lawsuits also have been commenced against the company and the company's U.S. subsidiary. The cases arise out of airport security services provided for United Flight 175 out of Logan Airport in Boston, Mass., which crashed into the World Trade Center. In addition to the present claims, additional claims may be asserted. The outcome of these or additional cases is uncertain. If there is an adverse outcome with respect to any of these claims, which is not covered by insurance, then there may be a significant adverse impact on the company. Company Strategy The company's success will be dependent upon its ability to change its business strategy. As part of its new business strategy, the company intends to develop technological solutions and systems for the aviation security industry, develop or acquire security activities other than aviation security, and seek other revenue producing businesses and business opportunities. About ICTS International ICTS International N.V. -- http://www.icts-tech.com/-- has interests in a variety of businesses and ventures. Its current principal activity consists of providing manpower-based aviation security services in the Netherlands and non-security related manpower-based general aviation services in the U.S.A. Its other activities consist primarily of the development of integrated technological solutions designed for enhancing processing time of passengers at airports and other gateways and the establishment and operation of motion-based entertainment theaters in the U.S.A. INTERLINE RESOURCES: HJ & Associates Raises Going Concern Doubt --------------------------------------------------------------- Salt Lake City-based HJ & Associates, LLC, raised substantial doubt about the ability of Interline Resources Corporation to continue as a going concern after auditing the company's financial statements for the year ended Dec. 31, 2007. The auditor reported that the company suspended a substantial portion of its operations in 2002 and subsequently has not generated revenues sufficient to cover its operation costs. As a result, the company, on a consolidated basis, has a stockholders' deficit and an accumulated deficit of $12,505,643 at Dec. 31, 2007, The company has had limited operations since a fire destroyed its Well Draw Gas Plant in June 2002. Since the fire, the company has focused on finding financing to rebuild the Well Draw Plant and on settling litigation matters related to the fire. Management has obtained working capital primarily from debt financing and from the sale of idle property and equipment. The company is in the process of arranging other debt and equity financing with other sources. In addition, the company has formed the NorthCut Refining LLC and arranged financing to rebuild and operate its Well Draw Gas plant facility. The company anticipates NorthCut will commence commercial operations in the next few months, and the company anticipates that its share of management fees and cash distributions from NorthCut, after related debt obligations have been satisfied, will contribute significantly to the working capital of the company. Financials The company posted a net loss of $42,121,590 on total revenues of $62,069 for the year ended Dec. 31, 2007, as compared with a net loss of $668,759 on total revenues of $335,503 in the prior year. At Dec. 31, 2007, the company's balance sheet showed $9,167,446 in total assets and $11,608,717 in total liabilities, resulting in a $2,441,271 stockholders' deficit. The company's consolidated balance sheet at Dec. 31, 2007, also showed strained liquidity with $301,172 in total current assets available to pay $1,246,934 in total current liabilities. A full-text copy of the company's 2007 annual report is available for free at http://ResearchArchives.com/t/s?2fb7 NorthCut Refining LLC NorthCut Refining LLC was formed in July 2007 as a Wyoming limited liability company. Interline Resources contributed the Well Draw facility, including land, fixtures, equipment and all operating permits, receiving a 75% member interest in NorthCut. The parties who arranged financing for construction of the project received a 25% interest in NorthCut (PCG Midstream, LLC, 5% and NorthCut Holdings, LLC, 20%). Interline Resources is designated as manger, however, until the construction loan is repaid. PCG Midstream acts as a co-interim manger. NorthCut is the borrower and Private Capital Group, Inc., is the lender under the Construction Loan Agreement. NorthCut pledged all of its assets as collateral for the loan. Interline Resources executed a Guaranty Agreement and a Security Agreement, guaranteeing repayment of the loan, and pledging all of the assets of the company. The Promissory Note carries an interest rate of 24% per year due on Aug. 1, 2009. The Operating Agreement provides that 75% of the Available Cash each month will be paid to reduce the loan amount. Interline Resources receives the remaining 25% of available cash, and the funding group receives no distributions until after the loan has been paid back. NorthCut and Interline Resources executed a Management Services Agreement. Interline Resources will act as manager of the Plant for a term of fifty years. Under the agreement, Interline Resources will provide management, supervisory, and other general services to NorthCut and the plant, and supervise and direct all aspects of the day-to-day operation of the plant. During the construction phase of the plant, Interline Resources receives a management fee of $87,000 per month for six months. Once in operation, Interline Resources receives a monthly operating fee of $40,000. Until the construction loan is repaid, all profits and losses are allocated 100% to Interline Resources. Well Draw Gas plant The natural gas gathering system was built and connected to the Well Draw Gas plant in 1973 and consists of nearly 60 miles high pressure discharge line, 120 miles of low pressure gathering lines and 90 miles of low pressure fuel return lines and associated valves, tanks, fittings and other appurtenant equipment. When Interline Resources purchased the Well Draw Gas plant in 1990, the sale included the gathering system. The system covers an area of around 70 by 40 miles. In 2006, the company sold around 19 miles of high-pressure discharge line for $175,000. The company currently owns 41 miles high-pressure discharge line; 120 miles of low pressure gathering lines; and 90 miles of low-pressure fuel return lines and associated valves, tanks, fittings and other appurtenant equipment. There is currently no gas being transported in the system. Because the system is in an area where the original wells connected to the system are depleted, or have been connected to other pipelines, the system has only a limited present value. Unless additional wells are drilled in the company's gathering area, the company has no prospects of operating its gas system and receiving revenues from the gas system. About Interline Resources Interline Resources Corporation (Other OTC: IRCE.PK) -- http://www.interlineresources.com/-- along with its subsidiaries Interline Energy Services, Inc., and Interline Hydrocarbons, Inc., operates in two segments: Oil and Gas and Used Oil Technology. The O&G segment engages in natural gas gathering and processing, crude oil gathering, fractionation, marketing of natural gas liquids, and oil and gas production. The gas is processed and fractionated into its constituent natural gas liquid products and remaining residue gas. Residue gas is sold into a major interstate pipeline and the natural gas liquid products are sold to both end users and other major refineries for further refinement. The UOT segment refines various types of used oils. The company's marketing efforts extend to a worldwide market. INTERPUBLIC GROUP: Secures $335 Million Revolving Credit Facility ----------------------------------------------------------------- The Interpublic Group of Companies Inc. entered into a three-year revolving credit facility with a syndicate of banks. The facility provides for borrowings of up to $335 million, of which $200 million is available for the issuance of letters of credit. The facility allows Interpublic to increase the aggregate commitment to a maximum amount of $485 million if lenders agree to the additional commitments. Interpublic may borrow and may request the issuance of letters of credit in U.S. Dollars and other currencies. Interpublic may use the proceeds of advances under the credit facility for general corporate purposes. The credit agreement will expire on July 18, 2011. Citibank N.A., acted as administrative agent for the lenders, JPMorgan Chase Bank N.A., acted as syndication agent, HSBC Bank USA, National Association and ING Capital LLC acted as co- documentation agents, and Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. acted as joint lead arrangers and joint book managers. A full-text copy of of the credit agreement is available for free at http://ResearchArchives.com/t/s?2fdc About Interpublic Group of Companies Inc. New York-based, Interpublic Group of Companies Inc. (NYSE: IPG) -- http://www.interpublic.com/-- is one of the world's leading organizations of advertising agencies and marketing services companies. Major global brands include Draftfcb, FutureBrand, GolinHarris International, Initiative, Jack Morton Worldwide, Lowe Worldwide, MAGNA Global, McCann Erickson, Momentum, MRM Worldwide, Octagon, Universal McCann and Weber Shandwick. Leading domestic brands include Campbell-Ewald, Carmichael Lynch, Deutsch, Hill Holliday, Mullen, The Martin Agency and R/GA. * * * As reported in the Troubled company Reporter on July 23, 2008, Fitch Ratings assigned a 'BB+' rating to the Interpublic Group of Companies' $335 million three year revolving credit facility. The rating outlook remains Positive. IPS CORP: S&P Revises Outlook to Neg, Affirms 'B' Credit Rating --------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on IPS Corp. to negative from stable. All ratings, including the 'B' corporate credit rating, were affirmed. The outlook revision reflects our increasing concerns about the impact weakening commercial construction activity, the current housing downturn, and other recessionary pressures will have on IPS' end-market demand and operating performance over the next several quarters," said Standard & Poor's credit analyst Thomas Nadramia. "As a result, IPS' credit measures are likely to weaken during this period." In addition, the company faces more restrictive covenants under its existing bank facility credit agreement over the next several quarters, with its net debt to EBITDA covenant stepping down to below 7x at Sept. 30, 2008, and again to below 6x at Sept. 30, 2009. A weakening in operating performance could result in a deterioration of the cushion relative to this covenant and could constrain access to its currently unutilized $20 million revolving credit facility. The ratings on Compton, Calif.-based IPS reflect its small revenue base, product concentration, exposure to cyclical construction end markets, high debt leverage, and modest free cash flow generation. The ratings also reflect the company's leading market shares in its niche markets and good operating margins. JETBLUE AIRWAYS: Moody's Cuts Corporate Family Rating to Caa2 -------------------------------------------------------------- Moody's Investors Service downgraded the Corporate Family and Probability of Default Ratings of JetBlue Airways Corp. to Caa2 from Caa1, as well as the ratings of its outstanding corporate debt instruments and certain Enhanced Equipment Trust Certificates (EETC). The outlook is negative. "The rating actions reflect Moody's expectation that the difficult operating environment affecting the airline industry will cause further erosion of JetBlue's financial metrics and that despite recent success in strengthening liquidity, the company will continue to face significant near term cash losses," George Godlin, a Moody's analyst, said. JetBlue reported a $21 million operating profit for the 2nd quarter of 2008, which was down over 70% from prior year results. Like most airlines, JetBlue's operations have been adversely affected by a weakening economic environment and persistently high fuel costs. Although fuel costs have moderated recently, they are likely to remain high and these challenging conditions are likely to continue, particularly as the industry enters the seasonally weak fall and winter months, and operating losses could erode the company's liquidity profile at a time when it faces meaningful calls on cash for debt maturities. Although JetBlue has historically had a low cost business model, its unit costs have increased over time due to the incremental expense associated with the operation of a large, complex route network, the addition of a second aircraft type to its fleet, and the effects of higher maintenance costs as its fleet has aged. The company has pursued several initiatives, including slowing capacity growth, cost cutting initiatives and deferrals of scheduled aircraft deliveries, which are likely to slow the company's cash burn. Further capacity reductions are expected after the summer months through a combination of aircraft sales, lower utilization, and discontinuing the operation of unprofitable routes. Even with the initiatives being taken, a combination of deteriorating economic conditions and sustained high fuel costs are likely to place continued stress on the company's operating performance over the coming months. Moody's notes that JetBlue has worked aggressively to support its liquidity profile. Over the last several months the company has received an equity investment of approximately $300 million from Lufthansa, received $165 million of net proceeds from a new convertible debt placement, and raised additional funds from the sale of aircraft. As well, the company's utilization of pre- delivery deposits associated with aircraft deferrals has allowed it to reduce capital spending by approximately $40 million in 2008. These transactions contributed to the increased reported cash balance of $846 million (excluding $397 million of investment securities) at June 30, 2008. Yet the company's redemption of a $175 million in convertible notes that were substantially put back to the company under terms of its indenture in early July has subsequently reduced cash balances. The company's liquidity could become increasingly constrained if industry current conditions, including high fuel costs and weakening demand, result in further cash operating losses. As part of its recent earnings statement, the company stated that it has obtained a new $110 million line of credit, deferred the deliveries of 10 Embraer 190 aircraft and secured financing for all of its 2009 Airbus A320 and 3 of its E190 aircraft deliveries. As well, the company is working on a number of other initiatives which if successful could improve near term liquidity. While these initiatives are viewed as helpful they are not seen as materially improving the company's near term liquidity profile; the aircraft deferrals are primarily in later years (2011 to 2016) and the new line of credit is only a one year facility that is secured by a portion of the company's portfolio of investment securities. The rating actions on the EETCs consider the rating downgrade of the underlying Corporate Family Rating, the continuing availability of liquidity facilities to meet interest payments for 18 months in the event of a JetBlue default, and the asset values of the aircraft which secure the various EETCs. Although the recovery for junior classes of any EETCs is generally more uncertain as they hold a first loss position, Moody's has not changed its view of the relative recovery on JetBlue's EETCs because of still-favorable trends for the Airbus A320 aircraft that collateralize the pass through certificates. The ratings on the senior tranches of the Series 2004-1 and 2004-2 Pass Through Certificates, and the 2006 spare parts financing reflect that they are supported by policies issued by a monoline insurance company. The negative outlook reflects Moody's expectation of continued deterioration in JetBlue's key credit metrics, such as interest coverage and leverage during 2008, due primarily to high fuel costs and a weakening economic environment. Unless demand improves and fuel cost pressures abate, the company could see a continued deterioration in financial performance. JetBlue's rating could be lowered if persistent cash operating losses or other cash uses further erode the company's liquidity profile. The company's rating outlook could be stabilized with sustained increases to revenues or reduced non-fuel costs, or a sustained decline in fuel costs that increases cash from operations and enables the company to satisfy maturing debt and capital spending requirements from existing cash reserves and cash from operations. Downgrades: Issuer: JetBlue Airways Corp. -- Probability of Default Rating, Downgraded to Caa2 from Caa1 -- Corporate Family Rating, Downgraded to Caa2 from Caa1 Series 2004-2 Pass Through Certificates -- Class C Certificates, Downgraded to B3 from B2 Series SP Pass Through Certificates -- Class B1, Downgraded to B3 from B2 -- Senior Unsecured Conv./Exch. Bond/Debenture, Downgraded to Ca from Caa3 Issuer: New York City Industrial Development Agcy, NY -- Senior Unsecured Revenue Bonds, Downgraded to Ca from Caa3 Withdrawals: Issuer: JetBlue Airways Corp. -- Senior Unsecured Conv./Exch. Bond/Debenture, Withdrawn, previously rated Caa3 Headquartered in Forest Hills, New York, JetBlue Airways Corp. operates a low-cost, point-to-point airline from a hub in New York. JHT HOLDINGS: Taps Pepper Hamilton as Delaware Counsel ------------------------------------------------------ JHT Holdings Inc. and its debtor-affiliates ask the United States Bankruptcy Court for the District of Delaware for permission to employ Pepper Hamilton LLP as their Delaware Counsel. Pepper Hamilton will: a) assist co-counsel in representing the Debtors; b) advise the Debtors with respect to their rights, powers and duties as debtor-in-possession in the continued management and operation of their business and properties; c) attend meetings and negotiating with representative of creditors and other parties-in-interest; d) advise and consult the Debtors and co-counsel regarding the conduct of the case, including all of the legal and administrative of operating in Chapter 11; e) advise the Debtors and co-counsel on matters relating to the evaluation of the assumption, rejection or assignment of unexpired leases and executory contracts; f) take all necessary action to protect and preserve the Debtors' estates, including the prosecution of actions on their behalf, the defense of any actions commences against those estates, negotiations concerning all litigation in which the Debtors may be involved and objections to claims filed against the estates; g) advise the Debtors and co-counsel with respect to the sale of the Debtors' assets; h) assist co-counsel negotiating and preparing the Debtors' plan of reorganization, disclosure statement and all related agreements and documents and taking any necessary action on behalf of the Debtors to obtain confirmation of the plan; i) appear before the Court, any appellate courts, and the Office of the U.S. Trustee, and protecting the interest of the Debtors' estates before the Court and the Office of the U.S. Trustee; and j) perform all other necessary legal services and providing all other necessary legal advice to the Debtors in connection with these Chapter 11 cases to bring the Debtors' Chapter 11 cases to a conclusion. Pepper Hamilton received in the aggregate amount of $75,000 pre- filing retainer. The firm's professionals will bill at these rates: Designation Hourly Rates ----------- ------------ Partners $450-$695 Associates $240-$345 Legal Assistants $190-$205 David B. Stratton, Esq., a partner at firm, assures the Court that the firm does not hold any interest adverse to the Debtors' estates and is a "disinterested person" as defined in Section 101(14) of the Bankruptcy Code. Mr. Stratton can be reached at: David B. Stratton, Esq. Pepper Hamilton LLP 1313 Market Street, Hercules Plaza, Suite 5100 Wilmington, Delaware 19801 Tel: (302) 777-6500 Fax: (302) 421-8390 http://www.pepperlaw.com/ Headquartered in Kenosha, Wisconsin, JHT Holdings Inc. -- http://www.jhtholdings.com/-- provide over-the-road transportation of various types of motor vehicles, including commercial trucks and cars. The company and 16 of its affiliates filed for Chapter 11 protection on June 24, 2008 (Bankr. D. Del. Lead Case No.08-11267). David B. Stratton, Esq., and Evelyn J. Meltzer, Esq., at Pepper Hamilton, LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection against their creditors, they listed assets and debts between $100 million to $500 million. JUNIPER GENERATION: S&P Cuts Rating on $206MM Notes to 'BB-' ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its rating to 'BB-' from 'BBB-' on Juniper Generation LLC's $206 million senior secured notes due 2014. The recovery rating is '1', indicating the expectation of very high (90% to 100%) recovery in the event of a default. The outlook is stable. "The lowered ratings follow the anticipated enactment of new short run avoided cost (SRAC) pricing that will lower energy payments to the company," said Standard & Poor's credit analyst Terrence Marshall. While Juniper's capacity payments and management fee were expected to cover all fixed operating expenses and debt service, the potential for negative energy margin has been increased by the variability in energy payment pricing. Since Juniper's offtaker contract amendment expired in June 2006, the pricing of energy payments floats on a monthly basis and is tied to the monthly natural gas price at the Malin hub according to the SRAC formula established by the California Public Utilities Commission (CPUC). Following the outcome of the CPUC's recent changes to the SRAC formula, the heat rate assumption upon which the SRAC pricing for energy payments is based will result in a reduction of the price paid for the energy produced by the Juniper project. These changes have not yet gone into effect, but are expected to be enacted sometime in late 2008. Juniper is a holding company with ownership interests in nine gas- fired cogeneration projects. Juniper is a special-purpose entity owned by ArcLight Energy Partners Fund II LLC (90% ownership) and Delta Power Co. LLC (10%). The projects sell power primarily to Pacific Gas & Electric Co. (BBB+/Stable/A-2) under long-term, standard-offer service contracts. Juniper's nine separate projects provide significant operational diversity. LEASE INVESTMENT: Fitch Downgrades Ratings on Five Note Classes --------------------------------------------------------------- Fitch Ratings has taken these rating actions for Lease Investment Flight Trust aircraft securitization as outlined below: -- Class A-1 notes downgraded to 'B' from 'BB'; -- Class A-2 notes downgraded to 'B' from 'BB'; -- Class A-3 notes downgraded to 'BB' from 'BBB-'; -- Class B-1 notes downgraded to 'C/DR6' from 'CC/DR5'; -- Class B-2 notes downgraded to 'C/DR6' from 'CC/DR5'; -- Class C-1 notes remain at 'C/DR6'; -- Class C-2 notes remain at 'C/DR6'; -- Class D-1 notes remain at 'C/DR6'; -- Class D-2 notes remain at 'C/DR6'. Cash flow available to service debt in the LIFT transaction has declined steadily over the past three years. Due to the combination of reductions in available collections and periodic spikes in expenses, cash liquidity for classes B, C, and D have been completely exhausted, resulting in interest shortfalls for each of those classes. Given the reductions in cash flow, it appears unlikely that class B notes will receive future interest payments. Furthermore, the class A cash liquidity was drawn upon for the first time on the January 2008 payment date in order to pay scheduled class A interest. However, class A liquidity was restored on the March 2008 payment date. Class A continues to pay partial minimum principal payments; however, as available cash flow continues to decline, the reliability of full principal payment on the class A notes also declines. Compounding these concerns is the LIFT portfolio's concentrations in older generation, less fuel efficient aircraft types such as the Boeing 737-300 and -400 (Classics) and McDonnell Douglas MD-80 series aircraft. These and other aircraft types are exposed to potential value and lease rate deterioration stemming from fuel price volatility and the resulting airline capacity reductions and bankruptcies. Fitch's analysis incorporated expected cash flow to be available to the trust over the remaining life of the transaction. This expectation is based on several factors including aircraft age, current portfolio value, potential lease rates, and perceived liquidity of the portfolio. Lease rate and portfolio value expectations have been updated to reflect Fitch's views on certain aircraft types given recent aviation market volatility. LIFT is a Delaware business trust formed to conduct limited activities, including the issuance of debt, and the buying, owning, leasing and selling of commercial jet aircraft. LIFT originally issued $1.4 billion of rated notes in June 2001. Primary servicing on LIFT's aircraft is being performed by GE Capital Aviation Services, wholly owned by General Electric Corporation while the administrative agent role is being performed by Phoenix American Financial Services, Inc. LIBERTAS PREFERRED FUNDING: Moody's Junks Ratings on Eight Notes ---------------------------------------------------------------- Moody's Investors Service downgraded ratings of eight classes of notes issued by and one swap entered into by Libertas Preferred Funding III, Ltd. The rating actions are: Class Description: $633,000,000 Class I Supersenior Swap -- Prior Rating: B3, on review for possible downgrade -- Current Rating: Ca Class Description: $27,000,000 Class I-J Senior Floating Rate Notes Due April 2047 -- Prior Rating: B3, on review for possible downgrade -- Current Rating: C Class Description: $108,000,000 Class II Senior Floating Rate Notes Due April 2047 -- Prior Rating: Ca -- Current Rating: C Class Description: $120,000,000 Class III Senior Floating Rate Notes Due April 2047 -- Prior Rating: Ca -- Current Rating: C Class Description: $118,000,000 Class IV Senior Floating Rate Notes Due April 2047 -- Prior Rating: Ca -- Current Rating: C Class Description: $10,000,000 Class V Mezzanine Floating Rate Deferrable Notes Due April 2047 -- Prior Rating: Ca -- Current Rating: C Class Description: $45,000,000 Class VI Mezzanine Floating Rate Deferrable Notes Due April 2047 -- Prior Rating: Ca -- Current Rating: C Class Description: $55,000,000 Class VII Mezzanine Floating Rate Deferrable Notes Due April 2047 -- Prior Rating: Ca -- Current Rating: C Class Description: $24,000,000 Class VIII Mezzanine Floating Rate Deferrable Notes Due April 2047 -- Prior Rating: Ca -- Current Rating: C The transaction experienced, as reported by the Trustee, an event of default on July 1, 2008 caused by a failure of the Senior Overcollateralization Ratio to be greater than or equal to 101 per cent, as described in Section 5.1(i) of the Indenture dated March 22, 2007. This event of default is still continuing. Libertas Preferred Funding III, Ltd. is a collateralized debt obligation backed primarily by a portfolio of synthetic securities in the form of credit default swaps. Reference obligations for the credit default swaps are RMBS and CDO securities. As provided in Article V of the Indenture during the occurrence and continuance of an Event of Default, certain parties to the transaction may be entitled to direct the Trustee to take particular actions with respect to the Collateral Debt Securities and the Notes. In this regard the Trustee reports that the Supersenior Swap Counterparty and the Controlling Class directed the Trustee to accelerate the maturity of the Rated Notes and sell and liquidate the Collateral, in accordance with relevant provisions of the transaction documents. The rating downgrades taken reflect the increased expected loss associated with each tranche. Losses are attributed to diminished credit quality on the underlying portfolio. MATTHEW LEASING: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: Matthew Leasing Ltd. 30 Hopper Street Westbury, NY 11590 Bankruptcy Case No.: 08-73898 Debtor-affiliates filing separate Chapter 11 petitions: Entity Case No. ------ -------- Conva-Aids Incorporated 08-73902 Swalm Street LLC 08-73903 Medigas LLC 08-73905 Metropolitan Gas Technologies LLC 08-73907 Ruddy Family LLC 08-73908 Type of Business: The Debtors provide health care services. Chapter 11 Petition Date: July 22, 2008 Court: Eastern District of New York (Central Islip) Judge: Robert E. Grossman Debtors' Counsel: Anthony F. Giuliano, Esq. (afg@pryormandelup.com) Pryor & Mandelup LLP 675 Old Country Road Westbury, NY 11590 Tel: (516) 997-0999 Fax: (516) 333-7333 http://pryormandelup.com/ Estimated Assets: Less than $50,000 Estimated Debts: $10 million to $50 million A. A list of Matthew's largest unsecured creditors is available for free at: http://bankrupt.com/misc/nyeb08-73898.pdf B. A list of Conva-Aids' largest unsecured creditors is available for free at: http://bankrupt.com/misc/nyeb08-73902.pdf C. A list of Swalm's largest unsecured creditors is available for free at: http://bankrupt.com/misc/nyeb08-73903.pdf D. A list of Medigas' largest unsecured creditors is available for free at: http://bankrupt.com/misc/nyeb08-73905.pdf E. A list of Metropolitan's largest unsecured creditors is available for free at: http://bankrupt.com/misc/nyeb08-73907.pdf F. A list of Ruddy's largest unsecured creditors is available for free at: http://bankrupt.com/misc/nyeb08-73908.pdf MEDICAL: 10th Cir. Affirms Carl Zeiss' Non-Insider Status ------------------------------------------------------------ The U.S. Court of Appeals for the Tenth Circuit affirmed a ruling by the bankruptcy appellate panel holding that Carl Zeiss Meditec AG was not a "non-statutory insider" of Debtor U.S. Medical, Inc. for the purposes of 11 U.S.C. Sec. 547(b)(4)(B). The ruling was made by Circuit Judges Paul J. Kelly and Timothy M. Tymkovich and the Hon. Gregory K. Frizzell of the U.S. District Court for the Northern District of Oklahoma, sitting by designation. In a 21-page decision penned by Judge Kelly, the Circuit Court pointed out that the legislative history pertaining to the definition of "insider" clearly states that "[a]n insider is one who has a sufficiently close relationship with the debtor that his conduct is made subject to closer scrutiny than those dealing at arms [sic] length with the debtor." The Circuit Court held that a creditor may only be a non-statutory insider of a debtor when the creditor's transaction of business with the debtor is not at arm's length. According to the Tenth Circuit, Congress has conclusively found that statutory insiders do not have interests "independent" of their debtors whereas parties held to be operating at arm's length necessarily do. Carl Zeiss Agreement U.S. Medical distributed new and used medical equipment through the Internet. U.S. Medical entered into a distribution agreement with Carl Zeiss, a German producer of surgical equipment and aesthetic lasers, on June 13, 2000. Under the deal, U.S. Medical served as Carl Zeiss' exclusive distributor in North America and Carl Zeiss became the Debtor's sole laser manufacturer. The agreement also provided that Carl Zeiss had the right to appoint a member of the Debtor's board of directors. Under a separate stock-purchase agreement, Carl Zeiss acquired a 10.6% equity interest in the Debtor for $2,000,000 in cash and a $2,000,000 inventory-purchase credit. In addition, Carl Zeiss retained an unexercised warrant for 80,000 additional shares of the Debtor. The distribution and stock-purchase agreements formed the basis of a "strategic alliance" between the companies. Dr. Bernard Seitz, the CEO of Carl Zeiss, was appointed to the Debtor's board in accordance with the stock-purchase agreement. The stock-purchase agreement provided for the payment of a financial penalty by the Debtor to Carl Zeiss if Dr. Seitz were removed from the board. Dr. Seitz received only a stock-option package in the Debtor -- which he never exercised -- as compensation for his service. Dr. Seitz attended every board meeting, either in person or by phone, and had access to all of the Debtor's financial information but did not participate in any vote concerning payment to Carl Zeiss. All day-to-day business between the Debtor and Carl Zeiss was handled by Carl Zeiss' Chief Financial Officer Michael Dettlebacher. Avoidance Action After experiencing financial difficulties, the Debtor voluntarily filed for Chapter 7 bankruptcy on June 24, 2002. In an adversary proceeding, Glen R. Anstine, the Chapter 7 Trustee appointed to oversee the liquidation of the Debtor's estate, sought to avoid certain transfers made between 90 days and one year before the bankruptcy petition date, claiming that Carl Zeiss was an "insider." Within this period, Carl Zeiss received sporadic payments and some inventory returns. Carl Zeiss lost its entire investment in the Debtor and was owed approximately $1,000,000 when the bankruptcy petition was filed. After a trial on March 7, 2006, the bankruptcy court held that Carl Zeiss was a "non-statutory insider" pursuant to 11 U.S.C. Sec. 101(31) because of the "extreme closeness" between the Debtor and Carl Zeiss. According to the Tenth Circuit, the bankruptcy court reached this conclusion even though it also specifically found no evidence that Dr. Seitz, as Carl Zeiss' representative, controlled, sought to control, or exercised any undue influence on the Debtor; rather, Dr. Seitz was sensitive to "potential conflicts of interest" and both Dr. Seitz and the Debtor's senior management "attended to the kinds of formalities one would expect to see in dealings between third parties at arm's length." Likewise, the bankruptcy court found no evidence that Carl Zeiss' 10% share of the Debtor allowed Carl Zeiss to control or attempt to exercise any undue influence on Debtor. The bankruptcy court denied leave for an interlocutory appeal to the district court. The parties stipulated to a judgment of $147,307 in the Trustee's favor if Carl Zeiss were ultimately ruled to be a non-statutory insider, and Carl Zeiss preserved its right to appeal. The bankruptcy court entered its final judgment on August 7, 2006. Carl Zeiss then appealed to the BAP. On appeal, the BAP reversed, holding that "not every creditor-debtor relationship attended by a degree of personal interaction between the parties rises to the level of an insider relationship," and that "closeness alone does not give rise to insider status." The BAP entered its judgment on June 12, 2007. The Chapter 7 Trustee elevated the matter before the Tenth Circuit. 10th Circuit's Ruling The Chapter 7 Trustee argues that the bankruptcy court was correct -- and the BAP was wrong -- because the closeness of a relationship between a creditor and a debtor alone is enough to support a finding that a creditor is a non-statutory insider of a debtor pursuant to 11 U.S.C. Sec. 101(31). According to the Trustee, a showing that the creditor exerted control or undue influence over the debtor or that the creditor engaged in less- than-arm's-length transactions with the debtor is not required. Carl Zeiss contends that the bankruptcy court's decision was incorrect because a trustee's demonstration of a creditor's control, undue influence, or transactions at less than arm's length is essential for a finding that a creditor is a non- statutory insider of a debtor. A close relationship alone, Carl Zeiss contends, is not enough to confer insider status. According to the Tenth Circuit, because the bankruptcy court held that "[t]he extreme closeness of the relationship" between the two "is determinative," without any finding that the transactions between Carl Zeiss and the Debtor were not at arm's length or that there was undue influence or control by Carl Zeiss, it erred in holding that Carl Zeiss was a non-statutory insider of the Debtor. Although the Chapter 7 Trustee is correct that an absence of actual control does not rule out non-statutory-insider status, that does not resolve the issue, the Circuit Court said, pointing out that the bankruptcy court necessarily had to determine that Carl Zeiss did not actually control the Debtor to rule that it was a non-statutory, rather than a statutory, insider. "Actual control," the Circuit Court held, is the ability of the creditor to "unqualifiably dictate corporate policy and the disposition of corporate assets," or the "legal right or ability to exercise control over a corporate entity." "Such actual control is obviously not present [in U.S. Medical's case]," the Circuit Court said. A full-text copy of the Circuit Court's opinion is available at no charge at: http://www.ca10.uscourts.gov/opinions/07/07-1259.pdf MERGE HEALTHCARE: Inks Employment Agreements with Key Officers -------------------------------------------------------------- Merge Healthcare Incorporated entered into written employment letter agreements on July 15, 2008, with Justin C. Dearborn, Steven M. Oreskovich and Nancy J. Koenig, and on July 8, 2008, with Antonia Wells in connection with their appointments on June 4, 2008, as executive officers. Mr. Dearborn accepted the position of chief executive officer, while Mr. Oreskovich accepted the position of chief financial officer. Ms. Koenig accepted the position of president of Merge Fusion and Ms. Wells accepted the position of president, Merge OEM. Under the terms of their compensation arrangements, Mr. Dearborn receives an annual base salary of $250,000 and is eligible for a target annual bonus equal to his annual base salary; Mr. Oreskovich receives an annual base salary of $200,000 and is eligible for a target annual bonus equal to 50% of his annual base salary; and each of Ms. Koenig and Ms. Wells receives an annual base salary of $200,000 and is eligible for a target annual bonus equal to her annual base salary. In addition, in connection with their appointment as executive officers of the company, the company granted Mr. Dearborn, Mr. Oreskovich, Ms. Koenig and Ms. Wells options to purchase 400,000, 200,000, 200,000 and 200,000 shares, respectively, of the company's common stock at a per share price equal to $0.68, the closing price on the date of grant. Based in Milwaukee, Wisconsin, Merge Healthcare Incorporated (Nasdaq: MRGE; TSX: MRG) -- http://www.mergehealthcare.com/-- is a developer of medical imaging and clinical software applications and developmental tools. The company develops medical imaging software solutions that support end-to-end business and clinical workflow for radiology department and specialty practices, imaging centers and hospitals. Possible Bankruptcy As reported in the Troubled Company Reporter on May 16, 2008, if adequate funds are not available or are not available on acceptable terms, the company will likely not be able to fund its new teleradiology business, take advantage of unanticipated opportunities, develop or enhance services or products, respond to competitive pressures, or continue as a going concern beyond June 30, 2008, and may have to seek bankruptcy protection. Going Concern Doubt As reported in the Troubled Company Reporter on April 29, 2008, KPMG LLP in Chicago expressed substantial doubt about Merge Healthcare Incorporated'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 from operations and negative cash flows. The company says it has generated losses from operations over the past nine consecutive quarters and the company currently has no credit facility. As a result, the company is currently completely dependent on available cash and operating cash flow to meet its capital needs. MERVYN'S LLC: Cerberus Sold Stake to Sun Last Year, NY Post Says ---------------------------------------------------------------- The New York Post's James Covert reports that Cerberus Capital Management has sold its stake in Mervyn's LLC in a previously undisclosed transaction late last year to Florida-based investment firm, Sun Capital Partners. A Cerberus spokesman, The Post says, said the buyout firm now only owns a 15% interest in the real-estate company that leases space to Mervyn's. As reported by the Troubled Company Reporter on July 22, 2008, The Wall Street Journal's Peter Lattman said the private-equity owners wouldn't stand to take much of a financial hit in a Mervyn's liquidation. Mr. Lattman explained that when the owners bought the company they structured the deal as two separate transactions -- one for the retailer and a second one for the retailer's real estate. The real-estate arm leased many of the stores to Mervyn's and has sold and leased certain properties to other retailers; and through sale-leaseback transactions and the appreciation of real- estate values over the past several years, the buyers have more than doubled their money on the real-estate investment, and profits have far exceeded losses on the retailer. Since 2004, Mervyn's private-equity owners have shut many stores, WSJ says. Executives at Mervyn's in recent days have been trying to persuade vendors to continue shipping merchandise for the back-to-school season. Mervyn's lender, CIT Group Inc., stopped providing financing in the spring, causing the retainer's vendors to get nervous and begin withholding shipments. The Post also relates that GMAC, another Mervyn's lender, has stopped financing deliveries; and Sun Capital also has declined to give Mervyn's an equity infusion. Mervyn's major suppliers include Levi Strauss. Sources told The Post Mervyn's is likely to file for Chapter 11 bankruptcy protection by early next week and possibly sooner. The Wall Street Journal said if management's effort fails, Mervyn's could be forced to file for bankruptcy protection as soon as this month and shut down. The Post says Mervyn's in recent weeks has withheld payments to suppliers as a result of slumping sales. The Post, citing sources, adds that the company is now in talks to obtain outside financing, including a debtor-in-possession loan to restart the flow of goods to its stores in the event of a bankruptcy filing. Mervyns LLC -- http://www.mervyns.com/-- operates more than 177 stores in seven states, providing a mix of top national brands and exclusive private labels. Mervyns stores have an average of 80,000 retail square feet, smaller than most other mid-tier retailers and easier to shop, and are located primarily in regional malls, community shopping centers, and freestanding sites. Cerberus Capital Management and Sun Capital Partners, along with three other partners -- including real-estate investor Lubert- Adler -- bought Mervyn's from Target Corp. in 2004 for $1,200,000,000. Cerberus, et al., put up about $400,000,000 in equity and financed the rest. M FABRIKANT: Bankruptcy Fees and Expenses Total More Than $8 Mil. ----------------------------------------------------------------- The professionals involved in the chapter 11 bankruptcy case of M. Fabrikant & Sons, Inc. and Fabrikant-Leer International, Ltd. filed applications for fees and expenses of more than $8 million, Diamond Intelligence reports. More than half of these amounts have been paid, the report says. The U.S. Bankruptcy Court in the Southern District of New York will hear the Debtors' application at a later date to consider approval of the professionals' fees and expenses, Diamond Intelligence relates. Based on the report, the fees and expenses asked by each firm for the period November 2006 through May 22, 2008 are: Name of Total Amounts Requested Applicant Fees Expenses --------- ----------------------- Troutman Sanders LLP $3,354,514 $36,894 (Debtors' Counsel) Peter J. Solomon Company 1,188,626 15,346 (Debtors' Financial Advisor) Schain Leifer Guralnick 175,062 4 (Debtors' Accountants) Moses & Singer LLP 1,896,882 153,779 (Committee's Counsel) Halperin Battaglia Raicht, LLP 340,459 9,012 (Committee's Conflicts Counsel) Consensus Advisors LLC 1,107,272 36,675 Union Bank of Israel 0 2,859 (Committee Member) ----------------------- TOTAL $8,062,816 $254,573 According to Bankruptcy Law 360, the Debtors' crisis manager and restructuring adviser, Getzler Henrich & Associates LLC, were paid $5.1 million for at least 18 months of service. The firm filed its fee application Monday, July 21, 2008, Bankruptcy Law adds. About M. Fabrikant Based in New York City, M. Fabrikant & Sons, Inc. -- http://www.fabrikant.com/-- sells diamonds and jewelries. The company and its affiliate, Fabrikant-Leer International Ltd., filed for chapter 11 protection on Nov. 17, 2006 (Bankr. S.D.N.Y. Lead Case No. 06-12737). Mitchel H. Perkiel, Esq., Lee W. Stremba, Esq., and Paul H. Deutch, Esq., at Troutman Sanders LLP represent the Debtors in their restructuring efforts. Alan Kolod, Esq., Lawrence L. Ginsberg, Esq., and Christopher J. Caruso, Esq., at Moses & Singer LLP serve as counsel to the Official Committee of Unsecured Creditors. The Debtors' schedules show $225,612,204 in assets and $70,443,195 in liabilities. MNJ USED CARS: Owner Nazer Haidar to Serve 33 Months in Jail ------------------------------------------------------------ MNJ Used Cars owner, Nazer Ali Haidar, 48, was sentenced Monday, July 21, 2008, to serve 33 months in prison for bankruptcy fraud, the Wichita Business Journal reports. As reported by the Troubled Company Reporter on Feb. 26, 2008, Mr. Haidar was set to be sentenced May 7, for up to five years imprisonment plus $250,000 fine. Mr. Haidar was charged by a federal jury of falsifying statements submitted in bankruptcy proceeding and of committing bankruptcy fraud. Richard Wieland, U.S. Trustee for Kansas, Oklahoma, and New Mexico, stated that the "criminal bankruptcy fraud threatens the integrity of the bankruptcy system." He added that the efforts of the U.S. Attorney's office and the Federal Bureau of Investigation helped fight "abuse in the bankruptcy system." Mr. Haidar sought protection under chapter 7 of the U.S. Bankruptcy Code on Sept. 23, 2002, listing $5,100 in total assets and $211,278 in total debts. Based on court evidence, Mr. Haidar kept a personal checking account at Commerce Bank during bankruptcy and transferred money to his wife and brother from his business account. In addition, that during August 2001 to August 2002 Mr. Haidar bought plane tickets, jewelries, and other items using his credit cards, which increased his debt to above $125,000. MNJ Used Cars is headquartered in Wichita, Kansas and owned by Nazer Ali Haidar. MRS. FIELDS: Stephen Russo Decides to Terminate Employment ---------------------------------------------------------- Stephen Russo, a director and the president and chief executive officer of Mrs. Fields Famous Brands, LLC, delivered on July 10, 2008, a letter to the company stating that he was terminating his employment with the company. In his letter, Mr. Russo has asserted that his termination is with "Good Reason" and that accordingly he was entitled to immediate payment of all salary, bonuses, and benefits accruing to the date of termination, specified severance payments, and a portion of the bonus payable with respect to calendar year 2008. The Notice of Termination does not address whether he also has terminated his positions as a manager of the company and as a manager or director, employee and officer of subsidiaries of the company. However, the company believes that Mr. Russo's status as an employee and officer of the company were terminated automatically be reason of his termination as an employee of the company and the company believes that it was likely Mr. Russo's intention that his termination also be deemed to have constituted a resignation as a manager of the company and a director or manager of its subsidiaries. The company's Board of Managers has not yet met to review the Notice of Termination and has not made any determinations as to either the Notice of Termination or as to whether it will seek to fill the position of president or chief executive officer on either an interim or permanent basis. About Mrs. Fields Mrs. Fields Famous Brands LLC -- http://www.mrsfields.com/-- is a well established franchisor in the premium snack food industry, featuring Mrs. Fields(R) and TCBY(R) as the company's core brands. As of March 29, 2008, the company's franchise systems operated through a network of 1,278 retail concept locations throughout the United States and in 21 foreign countries. Going Concern Doubt As reported in the Troubled Company Reporter on April 18, 2008, KPMG LLP, in Salt Lake City, expressed substantial doubt about Mrs. Fields Famous Brands LLC's ability to continue as a going concern after auditing the company's consolidated financial statements for the year ended Dec. 29, 2007. The auditing firm pointed to the company's recurring net losses, negative cash flows from, and net member's deficit at Dec. 29, 2007. As reported in the Troubled Company Reporter on May 20, 2008, Mrs. Fields Famous Brands LLC's consolidated balance sheet at March 29, 2008, showed $147.2 million in total assets and $247.2 million in total liabilities, resulting in a $100.0 million member's deficit. NATIONAL DRY: Gets Initial OK to Use Prudential's Cash Collateral ----------------------------------------------------------------- The United States Bankruptcy Court for the District of Delaware authorized National Dry Cleaners Inc. and its debtor-affiliates to use cash collateral of The Prudential Company of America, until Oct. 8, 2008, on an interim basis. The cash collateral will be used to pay for expenses including employee payroll and other benefits, rents, and costs related to the Debtors' business operations. "The access of Prudential's cash collateral will be sufficient to fund their operations in the short term," Joel A. Waite, Esq., at Young Conaway Stargatt & Taylor LLP. "The Debtors are presently in talks with Prudential about providing postpetition financing," Mr. Waite notes. The Debtors entered into a securities purchase and revolving credit agreement dated April 21, 1999, with Prudential. On April 21, 2001, the Debtors defaulted under the terms of the agreement when they failed to make a principal payment when it came due and violated certain financial covenants under the credit agreement. In Sept. 30, 2001, the Debtors agreed to enter into a recapitalization agreement with Prudential to: i) extend the period for the payments of the amounts owed to Prudential; and ii) to cure the existing defaults under the credit agreement. The credit agreement, in turn, was terminated. The recapitalization agreement contains certain senior note and revolving credit, and subordinated note agreements. A. The senior note agreement is comprised of: a) a 10.91 senior secured Term A note of $16,000,000 due Nov. 30, 2008; b) a senior floating rate secured Term B note of $6,000,000 due Nov. 30, 2008; and c) a senior floating rate secured revolving credit note of $3,900,000 due Nov. 30, 2008. B. The subordinated note agreement is comprised of a 11% senior secured subordinated note of $11,500,000 due Nov. 30, 2008. The Debtor has prepared a cash collateral budget from July 11, 2008, to Oct. 8, 2008. A full-text copy of the Debtors' cash collateral budget is available for free at: http://ResearchArchives.com/t/s?2fe0 There is a $250,000 carve-out for payment to professional employed by the Debtors, and a $50,000 carve-out for payment to professionals retained by the committee. As adequate protection, the lender will be granted replacement liens on all property and assets of the Debtors. Furthermore, the lender will have priority claim over all other administrative claims. NATIONAL DRY: Wants Court to Approve Proposed Bidding Procedures ---------------------------------------------------------------- National Dry Cleaners Inc. and its debtor-affiliates ask the United States Bankruptcy Court for the District of Delaware to approve proposed bidding procedures for the sale of certain of its assets free and clear of liens and interest, subject to competitive bidding and auction. A hearing is set today, July 24, 2008, at 3:00 p.m., to consider approval of the Debtors' proposed sale procedures. The deadline for submitting offers by qualified bidder has yet to be determined. Bidders are requested to deliver a minimum good faith deposit of 10% of the purchase price under the asset purchase and sale agreement. The sale is expected to close by Sept. 15, 2008. The closing of the deal will take place at the Offices of Young Conaway Stargatt & Taylor, LLP. As reported in the Troubled Company Reporter on July 11, 2008, the Debtors retained Hilco Corporate Finance LLC and Hilco Real Estate LLC to assist in the sale of the Debtors' business assets. A full-text copy of the asset purchase and sale agreement is available for free at: http://ResearchArchives.com/t/s?2fdd A full-text copy of the Debtors' sale bidding procedures is available for free at: http://ResearchArchives.com/t/s?2fde Separately, the Debtors ask the Court to approve an executive incentive plan dated July 2, 2008, to pay the Debtors' chief executive officer Kevin Lyng and chief financial officer David Erickson in connection with the sale, subject to standard and withholding deductions. Under the plan, the Debtors' officials are expected to receive: A. Kevin Lyng -- 4.5% of the first $3 million in consideration received and 7% of any excess consideration received from a sale of the assets of the Kansas City market; -- 4.5% of the first $2.4 million in consideration received and 7% of any excess consideration from a sale of the assets of the Florida Market; and -- 7% of the consideration received from the sale of assets of any other market region of the Debtors. B. David Erikson -- 2.25% of the first $3 million in consideration received and 3.5% of any excess consideration received from a sale of the assets of the Kansas City market; -- 2.25% of the first $2.4 million in consideration received and 3.5% of any excess consideration from a sale of the assets of the Florida Market; and -- 3.5% of the consideration received from the sale of assets of any other market region of the Debtors. Furthermore, payments will not exceed $350,000 for Mr. Lyng and $160,000 for Mr. Erikson under the incentive plan. A hearing is set for Aug. 6, 2008, at 12:00 noon, to consider approval of the Debtors' proposed incentive plan. Objections, if any, are due July 30, 2008, by 4:00 p.m. A full-text copy of the Debtors' executive incentive plan is available for free at: http://ResearchArchives.com/t/s?2fdf About National Dry Cleaners Inc. Headquartered in Phoenix, Arizona, National Dry Cleaners Inc. -- http://www.alphillips.com/and http://www.pridecleaners.com/-- aka Delia's Cleaners Inc. operates more than 300 dry cleaning stores across the nation. The enterprise employs over 1,500 people. As of June 30, 2008, NDCI operated 231 dry cleaning stores and 6 central dry cleaning and laundry plants in nine states. Of the dry cleaning stores, 164 are drop stores, meaning that the stores do not have dry cleaning or laundry equipment on site, and 67 dry cleaning stores have the necessary equipment to perform dry cleaning and laundry services on-site. The Debtor and its debtor-affiliates filed for separate Chapter 11 protection on July 7, 2008, (Bankr. D. Del. Case No.: 08-11382 to 08-11393) Joel A. Waite, Esq., Joseph M. Barry, Esq., Matthew Barry Lunn, Esq. at Young, Conaway, Stargatt & Taylor represent the Debtors in their restructuring efforts. The Debtors listed estimated assets of $10 million to $50 million and estimated debts of $10 million to $50 million. NETWOLVES CORP: Plan Confirmation Hearing to Continue August 20 --------------------------------------------------------------- The United States Bankruptcy Court for the Middle District of Florida will continue a hearing to consider confirmation of NetWolves Corporation's proposed joint plan of reorganization on Aug. 20, 2008. The plan confirmation hearing commenced on June 24, 2008, and was continued on July 15. The proposed amended plan will include, among other things, the cancellation of all outstanding shares of the Debtor's common stock and serial preferred stock. It is intended that the terms and conditions of this plan will be provided to the Debtor's equity holders and creditors on or about July 25, 2008. Overview of the Plan The plan contemplates the potential substantive consolidation of the Debtors' estates for purposes of voting and for distributions under the plan. NetWolves may seek prior to or at confirmation to substantively consolidate its Estate with those of its affiliated Debtors pursuant to Section 105 of the Bankruptcy Code and applicable law. The Debtors believe substantive consolidation will benefit all holders of claims and interests by: (i) essentially eliminating the myriad of intercompany claims (and administrative expense claims among the Debtors) that will otherwise be difficult, if not impossible, to accurately reconcile, and (ii) providing a more equitable distribution to all holders of claims and Interests under the plan. Terms of the Plan The Debtors will be reorganized pursuant to the plan and will continue in operation, achieving the objectives of chapter 11 for the benefit of their creditors, customers, suppliers, and employees. Generally, Administrative Claims, Priority Tax Claims, and Other Priority Claims will be fully paid in cash as and when required by the Bankruptcy Code, unless otherwise agreed by the Holders of the claims. Telecommunications Providers holding Allowed Cure Claims receive cash payments in the full amount of the claims over a thirty- month period following the effective date, or as may otherwise be determined by the Bankruptcy Court or agreement of the parties. Secured Claims will have the allowed amount of the claims treated under the plan as General Unsecured Claims, unless the holder can conclusively demonstrate the existence of a valid, enforceable perfected Lien, which claim will be treated as a Secured Claim under the Plan and the Bankruptcy Code. Holders of Unsecured Claims will receive (i) cash, (ii) new common stock, (iii) a combination of cash and new common stock, or (iv) the right to elect whether their respective claim(s) are satisfied through distributions of cash or new common stock, based upon the relative positions of the respective classes. Existing Holders of NetWolves Common Stock will retain a diluted Interest in NetWolves through a reverse stock split of existing common stock and the issuance of the new common stock under the plan to the holders of allowed claims. NetWolves estimates that existing common stockholders will retain approximately 5% of Reorganized NetWolves on a fully diluted basis, subject to the final Reorganization Value of the Reorganized Debtors. However, all other existing Old Stock Rights of NetWolves will be cancelled, except as specifically provided in the Plan. The Reorganized Debtors will obtain exit financing to support payments required to be made under the plan, repay any DIP financing, pay transaction costs, and fund working capital and general corporate purposes of the Reorganized Debtors following their emergence from bankruptcy. The Troubled Company Reporter reported on May 9, 2008, that the Hon. Paul M. Glenn approved the disclosure statement for a second amended joint plan of reorganization of the Debtors. A full-text copy of the second amended joint disclosure statement is available for free at http://bankrupt.com/misc/Netwolves About NetWolves Based in Tampa, Florida, NetWolves Corporation (Pink Sheets: WOLV) -- http://www.netwolves.com/-- provides telecommunications and Internet-managed services to more than 1,000 customers through its neutral FCC-licensed carrier. Some of NetWolves' customers include General Electric, University of Florida, McLane Company, JoAnn Stores and Marchon Eyewear. The company and three of its affiliates filed for Chapter 11 protection on May 21, 2007 (Bankr. M.D. Fla. Case Nos. 07-04186 through 07-04196). David S. Jennis, Esq., at Jennis Bowen & Brundage, P.L., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, it listed total assets of $8,847,572 and total liabilities of $7,637,029. NEUMANN HOMES: Has Until December 31 to File Chapter 11 Plan ------------------------------------------------------------ The U.S. Bankruptcy Court for the Northern District of Illinois extended the deadline by which Neumann Homes Inc. and its debtor- affiliates must file their Chapter 11 plan, through and including Dec. 31, 2008, and the deadline by which the Debtors must solicit acceptances of that plan through and including March 31, 2009. George Panagakis, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, in Chicago, Illinois, explained that the Debtors are still in the process of implementing a sale for their remaining real properties and resolving the issues concerning those properties with certain creditors. The Debtors related that they are also in ongoing negotiations with Bank of America about the disposition of the properties financed by the Bank, and have yet to resolve the trade claims concerning their developed properties. "The Debtors anticipate that they will be in a better position to file a plan upon the completion of such processes and, thus, require additional time to implement their strategies and formulate a plan," Mr. Panagakis said. Headquartered in Warrenville, Illinois, Neumann Homes Inc. -- http://www.neumannhomes.com/-- develops and builds residential real estate throughout the Midwest and West US. The company is active in the Chicago area, southeastern Wisconsin, Colorado, and Michigan. The company have built more than 11,000 homes in some 150 residential communities. The company offer formal business training to employees through classes, seminars, and computer- based training. The company filed for Chapter 11 protection on Nov. 1, 2007 (Bankr. N.D. Ill. Case No. 07-20412). George Panagakis, Esq., at Skadded, Arps, Slate, Meagher & Flom L.L.P., was selected by the Debtors to represent them in these cases. The Official Committee of Unsecured Creditors has selected Paul, Hastings, Janofsky & Walker LLP, as its counsel in these bankruptcy proceeding. When the Debtors filed for protection against its creditors, they listed assets and debts of more than $100 million. (Neumann Bankruptcy News; Bankruptcy Creditors' Services Inc. http://bankrupt.com/newsstand/or 215/945-7000) NORTHSTAR NEUROSCIENCE: Liquidation May Yield More Value, Says RCA ------------------------------------------------------------------ RA Capital Advisors wanted medical research company Northstar Neuroscience to liquidate or sell itself after Northstar's stock value slid down due to a failed research venture, The Seattle Times reports. In a letter to Northstar's board of directors, RA Capital, its largest shareholder, pressed the company to lay-off a sizeable part of its workforce and halt all operations, while it tries to find a buyer for the company, relates the Times. In the alternative, the company might have to liquidate and split its cash-on-hand -- which is worth $73 million as of March 31 -- to its shareholders. Northstar's market capitalization during the same period was $49 million. The company's value plunged after its research on motion-improvement for stroke survivors failed in a trial early this year, the Times says. This led the company to focus on other medical ventures. "Our objective is to gain sufficient clinical data by the end of next year to validate one or more of our therapies," the Times quotes CEO John Bowers as saying. However, RA Capital had other concerns. "Now is not the time for half-measures," RA Capital said in the letter. "This would clearly be in the best interest of the stockholders of the company in light of the prices at which the company's stock has been trading since January 2008," asserted RA Capital. Based in Seattle, Washington, Northstar Neuroscience -- http://www.northstarneuro.com/-- is pioneering the development of cortical stimulation therapies. The company is working with healthcare partners to develop clinical applications from the science of neurostimulation. Its solutions are tuned to the individual needs of patients -- offering greater hope for the renewal and recovery from neurological injury, disorder or disease -- enabling them to regain their quality of life. Northstar's Renova(TM) Cortical Stimulation System is an investigational device that is in clinical trials for several indications, including major depressive disorder, stroke motor recovery and tinnitus. NUTRITIONAL SOURCING: Has Until August 1 to File Chapter 11 Plan ---------------------------------------------------------------- The Hon. Peter J. Walsh of the U.S. Bankruptcy Court for the District of Delaware extended the exclusive periods of Nutritional Sourcing Corporation and its debtor-affiliates to: a) file a Chapter 11 plan of liquidation until Aug. 1, 2008, and b) solicit acceptances of that plan until Oct. 31, 2008. Judge Walsh granted the Debtors' requested extension of time provided that the plan is acceptable to the Official Committee of Unsecured Creditors. The extension of time will allow the Debtors to file a consensual Chapter 11 plan of liquidation and, to the extent possible, complete the sale of their largest remaining assets, Blockbuster Inc. franchise and its attendant real property leases. To recall, the Debtors have completed the sale of substantially all their Pueblo's De Diego Assets to Supermercados Maximo Inc. for $29,500,000. The Debtors have provided on Feb. 5, 2008, to Committee an initial draft of the plan, as amended on May 7, 2008. The Committee notified the Debtors that it needs more time to evaluate the Debtors' amended plan term sheet. As reported in the Troubled Company Reporter on July 7, 2008, the Court conditionally extended the Debtors' exclusive period to file a Chapter 11 plan until July 21, 2008. It was extended on grounds that the Committee will not file any competing plan by July 18, 2008. About Nutritional Sourcing Based in Pompano, Florida, Nutritional Sourcing Corp., fdba Pueblo Xtra International, Inc. -- http://www.puebloxtra.com/-- owns and operates supermarkets and video rental shops in Puerto Rico and the US Virgin Islands. The company and two affiliates, Pueblo International, L.L.C., and F.L.B.N., L.L.C., filed for chapter 11 protection on Aug. 3, 2007 (Bankr. D. Del. Case Nos. 07-11038 through 07-11040). Kay Scholer LLC represents the Debtors in their restructuring efforts. Pepper Hamilton LLP serves as their Delaware counsel. The U.S. Trustee for Region 3 appointed eight creditors to serve on an Official Committee of Unsecured Creditors. Skadden, Arps, Slate, Meagher & Flom LLP represent the Official Committee of Unsecured Creditors. The company has disclosed $130.8 million in assets and debt totaling $266.5 million with the Court. OCCULOGIX INC: Restates Annual and Quarterly Financial Reports -------------------------------------------------------------- OccuLogix Inc. filed restated unaudited consolidated financial statements for the quarter ended March 31, 2008, and restated audited consolidated financial statements for the financial years ended Dec. 31, 2007 and Dec. 31, 2006. The company does not intend to file its unaudited consolidated financial statements for any of the first three quarters of the financial year ended Dec. 31, 2007. The restatements were made in order to correct the manner in which OccuLogix has been consolidating OcuSense since Nov. 30, 2006, the date on which OccuLogix acquired its majority ownership interest in OcuSense which consists of voting preferred stock. The restatements did not result in a decline to total assets in any of the periods restated. Since the date of the acquisition, OccuLogix has consolidated OcuSense on the basis of a voting control model. OccuLogix has determined that, as a result of a voting agreement between OccuLogix and certain founding stockholders of OcuSense, OccuLogix is not able to exercise voting control as contemplated in ARB 51 consolidated financial statements and FAS 94 consolidation of all majority-owned subsidiaries. However, OccuLogix believes that OcuSense constitutes a variable interest entity as defined under FIN 46(R) Consolidation of Variable Interest Entities. Under FIN 46(R), consolidation is based on variable interests, rather than on voting interests. OccuLogix believes that it would have been required to consolidate OcuSense under the variable interest model as OccuLogix would absorb the majority of the expected losses of OcuSense. While the company anticipates that it will continue to consolidate OcuSense, the initial measurement of the related assets, liabilities and non-controlling interest under FIN 46(R) differs from what had been reported by OccuLogix using a voting control model. The impact of these differences have been reflected in the restated financial statements. The restatements affect the reported intangible assets, deferred tax, non-controlling interest, equity balances and reported net loss. The restatements do not impact the company's cash position for any of the affected periods. The impact on reported net loss was an increase in the loss to $69,829,983, from the reported loss of $68,139,314, an increase of 2.5% for the year ended Dec. 31, 2007 and an increase in the loss to $82,221,897, from the reported loss of $82,184,503 an increase of 0.05% for the year ended Dec. 31, 2006. The impact on reported net loss was a decrease in the loss to $2,277,075 from the reported loss of $2,943,500, a decrease in the loss of 22.6% for the three months ended March 31, 2008 and an increase in the loss to $4,585,762, from the previously reported loss of $4,272,744, an increase in the loss of 7.3% for the three months ended March 31, 2007. On May 20, 2008, OccuLogix filed a preliminary proxy statement to solicit the proxies of its stockholders for a number of proposed transactions, including, among others, the acquisition by OccuLogix of the minority ownership interest in OcuSense that it does not already own. The company's preliminary proxy statement is the subject of review by the U.S. Securities and Exchange Commission. After the completion of this review, the company will file and mail its final proxy statement. A full-text copy of the restated annual report is available for free at http://ResearchArchives.com/t/s?2fcf A full-text copy of the restated financial statements for the quarter ended March 31, 2008, is available for free at http://ResearchArchives.com/t/s?2fd0 About OccuLogix Inc. Headquartered in Mississauga, Ontario, Canada, OccuLogix Inc. (Nasdaq: OCCX; TSX: OC) -- http://www.occulogix.com/-- is a healthcare company focused on ophthalmic devices for the diagnosis and treatment of age-related eye diseases. Going Concern Doubt Ernst & Young LLP, in Toronto, Canada, expressed substantial doubt about OccuLogix 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 operating losses and working capital deficiency. ORAGENICS INC: Kirkland Russ Expresses Going Concern Doubt ---------------------------------------------------------- Kirkland Russ Murphy & Tapp, PA, in Clearwater, Fla., raised substantial doubt about the ability of Oragenics, Inc., to continue as a going concern after auditing the company's financial statements for the year ended Dec. 31, 2007. The auditing firm pointed to the company's recurring operating losses, negative operating cash flows and accumulated deficit. The company posted a net loss of $2,311,712 on total revenues of $133,088 for the year ended Dec. 31, 2007, as compared with a net loss of $2,935,719 on total revenues of $66,176 in the prior year. As of Dec. 31, 2007, Oragenics had an accumulated deficit of $13,970,793. Cash used in operations for the year ended Dec. 31, 2007, was $1,913,760 and cash flow from operations was negative throughout 2007. The company expects to incur substantial expenditures to further develop each of its technologies. The company believes the working capital at Dec. 31, 2007, will be insufficient to meet the business objectives as presently structured. Management recognizes that the company must generate additional capital resources or consider modifying its technology development plans to enable it to continue as a going concern. Management's plans include seeking financing, alliances or other partnership agreements with entities interested in the company's technologies, or other business transactions that would generate sufficient resources to assure continuation of its operations and research and development programs. At Dec. 31, 2007, the company's balance sheet showed $1,151,377 in total assets, $331,494 in total liabilities, and $819,883 in total stockholders' equity. The company's consolidated balance sheet at Dec. 31, 2007, showed strained liquidity with $592,028 in total current assets available to pay $331,494 in total current liabilities. A full-text copy of the company's 2007 annual report is available for free at http://ResearchArchives.com/t/s?2fb6 About Oragenics Oragenics, Inc. (AMEX: ONI) -- http://www.oragenics.com/-- formerly known as Oragen, Inc., operates as an early-stage biotechnology company in the United States. It primarily focuses on developing technologies associated with oral health, broad- spectrum antibiotics, and other general health benefits. The company develops SMaRT Replacement Therapy, which is a painless topical treatment for protection against tooth decay; and Mutacin 1140, an antibiotic with anti-microbial activity against gram- positive bacteria, including methicillin-resistant and vancomycin- resistant Staphylococcus aureus. The company was founded in 1996 and is based in Alachua, Florida. OSYKA CORP: Judge Isgur Approved Amended Disclosure Statement ------------------------------------------------------------- The Hon. Marvin Isgur of the United States Bankruptcy Court for the Southern District of Texas approved an amended disclosure statement dated July 18, 2008, explaining an amended joint Chapter 11 plan of reorganization. of Osyka Corp. Judge Isgur held that the Debtors' amended disclosure statement contains adequate information within the meaning of Section 1125 of the Bankruptcy Code. A plan confirmation hearing is set for Aug. 20, 2008, at 1:30 p.m., Central Daylight Time. Objections, if any, are due Aug. 18, 2008. Judge Isgur also approved the procedures of the Debtors proposed for the solicitation and tabulation of the amended plan votes. Deadline for voting on the amended plan is Aug. 18, 2008. Overview of the Plan The plan contemplates the reduction of the Debtors' overall debt and payment obligations by at least $82 million associated with corporate liabilities in order to realign their capital structure. The plan further provides more liquidity to the Debtors to continue to operate their business as a viable economic entity. Moreover, the plan is proposed in connection to a settlement agreement with J. Aron & Company and Texas Capital Bank, which provides the allocation of a minimum "purchase price" of at least $67,000,000. A full-text copy of the Settlement Agreement is available for free at: http://ResearchArchives.com/t/s?2a74 On July 10, 2008, Legado Resources LLC purchased all of the Debtors' assets for $77,000,000, free and clear of liens and interests. The sale is expected to close by Aug. 29, 2008. A full-text copy of the asset purchase agreement dated July 16, 2008, is available for free at: http://ResearchArchives.com/t/s?2fd8 The plan classifies claims against and interest in the Debtors in nine classes. The classification of treatments of claims and interests are: Treatment of Claims and Interests Type Estimated Estimated Class of Claims Treatment Amount Recovery ----- --------- --------- --------- --------- unclassified administrative $986,425 100% claims unclassified priority tax $1,148 100% claims A allowed other unimpaired $0 100% priority claims B other secured impaired $0 100% claims C allowed unimpaired $500,000 100% prepetition bank credit agreement claims D allowed impaired $61,246,978 100% prepetition junior credit agreement claims E allowed ISDA impaired $21,113,672 100% claims F warrants impaired $722,104 0% G allowed impaired $972,120 100% general unsecured claims H allowed impaired $1,500,000 0% intercompany claims I allowed equity unimpaired 100% interests The plan indicates that each estimated recovery is projected on assumption that the Debtors' total cash balances and cash collateral account on the plan's effective date exceeds $3,800,000, and that Class G claims do not surpass the Debtors' estimated amount of $974,120. As of June 13, 2008, the Debtors have $4,719,873 in cash. Class A allowed other priority claims will be paid in full in cash in an amount equal to the allowed priority claims after the distribution date. All allowed other priority claims, which are not due and payable by the plan's effective date, will be paid by the Debtors in the ordinary course of business. Unless agreed to a different treatment, each holder of Class B other secured claims will be paid in full, either (i) cash in the amount equal to 100% of the unpaid amount of the allowed other secured claim, (ii) the proceeds oft he sale of the collateral securing the claim, (iii) the collateral securing claim, (iv) a note with annual periodic cash payments of at least four years, (v) treatment that leaves unaltered the legal, equitable, and contractual rights to the holder is entitled, or (vi) other distribution as necessary to satisfy the requirements of the U.S. Bankruptcy Code. Holders of class E ISDA and class D allowed prepetition junior credit agreement claims are entitled to get their pro rata share of (i) 100% of equity in the reorganized Debtors and (ii) all of the excess cash collateral at least $200,000. However, in the event the Debtor consummate a sale to another party, holders will receive a pro rata share of (i) the applicable portion of the purchase price, (ii) 50% of excess cash collateral from $500,000 to $1,000,000, if any, and (iii) 10% of excess cash collateral at least $1 million, if any. The ISDA claim arose under a certain agreement dated May 10, 2006, entered between the Debtors' and J. Aron. Each holder of class G allowed general unsecured claims will get its pro rata share of (i) $200,000 in excess cash collateral and (ii) 50% of the net recovery, receive from the BIP Holdings LLC litigation, if any, after all allowed claims are paid. The BIP litigation is the causes of action arose out of the assignment of two sale and conveyance in 2006, between the Debtors and BIP, with respect to the sale of certain oil and gas leases and real property. Holders of class H allowed intercompany claims and class F warrant will not receive any distribution under the plan. All warrants will be extinguished as of the plan's effective date. Class I allowed equity interests of the Debtors will not be modified or impaired, unless Debtors and any interest holder agreed to in writing. A full-text copy of the amended disclosure statement is available for free at: http://ResearchArchives.com/t/s?2fd6 A full-text copy of the amended joint Chapter 11 plan of reorganization is available for free at http://ResearchArchives.com/t/s?2fd7 About Osyka Corporation Headquartered in Houston, Texas, Osyka Corporation -- http://www.osyka.com/-- is an oil and gas company. The company filed for Chapter 11 protection on March 3, 2008 (Bankr. S.D. Tex. Case No.08-31467). H. Rey Stroube, III, Esq., represents the Debtor in its restructuring efforts. No Official Committee of Unsecured Creditors has been appointed in this case to date. As reported in the Troubled Company Reporter on June 18, 2008, the Debtors' summary of schedules showed total assets of $109,754,313 and total debts of $83,792,755. PALM HARBOR: Earns $1.6 Million in Fiscal 2009 First Quarter ------------------------------------------------------------ Palm Harbor Homes Inc. reported last week financial results for the first quarter ended June 27, 2008. Net income for the first quarter of fiscal 2009 totaled $1.6 million, compared with a net loss of $4.3 million a year ago. The results for the first quarter include a pre-tax gain of $4.4 million on the repurchase of convertible senior notes. Net sales for the first quarter totaled $130.0 million compared with $143.3 million in the year-earlier period. Palm Harbor reported operating income of $778,000 for the first quarter compared with an operating loss of $2.6 million in the same period last year. Larry Keener, chairman and chief executive officer of Palm Harbor Homes Inc., said, "We are pleased with our progress during the first quarter as a result of our recent restructuring and consolidation actions. Based on these financial results, our operational breakeven point has been lowered by over $100 million in annual revenues compared to the same period last year. In addition, our selling, general and administrative costs have been reduced by an annualized rate of approximately $23 million compared with the first quarter of fiscal 2008. We are especially pleased with performance of our new commercial division, which added $9.2 million in revenue for the first quarter and has an additional $9.0 million already under contract for the second and third quarters. "While these results are encouraging, we also recognize we have more work to do as we continue to face tough industry headwinds, eroding consumer confidence and skyrocketing material costs. Our return to sustainable profitability in this environment requires not only our lowered operating costs and breakeven level, but also the aggressive pursuit of key revenue growth initiatives. We have expanded our product lines at both ends of the pricing spectrum to broaden our customer reach in both the manufactured housing and modular markets we serve. We are intensifying our promotional and advertising efforts, with a strong focus on Internet marketing, which has proven to be a cost-effective channel to reach new customers and generate sales leads. As a result of these initiatives, same store sales increased by approximately five percent during the quarter. "Additionally, we are working to improve our referral business by reducing completion times for construction of our modular products. Our diverse product line allows us to meet the needs of an array of homebuyers and we continue to look for new target markets. We have identified new distribution channels for modular products in the commercial, military and multi-family markets, each of which promise to be important new growth opportunities for Palm Harbor. Finally, we are working to increase the scope of our financial services divisions, both Standard Casualty Insurance and CountryPlace Mortgage, which continue to be profitable businesses for the company," Keener concluded. Kelly Tacke, executive vice president and chief financial officer of Palm Harbor Homes Inc., commented, "Along with our strategic initiatives, we have been intensely focused on actions that have significantly strengthened our balance sheet. During the first quarter, CPM sold approximately $51.3 million of its warehoused portfolio of chattel and mortgage loans. Notably, these loans were sold at book value without incurring a loss. We also renegotiated our floor plan facility with our current lender and extended the facility until March 2011. We believe our ability to complete these transactions on favorable terms is especially noteworthy in light of extremely difficult credit market conditions and demonstrates the market's confidence in Palm Harbor's business model and financial strength. "Additionally, we took advantage of the current investment opportunities in the bond market. We utilized approximately $6.3 million of our cash to retire approximately $10.8 million of our convertible senior notes to maximize our return on capital. Above all, we are focused on improving our financial performance and delivering greater value to our shareholders in fiscal 2009," added Tacke. At June 27, 2008, the company's consolidated balance sheet showed $502.8 million in total assets, $374.3 million in total liabilities, and $128.5 million in total stockholders' equity. About Palm Harbor Headquartered in Dallas, Palm Harbor Homes Inc. (Nasdaq: PHHM) -- http://www.palmharbor.com/-- is one of the nation's leading manufacturers and marketers of multi-section manufactured homes. The company markets nationwide through vertically integrated operations, encompassing manufacturing, marketing, financing and insurance. * * * Palm Harbor Homes Inc.'s fiscal 2008 results continue to be affected by worsening conditions in the manufactured housing industry. In addition, the company sees no signs of recovery for the factory-built housing industry in the near term. Prior to the fiscal 2009 first quarter ended June 27, 2008, the company had seven (7) consecutive quarterly net losses beginning the second quarter ended Sept. 29, 2006. This concludes the Troubled Company Reporter's coverage of Palm Harbor Homes Inc. until facts and circumstances, if any, emerge that demonstrate financial or operational strain or difficulty at a level sufficient to warrant renewed coverage. PARADIGM MEDICAL: Amends Report to Adjust Derivatives & Warrants ---------------------------------------------------------------- Paradigm Medical Industries, Inc., filed with the U.S. Securities and Exchange Commission on July 15, 2008, Amendment No. 2 on its Form 10-KSB for the year ended Dec. 31, 2007. With this filing, the company's consolidated financial statements have been restated to correct the errors reported in the company's accounting for the embedded derivatives and warrants issued in connection with the company's convertible notes in the balance sheets and the statements of operations for the years ended Dec. 31, 2006, and 2005, and quarterly financial statements for the quarter ended March 31, June 30, and Sept. 30, 2007, and 2006, respectively. In an updated letter dated May 18, 2008, Chisholm, Bierwolf & Nilson LLC raised substantial doubt about the ability of Paradigm Medical Industries, Inc., to continue as a going concern after it audited the company's financial statements for the year ended Dec. 31, 2007. The auditor pointed to the company's working capital deficit and recurring operating losses. Historically, the company has not demonstrated the ability to generate sufficient cash flows from operations to satisfy its liabilities and sustain operations, and the company has incurred significant losses from operations. The company posted a net loss of $1,731,000 on total sales of $1,872,000 for the year ended Dec. 31, 2007, as compared with a restated net loss of $1,198,000 on restated total sales of $2,195,000 in the prior year. At Dec. 31, 2007, the company's balance sheet showed $2,174,000 in total assets and $4,314,000 in total liabilities, resulting in a $2,140,000 stockholders' deficit. The company's consolidated balance sheet at Dec. 31, 2007, also showed $1,819,000 in total current assets available to pay $1,060,000 in total current liabilities. A full-text copy of the company's 2007 annual report is available for free at http://ResearchArchives.com/t/s?2fc8 About Paradigm Medical Headquartered in Salt Lake City, Paradigm Medical Industries Inc. (OTC BB: PMED) -- http://www.paradigm-medical.com/-- develops, manufactures, and markets diagnostic and surgical equipment for the ophthalmic market. The company specializes in powerful, easy-to-use, value-driven equipment capable of providing the experienced practitioner exceptional value while being affordable for doctors starting new practices or opening up satellite offices. PEGASUS AVIATION: Fitch Cuts Ratings to 'CCC/DR2' on Two Classes ---------------------------------------------------------------- Fitch Ratings has taken these rating actions on the three Pegasus Aviation Lease Securitization Trusts: Pegasus Aviation Lease Securitization (PALS I) -- Class A-1 notes remain at 'CC/DR4'; -- Class A-2 notes remain at 'CC/DR4'; -- Class B notes remain at 'C/DR6'; -- Class C notes remain at 'C/DR6'; -- Class D notes remain at 'C/DR6'. Pegasus Aviation Lease Securitization II (PALS II) -- Class A-1 notes downgraded to 'CCC/DR2' from 'B-/DR2'; -- Class A-2 notes downgraded to 'CCC/DR3' from 'B-/DR2'; -- Class B notes remain at 'C/DR6'; -- Class C notes remain at 'C/DR6'; -- Class D notes remain at 'C/DR6'. Pegasus Aviation Lease Securitization III (PALS III) -- Class A-1 notes affirmed at 'B/DR2'; -- Class A-2 notes affirmed at 'B/DR2'; -- Class A-3 notes affirmed at 'B/DR2'; -- Class B-1 notes remain at 'C/DR6'; -- Class B-2 notes remain at 'C/DR6'; -- Class C-1 notes remain at 'C/DR6'; -- Class C-2 notes remain at 'C/DR6'; -- Class D-1 notes remain at 'C/DR6'. Cash flow available to service debt in the PALS II transaction has continued to steadily decline over the past two years. The decline in monthly collections combined with increased expenses in recent months has further stressed the transaction structure. While the class A notes are receiving current interest payments, total monthly collections were insufficient to pay minimum principal to the class A notes on the March, May, and June 2008 payment dates. As available cash flow continues to decrease, the reliability of full principal payment on the class A notes also declines. The DR-Rating differential between the A-1 and A-2 notes reflects the differing amortization schedules between the two classes. Class A-1 is currently receiving the full benefit of class A principal payments. In addition, the PALS II portfolio contains significant concentrations in older generation, less fuel efficient aircraft types such as 757-200s and MD-80s. These aircraft types are exposed to potential value and lease rate deterioration resulting from increased fuel prices, airline capacity reductions, and bankruptcies in the current environment. Fitch's analysis incorporated expected cash flow to be available to the trust over the remaining life of the transaction. This expectation is based on several factors including aircraft age, current portfolio value, potential lease rates, and perceived liquidity of the portfolio. Lease rate and portfolio value expectations have been updated to reflect Fitch's views on certain aircraft given the aviation market volatility and significantly elevated fuel prices. PALS I and PALS III were affirmed as they were found to have credit support consistent with their current ratings. PLASTECH ENGINEERED: Wants to Employ Groom Law as Benefits Counsel ------------------------------------------------------------------ Plastech Engineered Products Inc. and its debtor-affiliates seek authority from the U.S. Bankruptcy Court for the Eastern District of Michigan to employ Groom Law Group, Chartered, as their employee benefits counsel, nunc pro tunc to June 27, 2008. According to the Debtors, Groom Law is particularly well-suited to serve as employee benefits counsel to address matters where expertise in employee benefits law is invaluable. "The firm is the largest employee benefits specialty firm in the country and possesses nationally recognized expertise on the intersection between employee benefits law and insolvency matters," the Debtors note. Pursuant to its employment, Groom Law is expected to: (a) provide legal advice concerning the Debtors' employee benefits plans, including application of the Employee Retirement Income Security Act of 1974, as amended, and relevant provisions of the Internal Revenue Code; (b) represent the Debtors on information inquiries, investigations, or proceedings brought by the (i) Pension Benefit Guaranty Corporation, (ii) the Department of Labor, or the (iii) Internal Revenue Service -- the three federal agencies with regulatory authority over the Debtors' employee benefit plans; (c) attend meetings and negotiate with representatives of the employees in administering the employee benefits plans; (d) appear, on the Debtors' behalf, before the Bankruptcy Court, any appellate court, and the United States Trustee on matters relating to the Debtors' employee benefits plan; and The Debtors assert that the firm's services are necessary to enable them to maximize the value of their estates. Groom Law, whose services are unique to the Debtors, will also coordinate its efforts with the other bankruptcy professionals employed in these cases to avoid duplication of work, the Debtors assure the Court. Groom Law's standard hourly rates range from $325 to $800, which will vary with the professional's years of experience, specialization, and level of professional attainment, Gary M. Ford, a partner at Groom Law says. Specifically, Mr. Ford's hourly rate is $800, and $675 per hour is billed for the services of fellow professional, Mr. Lonie Hassel. The Debtors agree to reimburse the firm for necessary and actual expenses incurred in the conduct of its services. Mr. Ford relates that his firm has received, or anticipates receipt of a $50,000 security retainer, which it intends to apply for professional services compensation in these Chapter 11 cases subject to the Court's approval. Mr. Ford further relates, based on conflicts search conducted, that his firm is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code, and as required by Section 327(a) of the Bankruptcy Code. About Plastech Engineered Based in Dearborn, Michigan, Plastech Engineered Products, Inc. -- http://www.plastecheng.com/-- is full-service automotive supplier of interior, exterior and underhood components. It designs and manufactures blow-molded and injection-molded plastic products primarily for the automotive industry. Plastech's products include automotive interior trim, underhood components, bumper and other exterior components, and cockpit modules. Plastech's major customers are General Motors, Ford Motor Company, and Toyota, as well as Johnson Controls, Inc. Plastech is a privately held company and is the largest family- owned company in the state of Michigan. The company is certified as a Minority Business Enterprise by the state of Michigan. Plastech maintains more than 35 manufacturing facilities in the midwestern and southern United States. The company's products are sold through an in-house sales force. The company and eight of its affiliates filed for Chapter 11 protection on Feb. 1, 2008 (Bankr. E.D. Mich. Lead Case No. 08- 42417). Gregg M. Galardi, Esq., at Skadden Arps Slate Meagher & Flom LLP, and Deborah L. Fish, Esq., at Allard & Fish, P.C., represent the Debtors in their restructuring efforts. The Debtors chose Jones Day as their special corporate and litigation counsel. Lazard Freres & Co. LLC serves as the Debtors' investment bankers, while Conway, MacKenzie & Dunleavy provide financial advisory services. The Debtors also employed Donlin, Recano & Company as their claims and noticing agent. Joel D. Applebaum, Esq., at Clark Hill PLC, represents the Official Committee of Unsecured Creditors. As of Dec. 31, 2006, the company's books and records reflected assets totaling $729,000,000 and total liabilities of $695,000,000. (Plastech Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) PLASTECH ENGINEERED: Wants 503(b)(9) Claims Resolution Rules Set ---------------------------------------------------------------- Plastech Engineered Products Inc. and is debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of Michigan to approve their proposed 503(b)(9) claims resolution procedures pertaining to the handling of administrative claims. Pursuant to a Court ruling on claims filed under Section 503(b)(9) of the U.S. Bankruptcy Code in the Debtors' Chapter 11 cases, these deadlines are in place: Jul. 29, 2008 Debtors' deadline to review, analyze and object to Section 503(b)(9) Claims. Aug. 16, 2008 Date by which Sec. 503(b)(9) Claimholders must respond to Objections. Aug. 21, 2008 Scheduled omnibus hearing on timely-filed 503(b)(9) Claims. The Debtors' limited financial wherewithal, coupled with the uncertainty of the course of their Chapter 11 cases, and volume of administrative claims filed against their estates prompted them to seek the entry of a 503(b)(9) Bar Date Motion, which the Court approved on April 18, 2008, relates Gregg M. Galardi, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, in Wilmington, Delaware. The Debtors relate they have approximately 1,600 claims totaling nearly $29,000,000 in liquidated 503(b)(9) Claims. The Section 503(b)(9) Order, if not amended and supplemented, would require them to file all of their 503(b)(9) Claims Objections by July 29, 2008. Consequently, the Claimants holding objected to 503(b)(9) Claims would have to respond to any objection by August 16, 2008, and the Court would be required to hold a hearing on the objections at the August 21, 2008 omnibus hearing in the Chapter 11 cases. The expedited time frame, which was once necessary, could substantially prejudice the Debtors' estates and other parties- in-interest, Mr. Galardi tells the Court. According to him, the present procedures would impose an impossible burden upon the Court given that the Debtors expect to object to a significant number of claims, aside from claims involving novel legal issues and significant factual disputes, he asserts. Debtors Propose 503(b)(9) Claims Resolution Procedures To allow efficient and orderly determination of the allowance or disallowance of 503(b)(9) Claims in their Chapter 11 cases, the Debtors propose these procedures: A. General Provisions (1) To the extent of any inconsistency between these 503(b)(9) Claims Resolution Procedures and Rule 3007 of the Federal Rules of Bankruptcy Procedure and any local rule regarding objections to Claims, the 503(b)(9) Claims Resolution Procedures will govern. (2) Every 503(b)(9) Claim Objection will be designated as either an "Omnibus Objection" or a "Substantive Objection". A particular 503(b)(9) Claim may, however, be subject to both a Substantive and an Omnibus Objection. (3) A 503(b)(9) Claim Objection will be filed with a Notice of Hearing on the Objection, which will be mailed or delivered to the Claimant at least 30 days prior to the Hearing date. (4) A Claimant must file a response to the Section 503(b)(9) Claims Objection within 10 days before the Hearing. (5) Omnibus Objections will be numbered consecutively regardless of the basis -- i.e., First Omnibus Objection (duplicate), Second Omnibus (wrong debtor). Substantive Objections to multiple 503(b)(9) Claims will be similarly designated. (6) Pursuant to Rule 3007(c) of the Federal Rules of Bankruptcy Procedure, Omnibus Objections and Substantive Objections may contain claims not to exceed 200 claims. B. Omnibus Objections (1) A Section 503(b)(9) Objection is an Omnibus Objection if it is: (a) A duplicate 503(b)(9) Claim (b) A 503(b)(9) Claim filed in the wrong Debtors' case (c) An amended or superseded 503(b)(9) Claim (d) A late filed 503(b)(9) Claim (e) A 503(b)(9) Claim that has been or will be released or satisfied during the case in accordance with the Bankruptcy Code, applicable rules, or a Court order (f) A 503(b)(9) Claim that does not otherwise comply with the requirements in the 503(b)(9) Order (g) A 503(b)(9) Claim based on something other than the sale of goods to the Debtors in the ordinary course of business (h) A 503(b)(9) Claim for value in excess of value of the goods received by a Debtor within the 20 days before the Petition Date, and (i) A 503(b)9) Claim that does not have a basis in the debtor's books and records and did not include or attach sufficient information or documentation to constitute prima facie evidence of the validity and amount of the claim. Otherwise, the Objection will be deemed Substantive. (2) Any Objection under subsection (1)(i) above must be supported by an affidavit stating that the affiant has reviewed the 503(b)(9) Claim and all supporting information and documentation, made reasonable efforts to research the 503(b)(9) Claim on the debtor's books and records and believes the documentation does not provide prima facie evidence of the validity and amount of the claim; (3) Any Objection that is not an Omnibus Objection will be deemed a Substantive Objection. C. Substantive Objections (1) A Substantive Objection to a 503(b)(9) Claim will include all substantive grounds for objecting to the claim. (2) A Substantive Objection to a 503(b)(9) Claim may be amended once without leave of Court or written consent of the Claimant within 20 days from filing of a related response by the Claimant. In all other instances, a Substantive Objection may only be amended with leave of the Court or written consent of the Claimant. (3) A 503(b)(9) Substantive Claim Objection may include an objection to a claim under Section 502(d) of the Bankruptcy Code. (4) A 503(b)(9) Substantive Claim Objection that includes a demand for relief of a kind specified in Rule 7001 of the Federal Rules of Bankruptcy Procedure, including one that contains a Section 502(d) Objection, may be included in an adversary proceeding. D. Hearings (1) Hearings on objections to 503(b)(9) Claims may be scheduled on the regularly scheduled omnibus hearing dates in the Debtors' Chapter 11 cases. The Court may, in its discretion, reschedule the hearing on a claim which will require substantial time to present argument or evidence. (2) Any party-in-interest to a Substantive Objection may request for a separate hearing on its Objection at a date and time convenient for the Court and the parties. E. Objection Deadlines And Notice of Possible Section 502(d) Objections (1) The Debtors must file and serve all Omnibus Objections to the 503(b)(9) Claims on or before September 15, 2008. (2) The Debtors must file and serve all Substantive Objections to a 503(b)(9) Claim on or before the later of: (a) a day that is 60 days after the effective date of any confirmed plan of reorganization; (b) a day that is 30 days after the entry of a final order overruling all or the last pending Omnibus Objection to the 503(b)(9) Claim; and (c) other date as the Court may direct as the Substantive Objection Deadline. (3) The Debtors must provide notice to any Claimant who has asserted a 503(b)(9) Claim to which the Debtors believe they will or might be filing a Section 502(d) Objection within 10 days prior to the confirmation hearing on any plan of reorganization, provided, that the Debtors will not be required to provide a Section 502(d) Objection Notice to any Claimant holding a 503(b)(9) Claim that has either been disallowed or is the subject of a pending Omnibus or Substantive Objection. (4) Nothing in the Procedures will shorten any applicable statute of limitation or repose or any other limitation periods for asserting claims or causes of action against the Claimants or defenses or set-offs against any 503(b)(9) Claim. The setting of the 503(b)(9) Claims Objection Deadlines is without prejudice to the rights of parties-in-interest to seek to extend or shorten the Objection Deadlines, or oppose any request for similar relief, upon showing of cause. The Debtors assert that the proposed Resolution Procedures is appropriate due to (i) limited personnel devoted to the management and wind-down of their estates, including the analysis of Section 503(b)(9) Claims, and (ii) threshold legal issues concerning the interpretation of Section 503(b)(9) that the Court may be called upon. Also, the proposed procedures will amend certain unnecessary shortened notices and response provisions, where the Claimants will not be prejudiced, they maintain. Thus, the Debtors seek to: (i) extend the 503(b)(9) Objection Deadline from July 29 to July 31, 2008. (ii) amend the Section 503(b)(9) Order to modify deadlines contained therein, and (iii) establish the proposed Claims Resolution Procedures determining the allowance or disallowance of Section 503(b)(9) Claims. The Court will convene on July 28, 2008, at 2:00 p.m. (Eastern), on shortened notice, to consider the Debtors' request. Objections to the motion must be filed by July 24, 2008. About Plastech Engineered Based in Dearborn, Michigan, Plastech Engineered Products, Inc. -- http://www.plastecheng.com/-- is full-service automotive supplier of interior, exterior and underhood components. It designs and manufactures blow-molded and injection-molded plastic products primarily for the automotive industry. Plastech's products include automotive interior trim, underhood components, bumper and other exterior components, and cockpit modules. Plastech's major customers are General Motors, Ford Motor Company, and Toyota, as well as Johnson Controls, Inc. Plastech is a privately held company and is the largest family- owned company in the state of Michigan. The company is certified as a Minority Business Enterprise by the state of Michigan. Plastech maintains more than 35 manufacturing facilities in the midwestern and southern United States. The company's products are sold through an in-house sales force. The company and eight of its affiliates filed for Chapter 11 protection on Feb. 1, 2008 (Bankr. E.D. Mich. Lead Case No. 08- 42417). Gregg M. Galardi, Esq., at Skadden Arps Slate Meagher & Flom LLP, and Deborah L. Fish, Esq., at Allard & Fish, P.C., represent the Debtors in their restructuring efforts. The Debtors chose Jones Day as their special corporate and litigation counsel. Lazard Freres & Co. LLC serves as the Debtors' investment bankers, while Conway, MacKenzie & Dunleavy provide financial advisory services. The Debtors also employed Donlin, Recano & Company as their claims and noticing agent. Joel D. Applebaum, Esq., at Clark Hill PLC, represents the Official Committee of Unsecured Creditors. As of Dec. 31, 2006, the company's books and records reflected assets totaling $729,000,000 and total liabilities of $695,000,000. (Plastech Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) PRB ENERGY: Michael Purfield Resigns as Chief Operating Officer --------------------------------------------------------------- Effective July 11, 2008, Michael C. Purfield resigned as the chief operating officer of PRB Energy, Inc. About PRB Energy Headquartered in Denver, PRB Energy Inc. fka PRB Gas Transportation Inc. -- http://www.prbenergy.com/-- operates as independent energy companies engaged in the acquisition, exploitation, development and production of natural gas and oil. In addition, the company and its affiliates provide gas gathering, processing and compression services for properties it operates and for third-party producers. They conduct business activities in Wyoming, Colorado and Nebraska. The Debtor filed for chapter 11 protection on March 5, 2008 (Bankr. D. Co. Case No. 08-12658) together with two affiliates, PRB Oil & Gas Inc. (Case No. 08-12661) and PRB Gathering Inc. (08- 12663). James T. Markus, Esq., at Block, Markus & Williams LLC represents the Debtors in their restructuring efforts. The U.S. Trustee for Region 19 has appointed creditors to serve on an Official Committee of Unsecured Creditors. Daniel J. Garfield, Esq., at Brownstein Hyatt Farber Schreck, P.C., represents the Committee in these cases. Debtors listed assets between $50 million and $100 million and liabilities between $10 million and $50 million. As reported in the Troubled Company Reporter on July 18, 2008, PRB Energy Inc. and its debtor-affiliates asked the United States Bankruptcy Court for the District of Colorado to extend their exclusive periods to:file a Chapter 11 plan until Oct. 2, 2008, and solicit acceptances of that plan until Dec. 1, 2008. The Debtors' initial exclusive period to file a plan expired on July 3, 2008. PREFERRED VOICE: Losses Prompt Philip Vogel's Going Concern ----------------------------------------------------------- Philip Vogel & Co. PC raised substantial doubt about the ability of Preferred Voice, Inc., to continue as a going concern after auditing the company's financial statements for the year ended March 31, 2008. The auditor pointed to the company's recurring losses from operations. The company has negative cash flows from operations of $130,777 and $870,524 for the years ended March 31, 2008, and 2007, respectively. The company posted a net loss of $747,816 on net sales of $3,541,586 for the year ended March 31, 2008, as compared with a net loss of $1,346,293 on net sales of $1,254,634 in the prior year. Management projects working capital needs to be approximately $1,560,000 over the next twelve months for corporate overhead and equipment purchases to continue to deploy services to carrier customers. Management believes that current cash and cash equivalents and cash that may be generated from operations will be sufficient to meet these anticipated capital requirements and to finance marketing initiatives for the next twelve months. Such projections have been based on revenue trends from current customers and customers, which are already under contract utilizing the revenue rates that have been experienced over the past six months with currently installed customers and projected cash requirements to support installation, sales and marketing, and general overhead. However, any projections of future cash requirements and cash flows are subject to substantial uncertainty. If the company's operating projections are not realized, it may be forced to raise additional capital through the issuance of new shares, the exercise of outstanding warrants, or reduction of current overhead. At March 31, 2008, the company's balance sheet showed $1,344,579 in total assets and 2,355,676 in total liabilities, resulting in a $1,011,097 stockholders' deficit. The company's consolidated balance sheet at March 31, 2008, also showed strained liquidity with $1,014,425 in total current assets available to pay $1,326,664 in total current liabilities. A full-text copy of the company's 2008 annual report is available for free at http://ResearchArchives.com/t/s?2fc7 About Preferred Voice Headquartered in Dallas, Preferred Voice Inc. (OTC BB: PRFV.OB) -- http://www.preferredvoice.com/-- provides a host of integrated voice-driven products and services. The company's Global Application Platform lets telecommunications providers offer enhanced services such as ring tones and games, voice-activated dialing, and conferencing. The product also includes a subscriber Web interface and supports billing and provisioning functions. PROXYMED INC: Files Chapter 11 Petition, DIP and Sale Motions ------------------------------------------------------------- ProxyMed Inc., dba MedAvant Healthcare Solutions, filed on July 23, 2008, a voluntary petition for reorganization under chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court for the District of Delaware. ProxyMed also filed a debtor-in-possession financing commitment of $8.1 million by its senior lender Laurus Master Fund, Ltd., of which $2.9 million represents new credit availability to support the Debtor's business operations during the Chapter 11 case. In addition to the filing, the Debtor has filed a motion to sell its assets to a private equity firm, Marlin Equity, under section 363 of the Bankruptcy Code, subject to higher and better bids at an auction sale expected to be conducted in 8 weeks to 10 weeks. "During the past year we have divested our non-core business lines in order to focus on our electronic data interchange business with the goal of improving our operating efficiencies," said Peter Fleming, MedAvant interim Chief Executive Officer. "Our objective now is to align our financial structure with our new business structure and bring in a partner to invest capital toward the growth of our company. We believe this financial assistance will enable us to move through this process as quickly as possible and so we may resume our focus on building a new, stronger company." The debtor-in-possession financing commitment from Laurus Master Fund, Ltd. is expected to provide the necessary liquidity to enable the Company to continue doing business as usual during the Chapter 11 process. The Debtor has also filed a series of motions with the Bankruptcy Court to assure the continuity and stability of the business, including the payment of wages, the continuation of benefit and rebate programs, and the payment of certain critical vendors. MedAvant expects operations to continue as usual throughout this process. The Debtor is represented in the bankruptcy filing by Michael P. Richman, Esq., at Foley & Lardner LLP, and Michael Nestor, Esq., at Young, Conaway, Stargatt & Taylor. Receipt of Nasdaq Delisting Notice MedAvant said that on July 16, 2008 it received notice from the Nasdaq Stock Market of the failure of its common stock to maintain a minimum bid price of $1.00 per share for thirty (30) consecutive trading days, as required by Nasdaq Marketplace Rule 4450(a)(5). If at anytime before Jan. 12, 2009, the minimum bid price for the company's common stock closes at $1.00 per share or more for 10 consecutive trading days, Nasdaq will notify it in writing that its compliance with the rule has been restored. Otherwise, Nasdaq will provide written notification of delisting of the company's securities from the Nasdaq Global Market. The company previously received a letter from Nasdaq on April 22, 2008, that notified the company that it had not maintained the minimum value of publicly held shares of $15,000,000 required for continued listing on the Nasdaq Global Market, as set forth in Marketplace Rule 4450(b)(3), or the MVPHS Rule. The company had until July 21, 2008, to regain compliance with the MVPHS Rule. Sale of Lab Services to ETSec MedAvant has closed the sale of its Laboratory services business to ETSec, pursuant to an asset purchase agreement between ET Labs, Inc., ETSec, Inc., ProxyMed Lab Services, LLC, and ProxyMed, Inc.. The transaction includes all products and services of MedAvant's Lab business, including the ongoing support of more than 50,000 deployed remote printers and devices. The sale also includes Pilot, MedAvant's proprietary patented technology that enables the remote delivery of lab results to providers, and Fleet Management System, which provides real-time status information and unparalleled remote printer management and support. "We have been focused for the past year on divesting our non-core businesses," said Peter Fleming, MedAvant Interim Chief Executive Officer. "These divestitures allow us the renewed ability to focus exclusively on building our EDI (Electronic Data Interchange) business which is our core competency. We continue to expand our payer and provider connectivity which [now] includes nearly 1,400 payers and more than 200,000 providers nationwide. With our real-time Phoenix platform, we can seamlessly link any payer to any provider in the nation in order to allow the transparent exchange of administrative, financial and clinical information. This capability, performed in a real-time environment, puts us at the forefront of our industry and allows us to offer our EDI customers greater efficiencies, fast payment, and improved clinical outcomes." Cain Brothers & Company, LLC acted as exclusive financial advisor to MedAvant for this transaction. Foley & Lardner LLP acted as legal counsel to MedAvant in this transaction. A full-text copy of the asset purchase agreement between ProxyMed and ETSec is available for free at: http://ResearchArchives.com/t/s?2ff4 Termination of L. Harding as President and COO On May 22, 2008, the company entered into a second amendment to a certain employment agreement, dated March 29, 2001, with Lonnie Hardin as company president and chief operating officer), as amended on March 8, 2005. The amendment sets forth, among other things, certain changes to the severance benefits due to Mr. Hardin upon a constructive termination following a change of control in the company. Upon the constructive termination, if Mr. Hardin executes a full, complete, and satisfactory release of any and all claims against the company, Mr. Hardin will receive: (i) 12 months of his base salary as of the date of termination; plus (ii) any and all accrued paid time off not already taken; plus (iii) a pro rata portion of any bonus that would have been paid to Mr. Hardin under any bonus plan of the company; plus (iv) the vesting of any and all unvested options as of the effective date of the change of control of the company. In addition, pursuant to the amendment, Mr. Hardin will no longer be subject to the non-competition covenant originally set forth in the employment agreement and a non-competition covenant will be deleted in its entirety from the employment agreement and will no longer be of any further force or effect. A full-text copy of an amendment to the employment agreement with Mr. Hardin is available for free at: http://ResearchArchives.com/t/s?2ff5 Cross-Default Notice from Laurus On May 14, 2008, the company received notice from its senior secured lender, Laurus Master Fund, Ltd., that a cross-default had occurred under a security and purchase agreement, dated Dec. 7, 2005, between the company and Laurus, as amended to date, and the related revolving credit facility. The cross-default occurred upon the company's failure to pay interest in the amount of $131,370 on subordinated 4% convertible promissory notes issued to the former shareholders of MedUnite, as part of the consideration paid in the company's acquisition of MedUnite. The interest was due and payable on April 1, 2008, subject to a 30-day grace period. In addition, Laurus notified the company that it was taking no immediate action with respect to this cross-default but would reserve all rights and remedies available to Laurus under the loan agreement. The company's failure to pay the interest on the MedUnite Notes due and payable on April 1, 2008, subject to the 30-day grace period, constitutes a separate event of default under the MedUnite Notes. This event of default under the MedUnite Notes was previously disclosed in the company's Quarterly Report on Form 10- Q, filed with the U.S. Securities and Exchange Commission on May 15, 2008, as amended on May 20. About ETSec ETSec is an enterprise security company that is 100% focused on providing clients with the proven strategies, solutions, and services they need to protect vital technical assets against potential security threats. Our expertise in providing a wide range of clients with security solutions and services has given us an appreciation for the economic constraints and real security threats that today's companies face. To help clients cope with these challenges, we take a holistic � yet practical � approach to enterprise security, helping clients stay ahead of near-term threats, while driving toward a longer-term plan to minimize risk. For more information, visit http://www.etsec.com. About ProxyMed/MedAvant MedAvant Healthcare Solutions (NASDAQ: PILL) -- http://www.medavanthealth.com/-- is a trade name of ProxyMed, Inc. It is a national connectivity network that connects payers with providers in a real-time environment for the purpose of transparently messaging administrative, financial and clinical information in order to lower total administrative costs, improve payer, provider and member relationships, and to ultimately improve clinical outcomes. As of March 31, 2008, the ProxyMed listed $15.9 million in assets, $28.2 million in liabilities and $12.3 million in stockholders' deficit. PROXYMED INC: Case Summary & 20 Largest Unsecured Creditors ----------------------------------------------------------- Lead Debtor: ProxyMed Transaction Services, Inc. fka MedUnite, Inc. aka WPJ, Inc. 1854 Shackleford Ct., Ste. 200 Norcross, GA 30093 Bankruptcy Case No.: 08-11551 Debtor-affiliates filing separate Chapter 11 petitions: Entity Case No. ------ -------- ProxyMed, Inc. 08-11553 ProxyMed Lab Services, L.L.C. 08-11554 Type of Business: The Debtors are information technology companies that facilitate the exchange of medical claim and clinical information among doctors, hospitals, medical laboratories, and insurance payers. See http://www.medavanthealth.com Chapter 11 Petition Date: July 23, 2008 Court: District of Delaware (Delaware) Judge: Brendan Linehan Shannon Debtors' Counsel: Kara Hammond Coyle, Esq. Email: bankfilings@ycst.com Michael R. Nestor, Esq. Email: bankfilings@ycst.com Young Conaway Stargatt & Taylor, L.L.P. 1000 West St., 17th Fl., Brandywine Bldg. Wilmington, DE 19801, 19899 Tel: (302) 571-6600 Fax: (302) 571-1253 http://www.ycst.com/ The Debtors indicated $40,655,000 in total consolidated assets and $47,640,000 in total consolidated debts as of December 31, 2007. In its petition, ProxyMed Transaction Services, Inc. indicated $10,000,0000 in estimated assets and $10,000,000 in estimated debts. Debtors' Consolidated List of 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Coalition America, Inc. net working capital $4,068,269 Attn: Officer, General or adjustment resale of Managing Agent containment division 2 Concourse Pkwy., Ste. 300 Atlanta, GA 30328 Fax: (404) 250-4933 WellPoint Health Networks notes $3,200,000 Attn: Officer, General or Managing Agent P.O. Box 4173 Woodland Hills, CA 91365-4173 Fax: (818) 234-9966 UnitedHealth Group notes $2,800,000 Attn: Officer, General or Managing Agent 2918 Hermann St. Milwaukee, WI 53207 Fax: (800) 842-1109 McKesson Corp. notes $2,300,000 Attn: Officer, General or Managing Agent 5995 Winward Pkwy. Alpharetta, GA 30005 Fax: (404) 728-3944 Aetna, Inc. notes $1,600,000 Attn: Officer, General or Managing Agent 151 Farmington Ave. Hartford, CT 06156 Fax: (860) 754-9122 CIGNA Corp. notes $1,600,000 Attn: Officer, General or Managing Agent 900 Cottage Grove Rd. Hartford, CT 06152 Fax: (860) 726-7573 Health Net, Inc. notes $1,600,000 Attn: Officer, General or Managing Agent 21281 Burbank Blvd. B3 Woodland Hills, CA 91367 Fax: (818) 676-6992 Enclarity consulting services $170,625 & trade debtor Oracle Corp. software & trade debt $150,474 Microsoft Licensing G.P. software & trade debt $137,600 Hitachi Data Systems IT & trade debt $108,091 Vaco Atlanta, L.L.C. consulting services $96,227 & trade debtor Ppoone IT & trade debt $94,100 Comsys Services, L.L.C. IT & trade debt $93,047 McKesson Information Solutions Vendor Communications $92,125 & trade debt United Healthcare Insurance trade debt $75,796 Co. Bowne of Atlanta, Inc. public & trade debt $68,543 Curtis, Mallet-Prevost, Colt legal & trade debt $66,453 & Mosle, L.L.P. CIT TECH#450-4822017-000 IT & trade debt $63,559 UHY LLP, MI consulting services $57,030 & trade debt RG GLOBAL: McKennon Wilson Expresses Going Concern Doubt -------------------------------------------------------- McKennon Wilson & Morgan LLP raised substantial doubt about the ability of RG Global Lifestyles, Inc., to continue as a going concern after auditing the company's financial statements for the year ended March 31, 2008. The auditor reported that the company has incurred losses, has used cash in operating activities and has a significant accumulated deficit. During the year ended March 31, 2008, the company incurred an operating loss before income taxes of $3,888,465 and used cash from operations of $2,054,306. As of March 31, 2008, the company had a working capital deficit of $2,639,892. The company posted a net loss of $3,844,562 on total revenues of $981,218 for the year ended March 31, 2008, as compared with a net loss of $23,970,031 on total revenues of $89,326 in the prior year. The company is dependent upon its ability to obtain equity and debt financing and ultimately achieving profitable operations from the development of its business segments. During the year ended March 31, 2008, the company funded operations through debt and equity offerings. Subsequent to the year-end, the company raised an additional $394,000 through the sales of common stock. Currently, the company does not have any commitments or assurances for additional capital. However, subsequent to March 31, 2008, the company commenced production under the water treatment contract with a customer. In addition, the company is currently in negotiations for the construction of additional water treatment facilities for this customer. There can be no assurance that the revenue from these contracts will be sufficient for the company to achieve profitability in its operations, and it is possible that additional equity or debt financing may be required for the company to continue as a going concern. The company estimates it has current cash reserves sufficient to fund operations through the second quarter of fiscal 2009. At March 31, 2008, the company's balance sheet showed $7,758,187 in total assets, $2,958,937 in total liabilities, and $4,799,250 in total stockholders' equity. The company's consolidated balance sheet at March 31, 2008, showed strained liquidity with $249,045 in total current assets available to pay $2,888,937 in total current liabilities. A full-text copy of the company's 2007 annual report is available for free at http://ResearchArchives.com/t/s?2fc6 About RG Global Headquartered in Rancho Santa Margarita, Calif., RG Global Lifestyles Inc. (OTC BB: RGBL) -- http://www.rgglife.com/-- develops and markets water purification and wastewater treatment products and technologies as well as bottled beverages. Its Catalyx Fluid Solutions division focuses on the sale and lease of its Catalyx(R) proprietary wastewater treatment technology for energy production and industrial applications. RG's OC Energy(TM) subsidiary manufactures and distributes bottled energy drinks and oxygenated water under the OC Energy brand. The Aquair(TM) subsidiary is the exclusive distributor of licensed atmospheric water generators that produce purified water from air. SCOTTISH RE: Ernst & Young Expresses Going Concern Doubt -------------------------------------------------------- Ernst & Young LLP raised substantial doubt about the ability of Scottish Re Group Limited to continue as a going concern after auditing the company's financial statements for the year ended Dec. 31, 2007. The auditing firm pointed to the company's net loss for the year ended Dec. 31, 2007, accumulated deficit of $1,042,400,000 as of Dec. 31, 2007, and the company's deteriorating financial performance and worsening liquidity and collateral position. The company posted a net loss of $895,742,000 on total revenues of $1,505,373,000 for the year ended Dec. 31, 2007, as compared with a net loss of $366,714,000 on total revenues of $2,429,500,000 in the prior year. Management's Statement As a result of declines in the fair value of its invested assets, which contain a significant concentration of sub-prime and Alt-A residential mortgage-backed securities, the company has experienced deteriorating financial performance and a worsening liquidity and collateral position. The continuing deterioration in the market for sub-prime and Alt-A securities through the first half of 2008 has compounded the considerable financial challenges and uncertainties faced by the company. In addition to causing significant impairment charges and reported losses, these adverse market conditions have impacted the value of underlying collateral used to secure the company's life reinsurance obligations and statutory reserves for its operating units. Any reserve credit shortfalls arising from a decline in the value of collateral places increased demand on the company's available capital and liquidity. The impairment charges and associated decline in the company's consolidated shareholders equity will also result in the failure to meet minimum net worth covenants for the HSBC II and Clearwater Re collateral finance facilities. The company had recently executed forbearance agreements with the counterparties under these facilities who have agreed to forbear taking action until Dec. 15, 2008, in return for certain economic and non-economic terms. Such terms have placed additional constraints on the company's available capital and liquidity. The company's liquidity is insufficient to fund its needs beyond the short term and, without additional sources of capital or the successful completion of strategic actions, is currently projected to be exhausted by the first quarter of 2009. Recent Events The company has faced a number of significant challenges during the latter part of 2007 and continuing into 2008, which have required the company to change its strategic focus. These challenges have included: -- The continuing deterioration in the U.S. residential housing market in general and the market for sub-prime and Alt-A residential mortgage-backed securities specifically. These conditions have had, and will likely continue to have, a material adverse effect on the value of the company's consolidated investment portfolio and capital and liquidity position; -- The negative outlooks placed on its financial strength ratings by each of the rating agencies in November 2007, followed by the ratings action taken by Standard & Poors in early 2008 lowering the financial strength ratings of the company's operating subsidiaries from "BB+" to "BB" and placing the ratings on CreditWatch with negative implications, as well as the subsequent ratings downgrades and negative outlooks placed on its financial strength ratings by other rating agencies, with the resulting material negative impact on its ability to achieve its previous goal of attaining an "A-" or better rating by the middle of 2009; and -- The material negative impact of ratings declines and negative outlooks by rating agencies on the company's ability to grow its life reinsurance businesses and maintain its core competitive capabilities. Company's Strategy On January 21, 2008, the company's board of directors established a special committee to evaluate the alternatives developed by management. On Feb. 22, 2008, management announced the unanimously adopted business strategy recommended by the special committee. The strategy consists of: -- the disposal of its non-core assets or lines of business, including the Life Reinsurance International Segment and the Wealth Management business; -- the development, through strategic alliances or other means, of opportunities to maximize the value of its core competitive capabilities within the Life Reinsurance North America Segment, including mortality assessment and treaty administration; and -- rationalization of the company's cost structure to preserve capital and liquidity. The company has changed its strategic focus and initiated a number of actions to preserve capital and mitigate growing liquidity demands. The company had ceased writing new reinsurance treaties and notified existing clients that it will not be accepting new risks on existing treaties. The company have also taken steps to reduce its operating expenses including reducing staffing levels. The company is also actively pursuing the sale of its Life Reinsurance North America Segment and recently entered into definitive agreements for the sale of its Life Reinsurance International Segment and Wealth Management business. The company also continues to pursue the restructuring of certain of its collateral financing facilities and potential alternatives to these facilities to alleviate the collateral requirements of its reinsurance operating subsidiaries. If the company fails in reaching a definitive agreement for the sale of its Life Insurance North America Segment by Dec. 15, 2008, the company will continue to follow a run-off strategy and will need to obtain additional forbearance from the relevant counterparties to Clearwater Re and HSBC II; find alternative collateral support for Clearwater Re and HSBC II or raise additional capital. If the company fails to successfully execute on these actions, its insurance operating subsidiaries may become insolvent and the company may need to seek bankruptcy protection. Balance Sheet At Dec. 31, 2007, the company's balance sheet showed $12,821,063,000 in total assets, $11,909,454,000 in total liabilities, $9,025,000 in minority interest, $555,857,000 in convertible cumulative preferred shares, and $346,727,000 in total stockholders' equity. A full-text copy of the company's 2007 annual report is available for free at http://ResearchArchives.com/t/s?2fc3 About Scottish Re Scottish Re Group Ltd. -- http://www.scottishre.com/-- is a global life reinsurance specialist. Scottish Re has operating businesses in Bermuda, Grand Cayman, Guernsey, Ireland, the United Kingdom, United States, and Singapore. Its flagship operating subsidiaries include Scottish Annuity & Life Insurance Company (Cayman) Ltd. and Scottish Re (US), Inc. Scottish Re Capital Markets, Inc., a member of Scottish Re Group Ltd., is a registered broker dealer that specializes in securitization of life insurance assets and liabilities. As reported in the Troubled Company Reporter-Latin America on June 17, 2008, Moody's Investors Service placed on review with direction uncertain Scottish Re Group Ltd.'s senior unsecured shelf of (P)Caa1, subordinate shelf of (P)Caa2, junior subordinate shelf of (P)Caa2, preferred stock of Caa3, and preferred stock shelf of (P)Caa3. Moody's had previously placed the ratings on review for possible downgrade. SEMGROUP ENERGY: Posts $12.9 Million Net Loss for FY 2007 --------------------------------------------------------- Semgroup Energy Partners, L.P., posted a net loss of $12.9 million on total revenues of $74.6 million for the year ended Dec. 31, 2007, as compared with a net loss of $35.9 million on total revenues of $28.8 million for the year ended Dec. 31, 2006. Results of Operations Service revenues were $74.6 million for the year ended Dec. 31, 2007, compared with $28.8 million for the year ended Dec. 31, 2006, an increase of $45.8 million, or 159%. Terminalling and storage revenues increased by $15.7 million to $24.8 million for the year ended Dec. 31, 2007, compared with $9.1 million for the year ended Dec. 31, 2006, primarily due to revenues generated under the Throughput Agreement subsequent to the closing of the company's initial public offering. The company's predecessor historically did not account for these services, including its gathering and transportation services, which were provided on an inter-company basis. The company's gathering and transportation services revenue increased by $30.0 million to $49.8 million for year ended Dec. 31, 2007, compared with $19.8 million for the year ended Dec. 31, 2006. Operating expenses include salary and wage expenses and related taxes and depreciation and amortization expenses. Operating expenses increased by $15.6 million, or 30%, to $67.2 million for the year ended Dec. 31, 2007, compared with $51.6 million for the year ended Dec. 31, 2006. Terminalling and storage operating expenses increased by $0.4 million to $4.9 million for the year ended Dec. 31, 2007, compared with $4.5 million for the year ended Dec. 31, 2006. The company's gathering and transportation operating expenses increased by $15.2 million to $62.3 million for the year ended Dec. 31, 2007. Around $5.3 million of this increase in operating expenses was due to its acquisition of Big Tex Crude Oil Company on June 30, 2006. Included in operating expenses for the year ended Dec. 31, 2007, are $1.6 million in costs associated with the clean up of a crude oil leak that occurred in the year ended Dec. 31, 2007, in relation to a 35-mile pipeline located in Conroe, Tex. The company's parent sold this gathering line on April 30, 2007, and the company's parent has assumed any future obligations associated with the aforementioned leak. The company's repair and maintenance expenses increased by $2.3 million to $8.2 million for the year ended Dec. 31, 2007, compared with $5.9 million for the year ended Dec. 31, 2006, of which $0.9 million was related to the Big Tex acquisition. The additional increase in repair and maintenance expenses was due primarily to the timing of routine maintenance in its gathering and transportation segment. In addition, the company's fuel expenses increased by $2.0 million to $9.6 million for the year ended Dec. 31, 2007, compared with $7.6 million for the year ended Dec. 31, 2006, of which $0.6 million was related to the Big Tex acquisition. The additional increase in its fuel costs is attributable to the increase in number of transport trucks the company operated for the respective periods, the rising price of diesel fuel during the comparative periods and a fire at a refinery located in western Texas that resulted in the company's transporting 0.7 million barrels of crude oil to alternative locations, which were a greater distance from the barrels' respective points of origination than the refinery that normally receives those barrels. The Throughput Agreement provides for a fuel surcharge, recorded in revenue, which offsets increases in fuel expenses related to either rising diesel prices or force majeure events such as the refinery fire that impacted its operations during the year ended Dec. 31, 2007. Interest expense represents interest on capital lease obligations and long-term borrowings under the company's revolving credit facility. Interest expense increased by $4.6 million to $6.6 million for the year ended Dec. 31, 2007, compared with $2.0 million for the year ended Dec. 31, 2006. The increase was due to an increase in the average long-term borrowings during the year ended Dec. 31, 2007, compared with the year ended Dec. 31, 2006, which accounted for around $2.4 million of the total increase in interest expense, and is a reflection of borrowings under its new revolving credit facility. In addition, during the third quarter of 2007, the company entered into two, interest-rate swap agreements, the fair value accounting for which resulted in $2.2 million in interest expense for the year then ended. Cash Flows and Capital Expenditures Net cash used in operating activities was $0.6 million for the year ended Dec. 31, 2007, as compared with $25.8 million for the year ended Dec. 31, 2006. This decrease in net cash used in operating activities is primarily due to a $22.9 million decrease in the company's net loss for the year then ended. In addition, the company's cash used in operating activities decreased due to a $0.9 million increase in depreciation and amortization, an increase in the company's unrealized loss related to derivative instruments of $2.2 million, and an increase in equity-based incentive compensation expense of $1.2 million. The impact of these increases was partially offset by an increase of $1.8 million in cash used related to changes in working capital. The company's future results of operations, including cash flow from operations, may not be comparable to the historical results of operations of the company's predecessor because the Crude Oil Business has historically been a part of the integrated operations of the company's parent, and neither the company's parent nor the company's predecessor recorded revenues associated with the gathering, transportation, terminalling and storage services provided on an inter-company basis. Net cash used in investing activities was $20.0 million for the year ended Dec. 31, 2007, as compared with $41.3 million for the year ended Dec. 31, 2006. This decrease was attributable to a reduction in capital expenditures primarily resulting from the timing of construction projects in its terminalling and storage segment. Capital expenditures for the years ended Dec. 31, 2007, and 2006 were $20.4 million and $41.5 million, respectively, consisting of both the company's acquisition of Big Tex on June 30, 2006, and expenditures for the construction of additional crude oil storage capacity during these periods. The company added 0.4 million additional barrels of crude oil storage capacity in the year ended Dec. 31, 2007, and 2.3 million additional barrels of crude oil storage capacity in the year ended Dec. 31, 2006. Cash flow from operations and the company's credit facility are its primary sources of liquidity. At Dec. 31, 2007, the company had around $160.4 million of availability under its revolving credit facility. The company's working capital increased by around $2.7 million in 2007 compared with 2006. The company believes that cash generated from these sources will continue to be sufficient to meet its short-term working capital requirements, long-term capital expenditure requirements and quarterly cash distributions. Usage of its revolving credit facility is subject to ongoing compliance with covenants. The company believes it is currently in compliance with all covenants. Balance Sheet At Dec. 31, 2007, the company's consolidated balance sheet showed $125.5 million in total assets, $108.3 million in total liabilities, and $17.2 million in total partners' capital. The company's consolidated balance sheet at Dec. 31, 2007, showed strained liquidity with $14.0 million in total current assets available to pay $15.3 million in total current liabilities. A full-text copy of the company's 2007 annual report is available for free at http://ResearchArchives.com/t/s?2fc1 Tulsa, Oklahoma-based SemGroup Energy Partners, L.P. (NASDAQ: SGLP) -- http://www.SGLP.com/-- owns and operates a diversified portfolio of complementary midstream energy assets. SemGroup Energy Partners provides crude oil and liquid asphalt cement terminalling and storage services and crude oil gathering and transportation services. The general partner of SemGroup Energy Partners is a subsidiary of SemGroup, L.P. SIMDAG-ROBEL: Partners Face Breach Suit Filed by Donald Trump ------------------------------------------------------------- The Hon. K. Rodney May of the U.S. Bankruptcy Court for the Middle District of Florida allowed Donald Trump to proceed with his case seeking $1 million payment from the developers of Trump Tower Tampa, Tampa Bay Business Journal's Michael Hinman says. Mr. Trump may demand payment from SimDag-RoBEL LLC partners Frank Dagostino, Howard Howell, Robert Lyons, Patrick Sheppard and Jody Simon, except SimDag-RoBEL which is under chapter 11 bankruptcy, Business Journal relates. Business Journal notes that Mr. Trump asserted the $1 million claim under a licensing agreement placing his name on Trump Tower Tampa -- a planned $225 million luxury condominium with 52 floors disclosed in January 2005. In a countersuit, SimDag/RoBEL argued that the Mr. Trump violated a confidentiality clause in the licensing agreement under which Mr. Trump was not allowed to reveal his actual participation in the condo project, Business Journal says. Mr. Trump's counsel, W. Keith Fendrick, Esq., at Foley & Lardner LLP, said in a July 10 filing that it is more hardship than the Debtor for his client to appear in bankruptcy court, Business Journal writes. A mediation is set for Sept. 29, 2008, before mediator Peter J. Grilli in order to resolve the dispute between the Debtor and Mr. Trump, Business Journal notes. Mr. Trump's breach of contract suit will be heard on Feb. 2, 2009, subject to the outcome of the court-ordered mediation, Business Journal relates. About SimDag-Robel Tampa, Florida-based SimDag-Robel, LLC, owns and operates a real estate business. The Debtor filed its chapter 11 petition on June 17, 2008 (Bankr. M.D. Fla. Case No. 08-08804). Judge K. Rodney May presides over the case. Adam L. Alpert, Esq., and Jeffrey W. Warren, Esq., at Bush Ross, P.A., represent the Debtor in its restructuring efforts. The Debtor estimated assets between $10 million and $50 million and debts between $10 million and $50 million. The Debtor listed Jerry Barnett/Miguel Alfredo/Ron Yutrenka and Kevin Brodsky as its largest unsecured creditors; each is owed $1,600,000. SIRIUS SATELLITE: XM Satellite Merger Gets FCC Votes ---------------------------------------------------- The Wall Street Journal reports that three votes have now been cast in the Federal Communications Commission's review of the XM Satellite Radio Holdings Inc. and Sirius Satellite Radio Inc. merger, but the deal is not close to being done. WSJ, citing an FCC official, says Democratic FCC commissioner Michael Copps voted the first vote against the deal. Two other commissioners - chairman Kevin Martin and Robert McDowell - have voted in favor of the merger, WSJ indicates. According to the Journal, Mr. Copps's determination to reject the merger wasn't a surprise; he's been vocal of his objections on media consolidation and the companies weren't counting on getting his approval. The Journal indicates that the decision increases pressure on another FCC commissioner - Republican Deborah Taylor Tate - the only member of the five-person board who remain mum on her views about the deal and whether or not she might approve of it. Another FCC commissioner, Democrat Jonathan Adelstein, laid out his conditions for the companies to get his vote, WSJ adds. The Journal states that these conditions include a six-year price cap for existing customers, interoperable radios that would also receive HD signals from terrestrial radio stations and a 25% set aside of channels for non-commercial and minority-owned radio stations. WSJ, quoting one FCC official, says that very little haggling has been going on about Mr. Adelstein's offer. About XM Satellite Radio Headquartered in Washington, D.C., XM Satellite Radio Holdings Inc. (Nasdaq: XMSR) -- http://www.xmradio.com/-- is a satellite radio company. The company broadcasts live daily from studios in Washington, DC, New York City, Chicago, Nashville, Toronto and Montreal. The company also provides satellite-delivered entertainment and data services for the automobile market through partnerships with General Motors, Honda, Hyundai, Nissan, Porsche, Subaru, Suzuki and Toyota. About SIRIUS Satellite Headquartered in New York, SIRIUS Satellite Radio Inc. (Nasdaq: SIRI) http://www.sirius.com/-- provides satellite radio services in the United States. The company offers over 130 channels to its subscribers 69 channels of 100.0% commercial-free music and 65 channels of sports, news, talk, entertainment, data and weather. Subscribers receive the company's service through SIRIUS radios, which are sold by automakers, consumer electronics retailers, mobile audio dealers and through the company's website. As of March 31, 2008, SIRIUS radios were available as a factory and dealer-installed option in 125 vehicle models and as a dealer only-installed option in 29 vehicle models. As reported in the Troubled Company Reporter on May 14, 2008, the company's balance sheet at March 31, 2008, showed $1.5 billion in total assets and $2.3 billion in total liabilities, resulting in a $839.4 million total stockholders' deficit. SIRIUS SATELLITE: Moody's to Review Ratings on Pending Merger ------------------------------------------------------------- Moody's Investors Service has placed all ratings for Sirius Satellite Radio Inc. under review for possible downgrade. In addition, Moody's downgraded the company's Speculative Grade Liquidity rating to SGL-4 from SGL-2. Moody's notes that the proposed merger between XM Satellite Radio Holdings Inc. and Sirius remains subject to FCC approval. The merger is expected to yield significant revenue and cost synergies as the combined entity has greater leverage with its OEM partners, retailers and content providers or talent, and offers a substantially wider audience to advertisers. Additionally, management believes the combined company will be better positioned to compete in the rapidly evolving audio entertainment industry. However, Moody's believes that the realization of these synergies carries considerable execution risk and its impact on the credit metrics will be dependent on the size and timing of these synergies as well as costs associated with realizing these synergies. The review for downgrade reflects the continued cash burn at both Sirius and XM, uncertainty surrounding the time and magnitude of synergies and therefore achievement of positive free cash flow, as well as Moody's concerns regarding the significant debt maturities (both at Sirius and XM) in 2009 which we believe present considerable refinancing risk. The SGL downgrade reflects the company's continued negative free cash flow and limited internal cash (Moody's notes that the company's cash balance as of March 31, 2008, was $253 million), as well as the $300 million debt maturity in 2009. These ratings are under review for possible downgrade: Sirius Satellite Radio, Inc. -- Corporate family rating, Caa1 -- Probability-of-default rating, Caa1 -- $250 Million Senior Secured Term Loan, B1 (LGD 1, 5%) -- 9 5/8% senior notes due 2013, Caa2 (LGD 4, 60%) Rating downgraded: Sirius Satellite Radio Inc. -- Speculative Grade Liquidity Rating -- to SGL-4 from SGL-2 Headquartered in New York, SIRIUS Satellite Radio, Inc. is a satellite radio broadcaster. SIRVA INC: Withdrawal of Triple Net's Appeal on DIP Financing OK'd ------------------------------------------------------------------ U.S. District Judge Richard Sullivan of the U.S. District Court for the Southern District of New York approved the stipulation between Sirva Inc., its debtor-affiliates and Triple Net Investments IX, LP, withdrawing with prejudice an appeal from: * a final order by the U.S. Bankruptcy Court for the Southern District of New York allowing Sirva Inc. and its debtor- affiliates to obtain postpetition financing, authorizing them to use cash collateral, and granting adequate protection to prepetition secured parties; and * the approval of the the stipulation resolving the reconsideration request of the Bankruptcy's Court order authorizing the payment of prepetition unsecured claims, entered into by the Debtors and the Official Committee of Unsecured Creditors in their Chapter 11 cases, and the Official Committee of Unsecured Creditors of 360networks (USA) Inc. The parties are directed to bear their own costs. About Sirva Inc. The company and 61 of its affiliates filed separate petitions for Chapter 11 protection on Feb. 5, 2008 (Bankr. S.D.N.Y. Case No. 08-10433). Marc Kieselstein, Esq. at Kirkland & Ellis, L.L.P. is representing the Debtor. When the Debtors filed for bankruptcy, it reported total assets of US$924,457,299 and total debts of US$1,232,566,813 for the quarter ended Sept. 30, 2007. The Court confirmed the Debtor's First Amended Prepackaged Plan on May 7, 2008. The Debtors' First Amended Prepackaged Joint Plan of Reorganization became effective on May 12, 2008. (Sirva Inc. Bankruptcy News; Bankruptcy Creditors' Services Inc. http://bankrupt.com/newsstand/or 215/945-7000). SOUTHERN LUMBER II: Case Summary & Five Largest Unsec. Creditors ---------------------------------------------------------------- Debtor: Southern Lumber II, LLC 389 Rodgers Rd. McDonough, GA 30252 Bankruptcy Case No.: 08-73769 Chapter 11 Petition Date: July 22, 2008 Court: Northern District of Georgia (Atlanta) Debtor's Counsel: William Russell Patterson, Esq. Email: wrpjr@rbhs-llp.com Ragsdale Beals Seigler Patterson & Gray 229 Peachtree St. N.E., Ste. 2400 Atlanta, GA 30303-1629 Tel: (404) 588-0500 http://www.rbhs-llp.com/ Estimated Assets: $10,000,000 to $50,000,000 Estimated Debts: $10,000,000 to $50,000,000 Debtor's Five Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Colonial Bank Bellah Landing $1,650,000 P.O. Box 10088 Phase I (foreclosed Birmingham, AL 35202 on May 6, 2008) Richard Harp Excavation, Inc. Business debt $1,544,926 240 Industrial Way Fayetteville, GA 30214 Southern Lumber, Inc. Business debt $527,645 P.O. Box 1274 Stockbridge, GA 30281 Kleemeier, Inc. Business debt $305,000 dba On-Site Kleemeier, Inc. 8070 Fairoaks Ct. Jonesboro, GA 30236 The Erosion Co. Business debt $32,893 SPECTRUM BRAND: Sale Failure Cues Moody's to Confirm Junk Rating ---------------------------------------------------------------- Moody's Investors Service confirmed Spectrum Brand's Caa1 corporate family rating but downgraded its probability of default rating and revised its rating outlook to negative following the recent statement that the company was unable to obtain the consent of its senior lenders to complete the proposed sale of its pet division to Salton, Inc. At the same time, the senior secured credit facility rating was upgraded to B1 from B2 and the senior subordinated notes rating was confirmed at Caa3. These rating actions conclude a review for possible downgrade initiated on May 22, 2008. In 2006, Spectrum initiated an asset sale strategy aimed at improving the company's capital structure and profitability. "The downgrade in the probability of default rating and change in the rating outlook to negative principally reflects Moody's belief that Spectrum's inability to sell either the Home & Garden business or the Pet business increases the probability of a default as its financial covenants continue to step down" Kevin Cassidy, senior credit officer at Moody's Investors Service, said. The negative outlook also reflects Moody's view that ultimate recovery in a possible debt restructuring, which is considered above average now, could diminish over time if the company's operating performance deterioratesdue to the continuing weakness in consumer spending. Spectrum's Caa1 corporate family rating is driven by its very high leverage at almost 10x (adjusted debt/EBITDA), weak interest coverage of a little over 1x (EBITA/interest), and limited financial flexibility. The rating also reflects high raw material costs, exposure to volatile zinc and nickel prices, competition from well capitalized companies across most business lines, and the weather dependency of the home and garden business. The rating is supported by Spectrum's portfolio of recognized brands, strong market positions in many product categories, long-standing relationships with key retailers, an improved cost structure following restructuring efforts that were implemented in 2006, and continued favorable trends in Latin America and the pet supply, battery and personal care businesses. The B1 rating of the senior secured credit facility reflects a Caa2 PDR and a 13% LGD point estimate and the Caa3 rating of the senior subordinated notes reflects a Caa2 PDR and 62% LGD point estimate. Despite a one notch downgrade of the PDR, the senior secured credit facility was upgraded by one notch to B1 and the senior subordinated notes were confirmed at Caa3 due to Moody's expectation of a higher than average recovery in a possible default scenario. These ratings were confirmed/assessments revised: -- Corporate family rating at Caa1; -- $700 million 7.375% senior subordinated bonds due 2015 at Caa3 (LGD4, 62% from LGD5, 83%); -- $350 million variable rate toggle senior subordinated notes due 2013 at Caa3 (LGD4, 62% from LGD5, 83%); This ratings was upgraded/assessment revised: -- $1.55 billion senior secured credit facility due 2013 to B1 (LGD 2, 13%) from B2 (LGD2, 29%); This rating was downgraded: -- Probability-of-default rating to Caa2 from Caa1 Headquartered in Atlanta, Georgia, Spectrum Brands, Inc. is a global consumer products company with a diverse product portfolio including consumer batteries, lawn and garden, electric shaving and grooming, and household insect control. Spectrum reported sales of over $2 billion for the 12 months ended March 2008. SPEIGHT FAMILY: Case Summary & Largest Unsecured Creditor --------------------------------------------------------- Lead Debtor: Speight Family LLC 8100 Bandley Drive Fountain, CO 80817 Bankruptcy Case No.: 08-20689 Debtor-affiliates filing separate Chapter 11 petitions: Entity Case No. ------ -------- Speight Family LLLP 08-20691 Chapter 11 Petition Date: July 22, 2008 Court: District of Colorado (Denver) Judge: Elizabeth E. Brown Debtors' Counsel: Jeffrey S. Brinen, Esq. (jsb@kutnerlaw.com) Kutner Miller Brinen, P.C. 303 E. 17th Ave., Ste. 500 Denver, CO 80203 Tel: (303) 832-2400 Fax: (303) 832-1510 Estimated Assets: $1 million to $10 million Estimated Debts: $1 million to $10 million A list of the Debtors' largest unsecured creditors is available for free at: http://bankrupt.com/misc/cob08-20689.pdf SPHERE DRAKE: PRO Insurance Invokes Chapter 15 ---------------------------------------------- Sphere Drake Insurance, Ltd. seeks bankruptcy protection from the United States Bankruptcy Court for the Southern District of New York through the Chapter 15 case that PRO Insurance Solutions, Ltd., its foreign representative, commenced. Together with Sovereign Marine & General Insurance Co. Ltd. and other insurance companies, the Debtor underwrote insurance and reinsurance business in pooling arrangements (WFUM Pools) through Willis Faber (Underwriting Management), Ltd., Willis Faber & Dumas, Ltd., and Devonport Underwriting Agency, Ltd. The WFUM Pools underwrote risks until the end of 1991, when they ceased accepting new business and went into run-off. In 1998, PRO Insurance assumed the administration of the WFUM Pools. When insurance pools like the WFUM Pools enter into run-off, they cease writing new business and seek to determine, settle and pay all liquidated claims of their insureds either as they arise, or, if possible, before they arise. Typically, a run-off of an insurance pool will take 20 or more years to complete. The Debtor and other WFUM Pools members each proposed to the High Court in the United Kingdom a "cut off" scheme of arrangements to shorten the run-off period, to reduce administrative costs and to terminate the WFUM Pools. With the approval of the Debtor's "cut off" scheme and PRO Insurance as its foreign representative by its creditors on October 19, 2007, the High Court sanctioned and recognized its own "cut off" scheme on November 5, 2007. Pro Insurance commences the Chapter 15 case to have the Debtor's "cut off" scheme recognized in the United States, along with a permanent injunction and other relief. Howard Seife, Esq. at Chadbourne & Parke, LLP represents the Debtor in its restructuring efforts. When it filed for protection, the Debtor listed estimated assets of between $50,000 and $100,000 and estimated debts between $1,000,000 and $10,000,000. SPHERE DRAKE: Chapter 15 Case Summary ------------------------------------- Chapter 15 Petitioner: PRO Insurance Solutions, Ltd. Chapter 15 Debtor: Sphere Drake Insurance, Ltd. Park Gate 161-163 Preston Road Brighton, East Sussex, BN1 6AU United Kingdom Chapter 15 Case No.: 08-12832 Type of Business: Together with Sovereign Marine & General Insurance Co. Ltd. and other insurance companies, the Debtor underwrote insurance and reinsurance business in pooling arrangements through Willis Faber (Underwriting Management), Ltd., Willis Faber & Dumas, Ltd., and Devonport Underwriting Agency, Ltd. Chapter 15 Petition Date: July 22, 2008 Court: Southern District of New York (Manhattan) Judge: James M. Peck Chapter 15 Petitioner's Counsel: Howard Seife, Esq. Email: hseife@chadbourne.com Chadbourne & Parke, LLP 30 Rockefeller Plaza New York, NY 10112 Tel: (212) 408-5361 Fax: (212) 541-5369 http://www.chadbourne.com/ Estimated Assets: $50,000 to $100,000 Estimated Debts: $1,000,000 to $10,000,000 STURGIS IRON: Closes Sale of Scrap Yards to Steel Dynamics ---------------------------------------------------------- Steel Dynamics, Inc. disclosed at its second quarter and first half report that during June 2008, it purchased certain assets of Sturgis Iron & Metal, Inc. for $42 million. SDI said none of the seven scrap yards that were purchased are currently operating. The following locations are expected to reopen in the third quarter under OmniSource management: Sturgis, Kalamazoo and Monroe, Michigan; South Bend and Peru, Indiana; and Fitzgerald, Georgia. As reported in the Troubled Company Reporter on June 9, 2008, the Hon. Jeffrey R. Hughes of the United States Bankruptcy Court for the Western District of Michigan authorized Sturgis Iron & Iron Metal Co. Inc. to sell substantially all of its assets to SDI Sub, LLC under an asset purchase agreement dated May 12, 2008, as amended. Under the agreement, SDI Sub can elect to pay $1,000,000 to the Debtor's Elkhart facility, which was classified as a superfund site by the U.S Environmental Protection Agency in April 2008. About Sturgis Iron Based in Sturgis, Michigan, Sturgis Iron & Metal Co., Inc. sells ferrous metal scrap & waste in wholesale. It also manufactures secondary nonferrous metals, and provides pre-finishing iron or steel processes services, finishing metal processing services, and smelting metal services. The company filed for chapter 11 protection on Apr. 4, 2008 (Bankr. W.D. Mich. Case No. 08-02966). Jay L. Welford, Esq., Judith Greenstone Miller, Esq., Paige Barr, Esq., Paul R. Hage, Esq. and Richard E. Kruger, Esq., at Jaffe Raitt Heuer & Weiss, P.C. represent the Debtor in its restructuring efforts. The Debtor selected Kurtzman Carson Consultants LLC as claims agent. The U.S. Trustee for Region 9 appointed an Official Committee of Unsecured Creditors in this case. The Committee proposed Winston & Strawn LLP as its counsel. As reported in the Troubled Company Reporter on May 13, 2008, the Debtor's summary of schedules shows total assets of $23,363,626 and total debts of $96,346,739. TAHERA DIAMOND: Court Orders C$2 Mil. Reserve for Miners' Liens --------------------------------------------------------------- The Ontario Superior Court of Justice on July 18, 2008, ordered Tahera Diamond Corporation to set aside C$2,000,000 into a trust account for the benefit of certain parties who are lien claimants under the Miners Lien Act in effect in the Northwest Territories and Nunavut. The claims is in connection with goods and services provided to Tahera prior to Jan. 16, 2008. There has been no other new developments to report since Tahera's press release of July 4, 2008. The company provides its bi-weekly report under the alternative information guidelines recommended by Ontario Securities Commission Policy 57-603 and Canadian Securities Administrators Staff Notice 57-301. About Tahera Diamond Tahera Diamond Corporation (TSX: TAH) -- http://www.tahera.com/-- is a Canadian owned diamond mining company. Tahera's wholly-owned Jericho project, commencing commercial production in early 2006, represents Canada's third, and Nunavut's first, diamond mine. On Jan. 16, 2008, Tahera obtained an order from the Ontario Superior Court of Justice granting Tahera and its subsidiary protection pursuant to the provisions of the CCAA. Tahera sought protection under CCAA, as its current cash flows and cash on hand would not allow it to meet its current obligations and its obligations with respect to the 2008 winter road resupply. The Ontario Superior Court of Justice extended the Debtor's CCAA stay period until Sept. 30, 2008. TELKONET INC: Promotes Jeff Sobieski to Chief Operating Officer --------------------------------------------------------------- Telkonet, Inc. appointed Jeff Sobieski as Chief Operating Officer with immediate effect. Formerly Executive Vice President of Energy Management, Mr. Sobieski has been with Telkonet since March 2007 and is taking over as COO following Dottie Cleal's resignation in May due to immediate-family health issues. Telkonet's President and CEO Jason Tienor commented, "Our business is seeing dramatic change with energy management related opportunities permeating almost all aspects of our product lines and many of our business functions and opportunities. Jeff assumed the post of EVP of Energy Management in December 2007, with responsibility for evolving the roadmap to realize continued growth and efficiencies across the energy management products and operations. He also led the drive to secure high level business for our energy management solution, as well as developing the roadmap for our new networked platform, preparing Telkonet for strong growth in this area. As Telkonet continues to implement additional operational efficiencies, the separate roles of EVP of Energy Management and COO are increasingly redundant and therefore, we have consolidated these into a single role held by Jeff Sobieski. We look forward to his continued strong contributions to help Telkonet realize its success and achieve new milestones." As COO, Mr. Sobieski will work out of Telkonet's offices in both Germantown and Milwaukee. Commenting on his new role, Mr. Sobieski said, "I am gratified by the Board's confidence in me, and regard this as a great honor and opportunity. As an existing part of the team, I can bring my organizational knowledge and established relationships into play, accelerating the process of uniting the company and establishing cross-functional communication." Prior to joining Telkonet, Mr. Sobieski, 33, was Chief Information Officer at EthoStream, which he co-founded with Jason Tienor in 2002. His career includes co-founding Interactive SolutionZ, a Milwaukee-based IT consulting firm, and a number of high-level consulting and system development projects, including positions within major corporations in the medical and insurance industries. Mr. Sobieski holds a B.S. degree in Computer Science from the University of Wisconsin-Oshkosh, and a MBA from Marquette University. He is married with two children. Going Concern Doubt As reported in the Troubled Company Reporter on April 22, 2008, RBSM LLP, in McLean, Va., expressed substantial doubt about Telkonet 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 significant operating losses in the current year and also in the past. The company believes that anticipated revenues from operations will be insufficient to satisfy its ongoing capital requirements for at least the next 12 months. About Telkonet Based in Germantown, Md., Telkonet Inc. (AMEX: TKO) -- http://www.telkonet.com/-- provides centrally managed solutions for integrated energy management, networking, building automation, and proactive support services in the United States and Canada. TELKONET INC: Registers 19.5MM Shares Issued to YA Global --------------------------------------------------------- Telkonet Inc. delivered to the U.S. Securities and Exchange Commission an amendment to the registration statement on Form S-3 filed July 1, 2008. The registration statement -- filed under the Securities Act of 1933, as amended -- relates to the registration of 19,351,000 shares of the company's common stock, par value $0.001 per share, that, according to Telkonet, may be offered and sold from time to time by YA Global Investments, L.P. Telkonet said it will not receive any proceeds from the sale of the shares pursuant to the prospectus. The company, however, will bear the costs relating to the registration of the shares, which is estimated to be roughly $15,444. On May 30, 2008, Telkonet entered into a Securities Purchase Agreement with YA Global pursuant to which the company agreed to issue and sell to YA Global up to $3,500,000 of secured convertible debentures and warrants to purchase up to 2,500,000 shares of the company's common stock. YA Global is a Cayman Island exempt limited partnership managed by Yorkville Advisors, LLC. Investment decisions for Yorkville Advisors are made by Mark Angelo, its portfolio manager. The sale of the convertible debentures and warrants will be effectuated in three separate closings, the first of which occurred on May 30, 2008, and the remainder of which will occur after the satisfaction of certain conditions, including, but not limited to, the approval by the company's stockholders of an amendment to the Company's certificate of incorporation authorizing additional shares of common stock for issuance. At the May 30, 2008 closing, Telkonet sold convertible debentures having an aggregate principal value of $1,500,000 and warrants to purchase 2,100,000 shares of common stock. The convertible debentures accrue interest at a rate of 13% per annum and mature on May 29, 2011. The convertible debentures may be redeemed at any time, in whole or in part, by Telkonet upon the company's payment of a redemption premium equal to 15% of the principal amount of convertible debentures being redeemed, provided that an Equity Conditions Failure -- as defined in the convertible debentures -- is not occurring at the time of the redemption. Telkonet said YA Global may also convert all or a portion of the convertible debentures at any time at a price equal to the lesser of (i) $0.58, or (ii) 90% of the lowest volume weighted average price of the company's common stock during the 10 trading days immediately preceding the conversion date. The warrants expire five years from the date of issuance and entitle YA Global to purchase shares of the company's common stock at a price per share of $0.61. The convertible debentures are secured by substantially all of the company's assets. A full-text copy of Telkonet's prospectus dated as July 10, 2008, is available at no charge at: http://ResearchArchives.com/t/s?2fe3 Baker & Hostetler LLP, advised Telkonet in connection with the registration statement. To contact the firm: Baker & Hostetler LLP Washington Square, Suite 1100 1050 Connecticut Avenue, N.W. Washington, DC 20036-5304 Tel: (202) 861-1500 Fax: (202) 861-1783 http://www.bakerlaw.com/ Going Concern Doubt As reported in the Troubled Company Reporter on April 22, 2008, RBSM LLP, in McLean, Va., expressed substantial doubt about Telkonet 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 significant operating losses in the current year and also in the past. The company believes that anticipated revenues from operations will be insufficient to satisfy its ongoing capital requirements for at least the next 12 months. About Telkonet Based in Germantown, Md., Telkonet Inc. (AMEX: TKO) -- http://www.telkonet.com/-- provides centrally managed solutions for integrated energy management, networking, building automation, and proactive support services in the United States and Canada. TORRENT ENERGY: Gets Bid Price Non-compliance Notice from Nasdaq ---------------------------------------------------------------- Neonode Inc. disclosed that on July 3, 2008, the company received a Nasdaq Staff deficiency letter from The NASDAQ Stock Market Listing Qualifications Department stating that for the last 30 consecutive business days, the bid price of the company's common stock has closed below the $1.00 minimum required for continued inclusion under Marketplace Rule 4310(c)(4). The notice further states that pursuant to Marketplace Rule 4310(c)(8)(D), the company will be provided 180 calendar days (or until Dec. 30, 2008) to regain compliance. If, at anytime before Dec. 30, 2008, the bid price of the company's common stock closes at $1.00 per share or more for a minimum of 10 consecutive business days, the company may regain compliance with the Rule. The notice indicates that, if compliance with the Minimum Bid Price Rule is not regained by Dec. 30, 2008, the NASDAQ staff will determine whether the company meets the Nasdaq Capital Market initial listing criteria as set forth in Marketplace Rule 4310(c), except for the bid price requirement. If the company meets the initial listing criteria, the NASDAQ staff will notify the company that it has been granted an additional 180 calendar day compliance period. If the company is not eligible for an additional compliance period the NASDAQ staff will provide written notification that the company's securities will be delisted. Furthermore, the company disclosed that it received a staff determination letter from NASDAQ on July 1, 2008, stating that the company's common stock is subject to delisting from the NASDAQ Capital Market indicating that it had failed to comply with Marketplace Rule 4310(c)(3)(B), 4310(c)(3)(A) or 4310(c)(3)(C), requiring the company maintain a market value of listed securities of at least $35,000,000, stockholders' equity of $2,500,000 or net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years. The company has submitted a request to have a hearing to the NASDAQ Listing Qualifications Panel. This request stays the delisting of the company's securities pending the hearing and a determination by the Panel with the company continuing to trade its securities under the ticker symbol "NEON" on the NASDAQ board. There can be no assurance that the Panel will grant the Company's request for continued listing. About Neonode Inc. Neonode Inc. (Nasdaq: NEON) -- http://www.neonode.com/-- is a Swedish mobile communication company that specializes in optical finger based touch screen technology. The company designs and develops mobile phones under its own brand and licenses its patented touch screen technologies, zForce(TM) and neno(TM) to third parties. Neonode USA, which is based in San Ramon, Calif., markets Neonode's products within North America, Latin America and China and is the exclusive licensor of the Neonode Intellectual Property. As reported in the Troubled company Reporter on May 29, 2008, Neonode Inc.'s consolidated balance sheet at March 31, 2008, showed total assets of $13.9 million and total liabilities of $23.4 million, resulting in a roughly $9.4 million of total stockholders' deficit. Going Concern Doubt BDO Feinstein International AB, in Stockholm, Sweden, expressed substantial doubt about Neonode 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 working capital deficiency. TRIBUNE COMPANY: Moody's Junks Corporate Family Rating to Caa2 -------------------------------------------------------------- Moody's Investors Service downgraded Tribune Company's (Tribune) Corporate Family rating to Caa2 from B3, the Probability of Default rating to Caa2 from B3 and associated debt ratings as detailed, concluding the review for downgrade initiated on April 21, 2008. Moody's also assigned an SGL-4 speculative-grade liquidity rating. The LGD point estimates were updated to reflect the current mix of debt. The downgrades reflect Moody's expectation that ongoing declines in Tribune's revenue will create increasing pressure on its ability to generate a sufficient level of cash flow necessary to sustain the highly levered capital structure and meet financial maintenance covenant tests under its credit facility. Tribune's asset sales program will beneficially reduce debt including near term maturities but also erode the future earnings base without materially reducing the company's high leverage. A reversal of recent operating trends is becoming increasingly necessary to avoid a restructuring of the company's balance sheet over the intermediate term and this could prove challenging in the current newspaper and television advertising environment despite Tribune's new revenue initiatives and significant cost reduction efforts. The rating outlook is negative. Downgrades: Issuer: Tribune Company -- Corporate Family Rating, Downgraded to Caa2 from B3 -- Probability of Default Rating, Downgraded to Caa2 from B3 -- Guaranteed Senior Secured Bank Credit Facility, Downgraded to Caa1, LGD3 - 36% from B2, LGD3 - 35% -- Guaranteed Senior Unsecured $1.6 Billion Bridge Credit Facility, Downgraded to Caa3, LGD5 - 82% from Caa2, LGD5 - 81% -- Senior Secured Bonds/Debentures, Downgraded to Ca, LGD5 - 89% from Caa2, LGD5 - 88% -- Subordinate Bonds (PHONES), Downgraded to Ca, LGD6 - 95% from Caa2, LGD6 - 94% -- Medium-Term Note Program, Downgraded to Ca from Caa2 -- Multiple Seniority Shelf, Downgraded to (P)Ca from (P)Caa2 Assignments: Issuer: Tribune Company -- Speculative Grade Liquidity Rating, Assigned SGL-4 Outlook Actions: Issuer: Tribune Company -- Outlook, Changed To Negative From Rating Under Review The Caa2 CFR reflects Moody's opinion that Tribune's ability to generate meaningful unlevered cash flow from its sizable and diversified portfolio of local print and broadcast media properties and equity investments only marginally supports the high debt burden associated with its December 2007 LBO. Strong local news and information infrastructure support the local media properties and consumer base that attracts advertisers but online and cross media competition for consumers and advertisers and a cyclical slowdown in the U.S. economy are creating significant revenue pressures. In Moody's view, this will make it difficult to materially reduce leverage over the intermediate term even if the company were to devote asset sale proceeds and the majority of its cash flow to debt reduction. Tribune is attempting to manage its operating and financial challenges by refocusing the content and advertising sales strategies of its newspapers to maximize profitability, implementing significant expense reductions, and selectively divesting assets to reduce debt. High leverage and revenue pressure create little room for any missteps on any of these fronts. Notwithstanding the operating challenges, the decline in short term interest rates has beneficially reduced cash interest costs on approximately $6.5 billion of un-hedged floating rate debt relative to earlier expectations, and Moody's believes Tribune will generate a moderate level of free cash flow during 2008. The negative rating outlook reflects Moody's concern that continued revenue pressure not matched by corresponding expense reductions and any difficulty in executing asset sales could continue to weaken cash flow and liquidity and lead to a requisite restructuring. The SGL-4 rating indicates weak intrinsic liquidity as the company is heavily reliant on asset sales and committed credit lines to fund approximately $1.4 billion of debt maturities through June 2009. Tribune has very limited headroom under its credit facility financial covenants to absorb further revenue declines and a covenant amendment might subsequently be necessary over the next 12 months. Headquartered in Chicago, Illinois, Tribune Company operates the second largest newspaper group in the U.S. as well as television and radio broadcasting and interactive services. The company owns 23 television stations including a VHF station in each of the top three metro markets, and TV-newspaper duopolies in Los Angeles, Chicago, Miami, and Hartford. In addition, Tribune owns equity interests in a variety of media enterprises including CareerBuilder and the Food Network. Annual revenue approximates $4.9 billion. TRITON AVIATION: Fitch Keeps 'C/DR6' Ratings on Four Note Classes ----------------------------------------------------------------- Fitch Ratings has affirmed Triton Aviation Finance as: -- Class A-1 notes affirmed at 'BB-'; -- Class B-1 notes remain at 'C/DR6'; -- Class B-2 notes remain at 'C/DR6'; -- Class C-1 notes remain at 'C/DR6'; -- Class C-2 notes remain at 'C/DR6'. Fitch's analysis incorporated expected cash flow to be available to the trust over the remaining life of the transaction. This expectation is based on several factors including aircraft age, current portfolio value, potential lease rates, and perceived liquidity of the portfolio. Lease rate and portfolio value expectations have been updated to reflect Fitch's views on certain aircraft given the aviation market volatility and significantly elevated fuel prices. Triton was affirmed as it was found to have credit support consistent with its current ratings. TRONOX INC: Lenders Waive Leverage Ratio Financial Covenant ----------------------------------------------------------- Tronox Incorporated received approval from its lenders for an amendment to its senior secured credit facility. The agreement was entered among Tronox Incorporated, Tronox Worldwide LLC, several banks and other financial institutions. Lehman Brothers Inc. and Credit Suisse served as joint lead arrangers and joint bookrunners. ABN AMRO Bank N.V. served as syndication agent, while JPMorgan Chase Bank N.A. and Citicorp USA Inc. served as co-documentation agents. Lehman Commercial Paper Inc. acted as administrative agent. As a result of increases in process chemical, energy and transportation costs and production difficulties the company experienced in the second quarter, combined with the impact of the weak U.S. economy, Tronox had requested and received approval for a waiver to its leverage ratio financial covenant for the 2008 second quarter and subsequently requested the amendment to its leverage ratio financial covenant for the remainder of the year. These are the amended leverage ratios: Leverage Ratio -------------- Three Months Ended New Previous ------------------ --- -------- June 30, 2008 5.20x 4.90x Sept. 30, 2008 5.55x 4.90x Dec. 31, 2008 5.35x 4.90x A full text copy of the third amendment to credit agreement and second amendment to guarantee and collateral agreement is available for free at http://ResearchArchives.com/t/s?2fc9 Tronox remains focused on reducing costs and increasing prices. In the third quarter, the company is continuing to see a trend of further price increases being implemented in all three regions of the world, which it believes will help offset ongoing titanium dioxide industry cost increases. There is no assurance, however, that these pricing trends will offset continuing cost increases that the company is unable to predict and that depend on numerous factors beyond its control. Tronox continues to evaluate all strategic alternatives to improve the business, including development opportunities, mitigation of legacy liabilities, capital restructuring and land sales. About Tronox Incorporated Headquartered in Oklahoma City, Tronox Incorporated (NYSE:TRX) -- http://www.tronox.com/-- is a producer and marketer of titanium dioxide pigment. Titanium dioxide pigment is an inorganic white pigment used in paint, coatings, plastics, paper and many other everyday products. The company's five pigment plants, which are located in the United States, Australia, Germany and the Netherlands, supply performance products to approximately 1,100 customers in 100 countries. In addition, Tronox produces electrolytic products, including sodium chlorate, electrolytic manganese dioxide, boron trichloride, elemental boron and lithium manganese oxide. UAL CORP: Reports $2.7 Billion Net Loss in Second Quarter 2008 -------------------------------------------------------------- Driven by a $773 million increase in consolidated fuel expense, UAL Corporation, the holding company whose primary subsidiary is United Airlines Inc., reported a net loss of $2.7 billion, or $151 million, excluding certain largely non-cash accounting charges. For the second quarter ended June 30, 2008, the company: -- reported basic and diluted loss per share of $1.19 excluding certain largely non-cash accounting charges. United's reported GAAP loss per share was $21.47; -- recorded $2.6 billion of previously announced accounting charges, including a $2.3 billion non-cash special charge for goodwill impairment; -- continued its focus on controlling costs, with mainline cost per available seat mile (CASM), excluding fuel and the above mentioned accounting charges, up 2.6% versus the same period in 2007. Mainline CASM for the quarter was up 85.5% versus the second quarter of 2007, reflecting a 55.4% increase in mainline fuel price per gallon and the significant accounting charges; -- strengthened its cash position by raising $90 million through new financings, asset sales and freeing up $130 million in restricted cash. In addition, the company expects to raise $330 million in cash in the third quarter through aircraft financings and the release of restricted cash, resulting in a total cash balance improvement of approximately $550 million; -- announced further capacity cuts and the retirement of the entire B737 fleet as well as six B747s. In total, United will retire 100 aircraft and will reduce fourth-quarter mainline domestic capacity 15.5% to 16.5% year-over-year. In conjunction with the capacity reductions, the company expects to reduce its workforce by approximately 7,000 by year-end 2009; and -- announced an alliance partnership with Continental Airlines, a partnership that will create the most comprehensive domestic system by linking networks as well as creating potential for cost savings and operational efficiencies, while simultaneously benefiting customers. Quarterly Net Loss Driven By Record High Fuel Costs The company's financial results in the second quarter of 2008 were impacted by previously disclosed largely non-cash accounting charges that, coupled with a $773 million or 54.1% increase in consolidated fuel expense, caused the company's net, pre-tax and operating results to be significantly lower year-over-year. The accounting charges include: -- a non-cash special charge of $2.3 billion for goodwill impairment; -- non-cash special charges of $194 million relating to the impairment of B737 aircraft that are being retired from the company's operating fleet, aircraft pre-delivery deposits and certain indefinite-lived intangible assets other than goodwill net of a related tax benefit of $29 million; -- severance charges of $82 million related to the staffing reductions that will result from the capacity reductions the company has announced. Cash payments related to severance will be incurred over time as we implement the company's capacity reduction plans; -- other largely non-cash charges of $54 million related to certain projects that have been terminated or deferred and a non-cash adjustment to increase certain employee benefit obligations; and -- a $29 million cash gain from a litigation settlement. Despite continued unit revenue growth, and better cost performance compared to its prior guidance, these gains were insufficient to offset the more than 55 percent increase in average fuel price per gallon. "Our industry is challenged as never before by the unrelenting price of oil, and United is taking aggressive action to offset unprecedented fuel costs and to strengthen the competitiveness of our business," said Glenn Tilton, United president, chairman and CEO. "The elimination of our entire B737 fleet and our alliance with Continental are examples of the different approach we are taking to respond to dramatically changed market conditions to deliver better results for all our stakeholders." Additional Actions to Address Unprecedented Fuel Costs While the price of jet fuel has steadily increased over the last few years, the rise in 2008 has been unprecedented, with fuel increasing by more than 37% since the beginning of the year. United is executing an aggressive plan to address the skyrocketing cost of fuel by: -- sizing the business appropriately for the environment, leading the industry in permanently reducing capacity. United is removing 94 narrowbody aircraft and 6 widebody aircraft from its operations, retiring its entire fleet of B737s in the process; -- using its capacity discipline to pass higher commodity costs to customers through fare and fuel surcharge initiatives; -- creating new revenue streams by charging for a la carte service, such as checked bags; -- reducing costs across the business; and -- reducing capital expenditures. $550 Million Raised From New Transactions During the quarter, the company raised $90 million through new aircraft financing transactions and assets sales and freed up $130 million in restricted cash by replacing it with a $100 million letter of credit. In addition, early in the third quarter, the company received funds from a $241 million aircraft financing transaction whereby it raised additional debt. The company freed up another $50 million of restricted cash by replacing it with letters of credit worth $34 million. The company also reached agreements in principle for the sale of assets worth approximately $40 million. As a result of all these actions, the company raised approximately $550 million in cash. Despite escalating fuel prices, the company generated positive operating and free cash flow during the quarter. The company realized $217 million of operating cash flow and $127 million of free cash flow, defined as operating cash flow less capital expenditures, during the second quarter. The company reduced total on and off balance sheet debt by $292 million in the quarter to $11.1 billion, despite entering into new debt financing. The company ended the quarter with an unrestricted cash balance of $2.9 billion and a restricted cash balance of $655 million. The company's quarter-end cash balance does not include any cash deposits associated with collateral from its fuel hedge counterparties. In addition to its strong cash balance, and subsequent to the financings and asset sales previously discussed, the company continues to have over $3 billion in unencumbered hard assets that it can use to further enhance liquidity through asset sales and/or secured financing transactions. "We continue to take the difficult, but necessary action across the company to reduce our costs, including reducing our workforce by more than 7,000 people," said Jake Brace, United executive vice president and CFO. "We are maintaining our cost guidance for the year even as we dramatically reduce capacity, and are improving our liquidity, ensuring United is well positioned to weather the current environment." Capacity Discipline Drives Revenue Growth The company's focus on capacity discipline and strong revenue management drove continued revenue growth. Total revenues increased by 3.0% in the second quarter of 2008 compared to the same period in 2007, as growth in passenger unit revenue and cargo more than offset the year-over-year reduction in capacity. The company's mainline RASM increased by 5.1% year-over-year from the second quarter of 2007 due to strong passenger and cargo yield performance partially offset by lower passenger load factors. The company's cargo business continued its strong performance with a 30.9% year-over-year increase in revenue. Higher fuel surcharges, foreign exchange gains and strong yield improvements contributed to the cargo revenue increase. Total passenger revenues increased by 2.6% in the second quarter compared to the prior year as a result of a 7.7% gain in consolidated yield, more than offsetting the 3 point decline in system load factor. Mainline domestic PRASM for the quarter increased by 5.9%, aided by a 4.8% reduction in capacity. International PRASM grew 3.2% in the second quarter compared to the same period last year, despite a 3.7% increase in international capacity year-over-year. Consolidated PRASM increased 3.9% year-over-year. The company's change to deferred revenue accounting for the Mileage Plus program, from the previous incremental cost method, decreased consolidated passenger revenue by approximately $42 million in the second quarter of 2008. The change to the expiration period for Mileage Plus accounts without activity from 36 to 18 months, which the company instituted in January 2007, did not impact the company's revenue results in the second quarter of 2008, as it did in the second quarter of 2007. In the second quarter of 2007 deferred revenue accounting increased consolidated passenger revenue by a net $1 million, including $47 million of non-cash revenue recognized from the expiration policy change. In total, these Mileage Plus accounting changes resulted in a net year-over-year decrease in consolidated passenger revenues of $43 million for the second quarter of 2008 compared to the same period in 2007. As the company no longer follows the incremental cost method of accounting, differences between the two accounting methods are calculated using the company's best estimate of the incremental cost method. Excluding Mileage Plus accounting impacts, consolidated PRASM increased 4.9% year-over-year. Regional affiliate PRASM was up 0.3 percent compared to last year, with a 6.6% increase in yield and a 1.1% capacity decline. Load factor for regional affiliates decreased 4.7 points in the second quarter of 2008 compared to the second quarter of 2007, while stage length for regional affiliates was up 5.3% for the same period. Focus On Improving Operating Performance "Our focus and our energy are all about generating a step change in our performance," said John Tague, executive vice president and COO. "We've set the targets, put the right leaders in place, and we're executing against our plan with a clear understanding of what we need to achieve, how we need to do it, and that we are ultimately accountable for that outcome." Continued Focus on Cost Control Mainline CASM increased by 85.5% year-over-year to 20.39 cents reflecting the large special charge and other largely non-cash accounting charges that the company took in the second quarter, as well as the steep increase in fuel expense. Second quarter mainline CASM, excluding these charges and fuel, increased by 2.6% from the year-ago quarter to 7.80 cents, better than the company's guidance due to lower than expected maintenance costs and airport rent costs. This result demonstrates United's continued focus on controlling non-fuel costs. The company has classified the majority of its various fuel hedging positions as economic hedges for accounting purposes. The company recorded a net gain of $238 million on hedge contracts in the second quarter -- a realized gain of $30 million relating to the current quarter and an unrealized gain of $208 million relating to contracts settling in future periods. The cash benefit of hedging during the quarter was $51 million. These gains were recorded in mainline aircraft fuel expense and resulted in lower fuel expense, than would otherwise be the case, for the second quarter. About UAL Corporation Based in Chicago, Illinois, UAL Corporation (NASDAQ: UAUA) -- http://www.united.com/-- is the holding company for United Airlines, Inc. United Airlines is the world's second largest air carrier. The airline flies to Brazil, Korea and Germany. The company filed for chapter 11 protection on Dec. 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represented the Debtors in their restructuring efforts. Fruman Jacobson, Esq., at Sonnenschein Nath & Rosenthal LLP represented the Official Committee of Unsecured Creditors before the Committee was dissolved when the Debtors emerged from bankruptcy. Judge Eugene R. Wedoff confirmed the Debtors' Second Amended Plan on Jan. 20, 2006. The company emerged from bankruptcy protection on Feb. 1, 2006. (United Airlines Bankruptcy News; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) * * * The Troubled Company Reporter said on June 2, 2008, that Fitch Ratings has revised the Rating Outlook for UAL Corp. and its principal operating subsidiary United Airlines, Inc. to Negative from Stable. Debt ratings for both entities have been affirmed as: UAL & United Issuer Default Ratings at 'B-'; United's secured bank credit facility (Term Loan and Revolving Credit Facility) at 'BB-/RR1'; and Senior unsecured rating for United at 'CCC/RR6'. The TCR said on July 22, 2008, that Moody's Investors Service lowered the Corporate Family and Probability of Default ratings of UAL Corp. (United) to Caa1 from B2, the secured bank debt rating to B3 from B1 and certain tranches of the Enhanced Equipment Trust Certificates (EETC) of United Airlines, Inc. (United Airlines). Moody's affirmed the SGL-3 Speculative Grade Liquidity Assessment. The rating outlook is negative. UAL CORP: Demands Payment of $4.5 Million Damages Under T8 Lease ---------------------------------------------------------------- Pursuant to the findings of fact and conclusions of law issued by the U.S. District Court for the Northern District of Illinois, United Airlines, Inc., contended that the District Court incorrectly ruled that United is not entitled to damages. Judge Eugene R. Wedoff of the U.S. Bankruptcy Court for the Northern District of Illinois granted United Air's request for the Court to reconsider its June 19, 2007, ruling that United does not have a contractual right under a T8 Lease to operate Turbo-Prop aircraft from Terminal 8. Judge Wedoff declared that United's Motion to stay the June 19 Order is moot, due to the Court's issuance of a temporary injunction in favor of United on May 31, 2008. Micah E. Marcus, Esq., at Kirkland & Ellis LLP, in Chicago, Illinois, asserted that United's damages aggregate $4,500,000, the amount of rent United paid to the city of Los Angeles and Los Angeles World Airports, for use of a remote terminal facility at LAX -- from the time that United first sought to reject a remote facility lease in November 2005 until August 2007, the expiration of the Remote Facility Lease. The Remote Facility Lease Payments, if returned to United, will in no way constitute a windfall to United, but will simply put United in the position it would have been in had the City not breached the T8 Lease, Mr. Marcus explained. Moreover, United's out-of-pocket rental payments for the Remote Facility Lease can be equated to a party's reasonable attempt to mitigate damages, in this case, United securing protection in the event of a sudden and forced return to the Remote Facility, he pointed out. Thus, United asked the Court to (i) approve its rejection of the Remote Facility Lease, nunc pro tunc to Nov. 30, 2005, and (ii) require the City repayment of any and all rents paid by United under the Remote Facility Lease after the effective date of the rejection. City Should Not be Penalized As United's making of the payments was to preserve its ability to use the Remote Facility, the costs that United incurred are its own responsibility, the City asserted. The City should not now be penalized by granting United a windfall from the City's pockets, Ann E. Pille, Esq., at Reed Smith, LLP, in Chicago, Illinois, reiterated. Furthermore, United's refusal to reject the Remote Facility Lease led to the City's inability to re-let the facility to other airlines, and forgo rent payments from another potential tenant. If the City is to return the payments, it would result in substantial harm to the City, Ms. Pille stated. Because the Remote Facility Lease is expired, United no longer has the statutory or jurisdictional power pursuant to Section 365 of the Bankruptcy Code to reject it, retroactively or otherwise. Moreover, the Court only permitted United to assume or reject the Remote Facility Lease, thus, United is estopped from seeking to reject the Remote Facility Lease retroactively, the City concluded. United Blames City for Delay United reiterated that the City is entirely to blame for the delay in the rejection of the Remote Facility Lease since if it was not for the City's breach of the T-8 Lease, United would not have conditionally withdrawn its notice of rejection in January 2006. There is even no windfall on United's part as the money rightfully belongs to United, and the City should not benefit from its conduct of breaching contracts and causing the delay of United's rejection of the Remote Facility Lease, Mr. Marcus argued. Procedurally, Mr. Marcus pointed out, the Retroactive Rejection is with merit as United sought the rejection of the Remote Facility Lease long before it expired, making the request timely. Mr. Marcus explained that the very purpose behind the allowance of retroactive rejection is that it acts as a stimulus to all parties to cooperate in getting the motion to reject heard and determined at the earliest practicable date. As United has done everything in its power to have its motion resolved on the merits, United's retroactive rejection of the Remote Facility Lease should be approved by the Court, he added. About UAL Corporation Based in Chicago, Illinois, UAL Corporation (NASDAQ: UAUA) -- http://www.united.com/-- is the holding company for United Airlines, Inc. United Airlines is the world's second largest air carrier. The airline flies to Brazil, Korea and Germany. The company filed for chapter 11 protection on Dec. 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represented the Debtors in their restructuring efforts. Fruman Jacobson, Esq., at Sonnenschein Nath & Rosenthal LLP represented the Official Committee of Unsecured Creditors before the Committee was dissolved when the Debtors emerged from bankruptcy. Judge Eugene R. Wedoff confirmed the Debtors' Second Amended Plan on Jan. 20, 2006. The company emerged from bankruptcy protection on Feb. 1, 2006. (United Airlines Bankruptcy News, Issue No. 161; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) * * * The Troubled Company Reporter said on June 2, 2008, that Fitch Ratings has revised the Rating Outlook for UAL Corp. and its principal operating subsidiary United Airlines, Inc. to Negative from Stable. Debt ratings for both entities have been affirmed as: UAL & United Issuer Default Ratings at 'B-'; United's secured bank credit facility (Term Loan and Revolving Credit Facility) at 'BB-/RR1'; and Senior unsecured rating for United at 'CCC/RR6'. The TCR said on July 22, 2008, that Moody's Investors Service lowered the Corporate Family and Probability of Default ratings of UAL Corp. (United) to Caa1 from B2, the secured bank debt rating to B3 from B1 and certain tranches of the Enhanced Equipment Trust Certificates (EETC) of United Airlines, Inc. (United Airlines). Moody's affirmed the SGL-3 Speculative Grade Liquidity Assessment. The rating outlook is negative. UAL CORP: Deloitte Audits Statements on Four Incentive Plans ------------------------------------------------------------ Deloitte & Touche LLP, reported that it audited the statements of net assets available for benefits of United Airlines, Inc.'s (i) Ground Employee 401(k) Plan, (ii) Management and Administrative 401(k) Plan (iii) Flight Attendant 401(k) Plan, and (iv) Pilot Directed Account Plan. The Ground Employee Plan covers all employees represented by the Aircraft Mechanics and Fraternal Association and the International Association of Machinists and Aerospace Workers. AMFA shares are distributed into (i) 85%, which is allocated based on that employee's Considered Earnings, excluding overtime, for the period from May 1, 2003, through Dec. 31, 2005, in proportion to the total of all employees, and (ii) 15%, which is distributed according to a similar ratio based on Considered Earnings, excluding overtime, for the period Jan. 1, 2005, through Dec. 31, 2005. IAM shares are distributed based on each eligible employee�s Considered Earnings for the period from May 1, 2003 through Dec. 31, 2005, in proportion to the total for all IAM- represented employees for the period. Under the Plan, equity distributions occurred on April 27, 2007, for $9,325,378 and on Nov. 8, 2007 for $127,549 The Management and Administrative Plan covers all employees who are classified as management employees, officers, administrative, employees, meteorologists, test pilots, maintenance instructors, engineers and flight dispatchers. Effective Dec. 31, 2007, the Mileage Plus Inc. Investment Plan was merged with and into the Plan pursuant to an amendment adopted by United's Retirement and Welfare Administration Committee. Only Management and Administrative employees hired as of Dec. 31, 2005, are eligible for the equity distribution. Under the Plan, equity distributions were made on April 27, 2007, for $3,649,693, and on Nov. 8, 2007, for $120,496. The Flight Attendant Plan includes flight attendants represented by the Association of Flight Attendants - CWA. Pursuant to United's Plan of Reorganization, Flight attendant shares were allocated in two groups. One-third of the shares were distributed on a per capita basis and the remaining two-thirds were distributed based on each eligible employee's Considered Earnings for the period May 1, 2003 through Dec. 30, 2005, in proportion to the total for all flight attendants for the period. Under the Plan, an equity distribution was made on April 27, 2007, for $3,490,003, and on November 8, for $1,140,701. The Pilot Directed Plan covers all employees of United who are represented by the Air Line Pilots Association, International. For eligible pilots, approximately 5% of the ALPA shares were allocated to pilots on furlough status with the remainder allocated to active pilots on a seniority-based formula. An equity distribution of $184,272 occurred on April 27, 2007, related to the 2006 Plan year and additional distributions occurred on Nov. 8, 2007, for $9,109,389. Some pilots opted to have United sell their claim to these shares in advance of United's emergence from bankruptcy. The cash proceeds from this sale were distributed in the same manner as the shares distribution which included contributions to the Plan. Full-text copies of the audited statements are available for free at the SEC: * Ground Employee Plan, at: http://ResearchArchives.com/t/s?2fe5 * Management and Administrative Plan, at: http://ResearchArchives.com/t/s?2fe6 * Flight Attendant Plan, at: http://ResearchArchives.com/t/s?2fe7 * Pilot Directed Account Plan, at: http://ResearchArchives.com/t/s?2fe8 About UAL Corporation Based in Chicago, Illinois, UAL Corporation (NASDAQ: UAUA) -- http://www.united.com/-- is the holding company for United Airlines, Inc. United Airlines is the world's second largest air carrier. The airline flies to Brazil, Korea and Germany. The company filed for chapter 11 protection on Dec. 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represented the Debtors in their restructuring efforts. Fruman Jacobson, Esq., at Sonnenschein Nath & Rosenthal LLP represented the Official Committee of Unsecured Creditors before the Committee was dissolved when the Debtors emerged from bankruptcy. Judge Eugene R. Wedoff confirmed the Debtors' Second Amended Plan on Jan. 20, 2006. The company emerged from bankruptcy protection on Feb. 1, 2006. (United Airlines Bankruptcy News, Issue No. 161; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) * * * The Troubled Company Reporter said on June 2, 2008, that Fitch Ratings has revised the Rating Outlook for UAL Corp. and its principal operating subsidiary United Airlines, Inc. to Negative from Stable. Debt ratings for both entities have been affirmed as: UAL & United Issuer Default Ratings at 'B-'; United's secured bank credit facility (Term Loan and Revolving Credit Facility) at 'BB-/RR1'; and Senior unsecured rating for United at 'CCC/RR6'. The TCR said on July 22, 2008, that Moody's Investors Service lowered the Corporate Family and Probability of Default ratings of UAL Corp. (United) to Caa1 from B2, the secured bank debt rating to B3 from B1 and certain tranches of the Enhanced Equipment Trust Certificates (EETC) of United Airlines, Inc. (United Airlines). Moody's affirmed the SGL-3 Speculative Grade Liquidity Assessment. The rating outlook is negative. UAL CORP: Ends Some Int'l Flights; Defers Moscow Flight Debut ------------------------------------------------------------- UAL Corporation's unit, United Airlines Inc., intends to discontinue a host of international routes effective Sept. 2, 2008, and Oct. 25, 2008, Bloomberg News reports. United's San Francisco - Nagoya; Los Angeles - Frankfurt; and Denver - London Heathrow routes will end on October 25, Bloomberg says. The carrier's San Francisco - Taipei and Chicago - Mexico City flights will be discontinued by September 2, according to the report. United will also let go of two daily flights between Chicago and Tokyo's Narita airport. "Asia-Pacific flights are the jewel in United's crown, and if they're not working for them, they're in deep doo-doo," Michael Roach of consulting firm Roach & Sbarra in San Francisco, told Bloomberg. "Their strategy is dependent on high- priced business, and it seems they're not doing so well at that." United spokesman Jeff Kovick confirmed to Bloomberg that United will end flights to Fort Lauderdale and West Palm Beach effective on September 2. United is set to announce more schedule changes in the coming days, Mr. Kovick says. United Defers Moscow Maiden Flight United Airlines asked the Department of Transportation in Illinois to defer the debut of the flights between Washington- Dulles airport and Moscow, from October 2008 to March 29, 2009, The Associated Press reports. United cites skyrocketing oil prices as the reason for the postponement, AP discloses. United intends to offer the flight when demand would be higher, considering that fuel costs increased by more than 20% since the carrier first applied for the route, AP notes. About UAL Corporation Based in Chicago, Illinois, UAL Corporation (NASDAQ: UAUA) -- http://www.united.com/-- is the holding company for United Airlines, Inc. United Airlines is the world's second largest air carrier. The airline flies to Brazil, Korea and Germany. The company filed for chapter 11 protection on Dec. 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represented the Debtors in their restructuring efforts. Fruman Jacobson, Esq., at Sonnenschein Nath & Rosenthal LLP represented the Official Committee of Unsecured Creditors before the Committee was dissolved when the Debtors emerged from bankruptcy. Judge Eugene R. Wedoff confirmed the Debtors' Second Amended Plan on Jan. 20, 2006. The company emerged from bankruptcy protection on Feb. 1, 2006. (United Airlines Bankruptcy News, Issue No. 161; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) * * * The Troubled Company Reporter said on June 2, 2008, that Fitch Ratings has revised the Rating Outlook for UAL Corp. and its principal operating subsidiary United Airlines, Inc. to Negative from Stable. Debt ratings for both entities have been affirmed as: UAL & United Issuer Default Ratings at 'B-'; United's secured bank credit facility (Term Loan and Revolving Credit Facility) at 'BB-/RR1'; and Senior unsecured rating for United at 'CCC/RR6'. The TCR said on July 22, 2008, that Moody's Investors Service lowered the Corporate Family and Probability of Default ratings of UAL Corp. (United) to Caa1 from B2, the secured bank debt rating to B3 from B1 and certain tranches of the Enhanced Equipment Trust Certificates (EETC) of United Airlines, Inc. (United Airlines). Moody's affirmed the SGL-3 Speculative Grade Liquidity Assessment. The rating outlook is negative. UAL CORP: Lays Off 485 Jobs From Illinois and Colorado ------------------------------------------------------ United Air Lines, Inc. laid off 335 staff members in mid-June, from its operations in Elk Grove Township, Cook County, Illinois, The Daily Herald reports. Megan McCarthy, United's spokesperson, did not confirm the types of jobs that were eliminated. "The cause is the ever-increasing cost of fuel," Ms. McCarthy told the Daily herald. Meanwhile, United intends to lay off 50 customer service representatives and 100 ramp servicemen in Denver, Kansas.com discloses. About UAL Corporation Based in Chicago, Illinois, UAL Corporation (NASDAQ: UAUA) -- http://www.united.com/-- is the holding company for United Airlines, Inc. United Airlines is the world's second largest air carrier. The airline flies to Brazil, Korea and Germany. The company filed for chapter 11 protection on Dec. 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represented the Debtors in their restructuring efforts. Fruman Jacobson, Esq., at Sonnenschein Nath & Rosenthal LLP represented the Official Committee of Unsecured Creditors before the Committee was dissolved when the Debtors emerged from bankruptcy. Judge Eugene R. Wedoff confirmed the Debtors' Second Amended Plan on Jan. 20, 2006. The company emerged from bankruptcy protection on Feb. 1, 2006. (United Airlines Bankruptcy News, Issue No. 161; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) * * * The Troubled Company Reporter said on June 2, 2008, that Fitch Ratings has revised the Rating Outlook for UAL Corp. and its principal operating subsidiary United Airlines, Inc. to Negative from Stable. Debt ratings for both entities have been affirmed as: UAL & United Issuer Default Ratings at 'B-'; United's secured bank credit facility (Term Loan and Revolving Credit Facility) at 'BB-/RR1'; and Senior unsecured rating for United at 'CCC/RR6'. The TCR said on July 22, 2008, that Moody's Investors Service lowered the Corporate Family and Probability of Default ratings of UAL Corp. (United) to Caa1 from B2, the secured bank debt rating to B3 from B1 and certain tranches of the Enhanced Equipment Trust Certificates (EETC) of United Airlines, Inc. (United Airlines). Moody's affirmed the SGL-3 Speculative Grade Liquidity Assessment. The rating outlook is negative. US AIRWAYS: Moody's Junks Corporate Family Rating; Outlook Neg -------------------------------------------------------------- Moody's Investors Service downgraded the Corporate Family and Probability of Default Ratings of US Airways Group, Inc. to Caa1 from B3 and lowered the ratings of its outstanding corporate debt instruments and certain Enhanced Equipment Trust Certificates (EETC). Moody's lowered the Speculative Grade Liquidity Assessment to SGL-4 from SGL-3. The rating outlook is negative. The rating actions were prompted by the expectation that US Airways' financial performance will remain under pressure and that its liquidity profile could deteriorate as a result of the difficult operating environment facing the U.S. airline industry. Despite the recent moderation in fuel costs, Moody's believes the environment will continue to be characterized by sustained high fuel costs and a weakening domestic economy that precludes adequate pass-thru of rising costs in ticket prices. US Airways reported a net loss (excluding special items) of $101 million for the second quarter of 2008, a sharp decline from a profit of $261 million in 2007, primarily due to the effects of higher fuel costs. Absent a significant improvement in its ability to recover fuel costs in ticket pricing, US Airways will continue to incur losses that will erode its financial profile. Moody's also notes that US Airway's non-fuel costs are higher than those of a number of other domestic airlines partly due to fleet age and the full consolidation of a regional airline subsidiary. The benefits of the merger between US Airways and America West Airlines, which have not yet been fully realized, continue to represent an opportunity for non-fuel cost savings. US Airways has initiated a number of actions to more effectively control costs, including increasing its fuel hedges, planned capacity cuts, workforce reductions, and other changes in its operations. Yet even with these initiatives, a combination of deteriorating economic conditions and sustained high fuel costs are likely to preclude a return of financial metrics supportive of a rating above the Caa range in the near term. Absent an improvement in the operating environment, sustained cash operating losses, in conjunction with scheduled debt maturities and capital expenditures, could cause a material deterioration in the company's cash balance over the coming year. The SGL-4 reflects a weakening liquidity profile. US Airways' $2.8 billion of cash and investments at June 30, 2008 ($2.3 billion of which was unrestricted) provides important near term flexibility, but could erode rapidly over the coming months. The company has financed its 2008 aircraft deliveries and is actively pursuing initiatives to enhance its liquidity through additional financings, sale leaseback transactions and reduced capital spending. Absent full effectiveness of these liquidity initiatives, continuing losses due to sustained high fuel costs could meaningfully decrease the cash balance during the seasonally weaker winter months, when air traffic liability will reverse, and become a use of cash. US Airways' credit card processing banks have a credit card holdback to 25% of unused credit card receivables and under certain circumstances could increase this amount further, which would increase US Airways' cash requirements. As well, the company's term loan facility requires US Airways to maintain unrestricted cash and equivalents of not less than $1.25 billion, with not less than $750 million of that amount held in cash control accounts, which constrains financial flexibility. The rating actions on US Airways' EETCs consider the underlying Corporate Family rating of US Airways, the continuing availability of liquidity facilities to meet interest payments for 18 months in the event of a US Airways default, and the asset values of specific aircraft which comprise the collateral pool for the EETCs. The downgrades on the ratings on the junior certificates of the 1998-1 and 1999-1 EETCs reflect that the aircraft that secure the EETCs are generally older aircraft, which may make their values more susceptible to volatility if current market conditions persist. The negative outlook considers the potential for continued deterioration in US Airways' key credit metrics, such as interest coverage and leverage during 2008, due primarily to high fuel costs and a weak domestic demand environment. Although load factors remain strong, fare increases are unlikely to fully offset the impact of elevated fuel costs. US Airways' plan to reduce capacity in the fall should allow the company to raise fares in the near term but unless fuel costs decline the company is likely to continue to sustain further losses. US Airways' rating could be lowered if the company is unable to reverse operating losses and restore cash flow and financial metrics, or if weak operating conditions or increased holdback requirements from credit card processors further constrain available liquidity. US Airways' rating outlook could be stabilized with sustained increases to revenues or reduced non-fuel costs, or a sustained decline in fuel costs that increases cash flow from operations and enables the company to satisfy maturing debt and capital spending requirements from existing cash reserves and cash from operations. Downgrades: Issuer: Hillsborough County Aviation Authority, FL -- Senior Secured Revenue Bonds, Downgraded to Caa3 from Caa2 Issuer: Indianapolis Airport Authority, IN -- Revenue Bonds, Downgraded to Caa3 from Caa2 Issuer: Phoenix Industrial Development Authority, AZ -- Senior Unsecured Revenue Bonds, Downgraded to Caa3 from Caa2 Issuer: US Airways Group, Inc. -- Probability of Default Rating, Downgraded to Caa1 from B3 -- Speculative Grade Liquidity Rating, Downgraded to SGL-4 from SGL-3 -- Corporate Family Rating, Downgraded to Caa1 from B3 -- Senior Secured Bank Credit Facility, Downgraded to B3 from B2 Issuer: US Airways, Inc. Ser. 1998-1 Pass Through Certificates -- Class C Certificates, Downgraded to Caa1 from B3 Ser. 1999-1 Pass Through Certificates -- Class C Certificates, Downgraded to Caa1 from B3 Headquartered in Tempe, Arizona, US Airways Group, Inc., through its subsidiaries operates the 5th largest airline in the U.S. with service throughout the U.S. as well as Canada, the Caribbean, Latin America and Europe. US CONCRETE: 'B+' Corporate Credit Rating On CreditWatch Negative ----------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings, including its 'B+' corporate credit rating, on ready-mixed concrete producer U.S. Concrete Inc., on CreditWatch with negative implications. The CreditWatch listing follows the company's announcement that as a result of the challenging operating conditions in construction end-markets, its second quarter 2008 earnings would be below prior expectations mainly due to lower ready-mixed concrete volumes across most of the regions it operates. In addition, it is expected that the company's operating performance will continue to be impacted in the near term by lower volumes. "While liquidity is expected to remain sufficient to meet obligations during this period, the company's credit measures will likely deteriorate to a level that would be very aggressive for the current ratings," said credit analyst Thomas Nadramia. In resolving the CreditWatch listing, we will discuss with management its near-term operating expectations and liquidity position. A rating downgrade is not a foregone conclusion. However, if a downgrade is the ultimate conclusion of our review, it will likely be limited to one notch. U.S. ENERGY: Has Until August 22 to File Chapter 11 Plan -------------------------------------------------------- The Hon. Robert D. Drain of the United States Bankruptcy Court for the Southern District of New York extended the exclusive periods of U.S. Energy System Inc. and its debtor-affiliates to: a) file a Chapter 11 plan until Aug. 22, 2008, and b) solicit acceptances of that plan until Oct. 21, 2008. As reported in the Troubled Company Reporter on June 25, 2008, the Debtors originally asked Judge Drain to set Sept. 8, 2008, as the period within which they may file a proposed Chapter 11 plan. The requested extension of time will allow them to bring restructuring negotiations to a conclusion and, eventually, propose and file a confirmable Chapter 11 plans for each of the Debtors. The Debtor will file a request before the Court for approval of a proposed bidding procedures for the sale of the outstanding common stock of Debtors' affiliates, U.S. Energy Biogas Corp., to: a) resolve all of Biogas' secured debt, b) discharge an entire tranche of secured debt owed by U.S. Energy Overseas Investment LLC, a debtor affiliate, and c) provide U.S Energy Systems with sufficient fund to pay the administrative expenses associated with confirmation of a Chapter 11 plan. According to Bloomberg News, lender Silver Point Capital LP is expected to make a bid for the Debtors' Biogas within two weeks. As reported in the Troubled Company Reporter on Aug. 8, 2007, the Debtors executed a letter of intent submitted by Silver Point, to acquire 100% of the common stock of the Debtors' Biogas for $9,000,000. The Debtors said that they have made substantial progress in their Chapter 11 cases They have resolved their corporate governance disputes, established a bar dates in their cases and timely fulfilled statutory requirements attendant to the commencement of their cases. About U.S. Energy Based in Avon, Connecticut, U.S. Energy Systems Inc. (Pink Sheets: USEY) -- http://www.usenergysystems.com/-- owns green power and clean energy and resources. USEY owns and operates energy projects in the United States and United Kingdom that generate electricity, thermal energy and gas production. The company filed for Chapter 11 protection on Jan. 9, 2008 (Bank. S.D.N.Y. Case No. 08-10054). There are 34 affiliates who filed for separate Chapter 11 petitions. Peter S. Partee, Esq., at Hunton & Williams LLP, represents the Debtor in its restructuring efforts. Jefferies & Company, Inc. serves as the company's financial advisor. The Debtor also selected Epiq Bankruptcy Solutions LLC as noticing, claims and balloting agent. The Official Committee of Unsecured Creditors has yet to be appointed in these cases by the U.S. Trustee for Region 2. When the Debtors filed for protection from their creditors, they listed total assets of $258,200,000 and total debts of $175,300,000.US WASHINGTON MUTUAL: $3.3BB Loss Cues Moody's to Review Ratings ------------------------------------------------------------- Moody's Investors Service placed the ratings of Washington Mutual, Inc., having a Baa3 senior unsecured rating, and Washington Mutual Bank, having a C- financial strength rating of, Baa2 long term deposit rating, and Prime-2 short term rating, under review for downgrade. The review follows WaMu's reported $3.3 billion loss for the second quarter of 2008. During its review, Moody's will assess the affect of Wamu's recent and expected operating performance on its financial flexibility. This will include a review of the firm's ability to manage unexpected losses given WaMu's significant asset quality issues and the related provisioning needs. Additionally, Moody's will review WaMu's capital adequacy and contingency funding plans. WaMu's financial flexibility has been reduced due to the significant decline in its market value--it is trading at a substantial discount to book value--and a decline in balances of certain deposit categories in the second quarter of 2008. Moody's believes that it would be expensive, at best, for WaMu to raise new equity capital or issue new debt given the market's current negative opinion of the company. The make whole provision in WaMu's recently issued $7 billion convertible preferred investment contributes significantly to this limited ability to access new equity. Additionally, though liquidity remains sufficient, WaMu experienced some declines in its commercial and brokered institutional deposit balances in the second quarter of 2008. "This reduced financial flexibility makes it more difficult for the company to successfully navigate through unanticipated events," Craig Emrick, Moody's vice president and senior credit officer said . Moody's said that although WaMu's financial flexibility has declined, its liquidity has remained sufficient through the difficult market conditions. At the bank level this has been provided through its core deposit franchise, Federal Home Loan Bank access and limited wholesale funding. At the holding company level, debt maturities in 2008 and 2009 are limited and cash balances (excluding any amounts related to the $7 billion capital raise) are sufficient to cover holding company cash needs through 2009. WaMu's asset quality issues primarily relate to the company's residential mortgage portfolio, but deterioration is also being experienced in the company's credit card portfolio. To establish the necessary provisioning for this asset quality deterioration, Moody's expects WaMu to record sizable quarterly losses through 2009. Although Moody's most recent capital replenishment analysis on WaMu results in the company maintaining regulatory capital ratios above the well capitalized minimums, this analysis is based on several assumptions. The most important of these assumptions is the lifetime loss on WaMu's residential mortgage portfolio. Moody's loss assumption for this portfolio that is incorporated into the rating--currently at $23.6 billion for mortgage loans held for investment--has grown significantly over the previous nine months and has the potential to increase further depending on the actual severity of house price declines and the performance of the U.S. economy. "We believe that WaMu's recent $7 billion capital raise should provide sufficient cushion to absorb the large credit provisions WaMu will be required to take in the coming quarters," Mr. Emrick said. "However, if WaMu's actual losses exceed the assumed losses included in Moody's capital replenishment analysis, or if our other assumptions turn out to be inaccurate, the company could face a capital shortfall and may have limited financial flexibility to offset this." Moody's noted that WaMu has disclosed initiatives to reduce the size of its balance sheet and achieve annualized cost savings of $1.0 billion. If these initiatives are successfully executed they would represent positive developments for the credit profile of WaMu. On Review for Possible Downgrade: Issuer: Bank United -- Subordinate Regular Bond/Debenture, Placed on Review for Possible Downgrade, currently Baa3 Issuer: Providian Capital I -- Preferred Stock Preferred Stock, Placed on Review for Possible Downgrade, currently Ba1 Issuer: Providian Financial Corporation -- Senior Unsecured Conv./Exch. Bond/Debenture, Placed on Review for Possible Downgrade, currently Baa3 Issuer: Washington Mutual Bank -- Bank Financial Strength Rating, Placed on Review for Possible Downgrade, currently C- -- Issuer Rating, Placed on Review for Possible Downgrade, currently Baa2 -- OSO Rating, Placed on Review for Possible Downgrade, currently P-2 -- Deposit Rating, Placed on Review for Possible Downgrade, currently P-2 -- OSO Senior Unsecured OSO Rating, Placed on Review for Possible Downgrade, currently Baa2 -- Multiple Seniority Bank Note Program, Placed on Review for Possible Downgrade, currently Baa3 -- Subordinate Regular Bond/Debenture, Placed on Review for Possible Downgrade, currently Baa3 -- Senior Unsecured Deposit Note/Takedown, Placed on Review for Possible Downgrade, currently Baa2 -- Senior Unsecured Regular Bond/Debenture, Placed on Review for Possible Downgrade, currently Baa2 -- Senior Unsecured Deposit Rating, Placed on Review for Possible Downgrade, currently Baa2 Issuer: Washington Mutual Bank FSB -- Bank Financial Strength Rating, Placed on Review for Possible Downgrade, currently C- -- Issuer Rating, Placed on Review for Possible Downgrade, currently Baa2 -- OSO Rating, Placed on Review for Possible Downgrade, currently P-2 -- Deposit Rating, Placed on Review for Possible Downgrade, currently P-2 -- OSO Senior Unsecured OSO Rating, Placed on Review for Possible Downgrade, currently Baa2 -- Senior Unsecured Deposit Rating, Placed on Review for Possible Downgrade, currently Baa2 Issuer: Washington Mutual Capital I -- Preferred Stock Preferred Stock, Placed on Review for Possible Downgrade, currently Ba1 Issuer: Washington Mutual Capital Trust 2001 -- Preferred Stock Preferred Stock, Placed on Review for Possible Downgrade, currently Ba1 Issuer: Washington Mutual Pfd Funding (Cayman) I Ltd -- Preferred Stock Preferred Stock, Placed on Review for Possible Downgrade, currently Ba2 Issuer: Washington Mutual Preferred Funding Trust I -- Preferred Stock Preferred Stock, Placed on Review for Possible Downgrade, currently Ba2 Issuer: Washington Mutual Preferred Funding Trust II -- Preferred Stock Preferred Stock, Placed on Review for Possible Downgrade, currently Ba2 Issuer: Washington Mutual Preferred Funding Trust III -- Preferred Stock Preferred Stock, Placed on Review for Possible Downgrade, currently Ba2 Issuer: Washington Mutual Preferred Funding Trust IV -- Preferred Stock Preferred Stock, Placed on Review for Possible Downgrade, currently Ba2 Issuer: Washington Mutual, Inc. -- Multiple Seniority Shelf, Placed on Review for Possible Downgrade, currently (P)Ba2 -- Preferred Stock Preferred Stock, Placed on Review for Possible Downgrade, currently Ba2 -- Subordinate Regular Bond/Debenture, Placed on Review for Possible Downgrade, currently Ba1 -- Senior Subordinated Regular Bond/Debenture, Placed on Review for Possible Downgrade, currently Ba1 -- Senior Unsecured Regular Bond/Debenture, Placed on Review for Possible Downgrade, currently Baa3 Outlook Actions: Issuer: Bank United -- Outlook, Changed To Rating Under Review From Stable Issuer: Providian Capital I -- Outlook, Changed To Rating Under Review From Stable Issuer: Providian Financial Corporation -- Outlook, Changed To Rating Under Review From Stable Issuer: Washington Mutual Bank -- Outlook, Changed To Rating Under Review From Stable Issuer: Washington Mutual Bank FSB -- Outlook, Changed To Rating Under Review From Stable Issuer: Washington Mutual Capital I -- Outlook, Changed To Rating Under Review From Stable Issuer: Washington Mutual Capital Trust 2001 -- Outlook, Changed To Rating Under Review From Stable Issuer: Washington Mutual Pfd Funding (Cayman) I Ltd -- Outlook, Changed To Rating Under Review From Stable Issuer: Washington Mutual Preferred Funding Trust I -- Outlook, Changed To Rating Under Review From Stable Issuer: Washington Mutual Preferred Funding Trust II -- Outlook, Changed To Rating Under Review From Stable Issuer: Washington Mutual Preferred Funding Trust III -- Outlook, Changed To Rating Under Review From Stable Issuer: Washington Mutual Preferred Funding Trust IV -- Outlook, Changed To Rating Under Review From Stable Issuer: Washington Mutual, Inc. -- Outlook, Changed To Rating Under Review From Stable Headquartered in Seattle, Washington, Washington Mutual, Inc. reported on June 30, 2008, that its assets were $310 billion. WCI COMMUNITIES: Amends Exchange Offer for $125MM of 4% Sr. Notes ----------------------------------------------------------------- WCI Communities Inc. amended the exchange offer commenced on July 8, 2008 for all of its outstanding $125 million 4% Contingent Convertible Senior Subordinated Notes due 2023. Pursuant to the terms of the amended exchange offer, the company offers to exchange a unit, consisting of $1,000 principal amount of new 17.5% senior secured notes due 2012 and a warrant to purchase 33.7392 shares of its common stock, for each $1,000 principal amount of the company's current Outstanding Notes. The exchange offer will expire at 12:00 midnight EDT on Aug. 4, 2008, unless extended or terminated by the company. Tendered notes may be withdrawn at any time prior to 12:00 midnight on the expiration date. Investors and security holders may obtain the offering memorandum and related materials through the exchange agent for the exchange offer: The Bank of New York Mellon Trust Company NA Attn: David Mauer 101 Barclay Street - 7 East New York, NY 10286 Tel (212) 815-3687 Fax (212) 298-1915 The exchange offer is being made pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended. No commission or other remuneration will be paid or given, directly or indirectly, by WCI for solicitation of acceptance of the exchange offer. The consummation of the exchange offer is subject to certain customary conditions, including a 90% minimum tender condition, which means that at least 90% of the aggregate principal amount outstanding of the notes must have been validly tendered and not withdrawn. The exchange offer is also conditioned on the amendment and restatement of the company's existing credit facilities and issuance of new second lien notes. No assurances can be given that the company will be successful in entering into an amendment and restatement of the company's existing credit facilities or issuing new second lien notes, in each case on satisfactory terms or at all. Subject to applicable law, WCI may, in its sole discretion, waive any condition applicable to the exchange offer or extend or terminate or otherwise amend the exchange offer. A full-text copy of the amendment is available for free at http://ResearchArchives.com/t/s?2fe1 About WCI Communities WCI Communities Inc. (NYSE: WCI) -- http://www.wcicommunities.com/ -- named America's Best Builder in 2004 by the National Association of Home Builders and Builder Magazine, has been creating amenity-rich, master-planned lifestyle communities since 1946. Florida-based WCI caters to primary, retirement, and second-home buyers in Florida, New York, New Jersey, Connecticut, Maryland and Virginia. The company offers traditional and tower home choices with prices from the high-$100,000s to more than $10.0 million and features a wide array of recreational amenities in its communities. In addition to homebuilding, WCI generates revenues from its Prudential Florida WCI Realty Division, and title businesses, and its recreational amenities, as well as through land sales and joint ventures. The company currently owns and controls developable land on which the company plans to build over 15,000 traditional and tower homes. The company operates in three principal business segments: Tower Homebuilding, Traditional Homebuilding, which includes sales of lots, and Real Estate Services, which includes real estate brokerage and title operations. * * * As disclosed in the Troubled Company Reporter on May 23, 2008, Standard & Poor's Ratings Services lowered its corporate credit rating on WCI Communities Inc. to 'CC' from 'CCC'. Concurrently, S&P lowered its ratings on $650 million of subordinated notes to 'C' from 'CC'. The outlook remains negative. WCI Communities Inc. still carries Moody's Investors Service's Caa2 corporate family and Caa3 senior subordinate ratings. Outlook is negative. Going Concern Doubt Ernst & Young LLP, in Miami, Florida, expressed substantial doubt about WCI Communities Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the year ended Dec. 31, 2007. Holders of the company's $125.0 million, 4.0% Contingent Convertible Senior Subordinated Notes due 2023 have an option of requiring the company to repurchase the convertible notes at a price of 100.0% of the principal amount on Aug. 5, 2008. Pursuant to certain amendments in the company's revolving credit facility and Senior Term Loan Agreement, the company will need to have sufficient liquidity after giving effect to, on a pro forma basis, the repurchase of the convertible notes. The company does not anticipate having sufficient liquidity to satisfy bank covenant liquidity tests. If the company is unable to obtain an amendment or waiver, issue exchange securities, or otherwise satisfy its obligations to repurchase the convertible otes, the convertible note holders would have the right to exercise remedies specified in the Indenture, including accelerating the maturity of the convertible notes, which would result in the acceleration of substantially all of the company's other outstanding indebtedness. In addition, if the company is determined to be in default on the convertible notes, it may be prohibited from drawing additional funds under the revolving credit facility, which could impair its ability to maintain sufficient working capital. XERIUM TECH: Names CEO Stephen R. Light as Chairman of the Board ---------------------------------------------------------------- Xerium Technologies Inc.'s board of directors appointed Stephen R. Light, Xerium's president and chief executive officer, as its chairman of the board of directors. The board also has appointed Michael Phillips, who has served as a director since December 1999, to the new position of vice chairman of the board. John S. Thompson, who stepped down after serving as board chairman since July 2004, will continue to serve as a director. "The entire board and I are very grateful to [Mr. Thompson] for his stewardship during times of momentous change and progress, including the IPO, a major debt refinancing, and a smooth transitioning to new leadership," Mr. Light commented. "We look forward to continuing to benefit from [[Mr. Thompson's] wisdom and experience as an active member of our board. All of us at Xerium are fully committed to moving forward with our recently announced strategic repositioning, which calls for us to improve this company's financial strength and operational efficiency to the benefit of our numerous stakeholders, which includes all of our employees, suppliers, customers, and shareholders." Mr. Light joined Xerium as president and CEO, well as a director, in February 2008. Prior to joining Xerium, he completed the turnaround of Flow International Corp., a producer of industrial waterjet cutting and cleaning equipment. Mr. Light also served as president and CEO of OmniQuip Textron, and held senior level management positions at General Electric, Emerson Electric and N.V. Phillips. Mr. Phillips is a partner with private equity firm Apax Partners Beteiligungsberatung GmbH, which is an affiliate of Apax Europe IV GP Co. Ltd., the beneficial owner of approximately 54.3% of the outstanding shares of common stock of Xerium Technologies. Mr. Phillips joined Apax Partners in 1992, he is a member of the Executive Committee and Apax Approval, Investment and Exit Committees and he leads the Munich office. Mr. Thompson has served as a director and chairman of the board since July 2004. He served as chief executive officer of SPS Technologies Inc., a manufacturer of specialty fasteners, assemblies, precision components, metalworking, magnetic products and superalloys listed on the New York Stock Exchange, from April 2002 to December 2003, when he retired. He also served as its president and chief operating officer from October 1999 to March 2002, and as a director from April 2000 to December 2003. About Xerium Technologies Based on Youngsville, North Carolina, Xerium Technologies Inc. (NYSE: XRM) -- http://www.xerium.com/-- manufactures and supplies consumable products used in the production of paper: clothing and roll covers. With 35 manufacturing facilities in 15 countries, including Austria, Brazil and Japan, Xerium Technologies has approximately 3,900 employees. * * * As disclosed in the Troubled Company Reporter on June 9, 2008, Moody's Investors Service revised Xerium Technologies, Inc.'s outlook to positive from negative, upgraded its speculative grade liquidity rating to SGL-3 from SGL-4, and upgraded its probability of default rating to Caa1 from Caa2. As related in the Troubled Company Reporter on June 5, 2008, Standard & Poor's Ratings Services affirmed its ratings on Xerium Technologies Inc., including the 'CCC+' corporate credit rating, and removed them from CreditWatch, where they were originally placed with negative implications on March 19, 2008. At the same time, S&P assigned a positive outlook. XM SATELLITE: Sirius Merger Wins Approval of Two FC Commissioners ----------------------------------------------------------------- The Wall Street Journal reports that three votes have now been cast in the Federal Communications Commission's review of the XM Satellite Radio Holdings Inc. and Sirius Satellite Radio Inc. merger, but the deal is not close to being done. WSJ, citing an FCC official, says Democratic FCC commissioner Michael Copps voted the first vote against the deal. Two other commissioners - chairman Kevin Martin and Robert McDowell - have voted in favor of the merger, WSJ indicates. According to the Journal, Mr. Copps's determination to reject the merger wasn't a surprise; he's been vocal of his objections on media consolidation and the companies weren't counting on getting his approval. The Journal indicates that the decision increases pressure on another FCC commissioner - Republican Deborah Taylor Tate - the only member of the five-person board who remain mum on her views about the deal and whether or not she might approve of it. Another FCC commissioner, Democrat Jonathan Adelstein, laid out his conditions for the companies to get his vote, WSJ adds. The Journal states that these conditions include a six-year price cap for existing customers, interoperable radios that would also receive HD signals from terrestrial radio stations and a 25% set aside of channels for non-commercial and minority-owned radio stations. WSJ, quoting one FCC official, says that very little haggling has been going on about Mr. Adelstein's offer. About SIRIUS Satellite Headquartered in New York, SIRIUS Satellite Radio Inc. (Nasdaq: SIRI) http://www.sirius.com/-- provides satellite radio services in the United States. The company offers over 130 channels to its subscribers 69 channels of 100.0% commercial-free music and 65 channels of sports, news, talk, entertainment, data and weather. Subscribers receive the company's service through SIRIUS radios, which are sold by automakers, consumer electronics retailers, mobile audio dealers and through the company's website. About XM Satellite Radio Headquartered in Washington, D.C., XM Satellite Radio Holdings Inc. (Nasdaq: XMSR) -- http://www.xmradio.com/-- is a satellite radio company. The company broadcasts live daily from studios in Washington, DC, New York City, Chicago, Nashville, Toronto and Montreal. The company also provides satellite-delivered entertainment and data services for the automobile market through partnerships with General Motors, Honda, Hyundai, Nissan, Porsche, Subaru, Suzuki and Toyota. At March 31, 2008, the company's consolidated balance sheet showed $1.7 billion in total assets, $2.7 billion in total liabilities, $60.2 million in minority interest, resulting in a $1.1 billion total stockholders' deficit. * * * As reported in the Troubled Company Reporter on March 28, 2008, Standard & Poor's Ratings Services said its ratings on XM Satellite Radio Holdings Inc. and XM atellite Radio Inc. (CCC+/Watch Developing/--) remain on CreditWatch with developing implications, where S&P originally placed them on March 4, 2008, due to S&P's concerns over standalone refinancing risks XM might face if its merger with Sirius Satellite Radio Inc. (CCC+/Watch Developing/--) wasn't approved. ZVUE CORP: Has Until August 1 to Comply with Nasdaq Listing Rules ----------------------------------------------------------------- ZVUE Corporation received notice from the NASDAQ Stock Market that the company does not meet the independent director and audit committee requirements for continued listing on The Nasdaq Stock Market under Marketplace Rules 4350(c)(1)1 and 4350(d)(2)2. In addition, the company is not eligible for the cure period provided in Marketplace Rule 4350. As a result, Staff is reviewing the company's eligibility for continued listing on The Nasdaq Stock Market. To facilitate this review, NASDAQ has asked the company to provide a specific plan and timetable to achieve compliance with the Rules on or before Aug. 1, 2008. The company is in the process of preparing the requested plan and timetable and expects to meet the Aug. 1, 2008 deadline. ZVUE Corporation, fka HandHeld Entertainment Inc. (NASDAQ: ZVUE) -- http://www.zvue.com/-- is a digital entertainment company. Its ZVUE Network is among the companies providing user- generated video online. ZVUE(TM) personal media players are mass- market priced and available for purchase online and in Wal-Mart and InMotion stores throughout the U.S. and online. Going Concern Doubt March 24, 2008, Salberg & Company P.A., in Boca Raton, Florida, expressed substantial doubt about Handheld Entertainment Inc. nka. Zvue 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 has a net loss of $18,188,833, gross margin of $730,102 and net cash used in operations of $12,156,127 an accumulated deficit of $41,218,007. * Chapter 11 Cases with Assets & Liabilities Below $1,000,000 ------------------------------------------------------------- Recent Chapter 11 cases filed with assets and liabilities below $1,000,000: In Re Global Restaurant Group, L.L.C. dba Crescent Moon Bankr. N.D. Ga. Case No. 08-73037 Chapter 11 Petition filed July 10, 2008 See http://bankrupt.com/misc/ganb08-73037.pdf In Re T.O.T. Gourmet Market & Cafe Corp. Bankr. D. Md. Case No. 08-19150 Chapter 11 Petition filed July 15, 2008 See http://bankrupt.com/misc/mdb08-19150.pdf In Re Colorado Freightways, Inc. Bankr. W.D. Mo. Case No. 08-42834 Chapter 11 Petition filed July 16, 2008 See http://bankrupt.com/misc/mowb08-42834.pdf In Re Investors Property Corp. Bankr. M.D. Fla. Case No. 08-04126 Chapter 11 Petition filed July 16, 2008 Filed as Pro Se In Re Assata Nneka Tate dba Assata's Cafe & Lounge Bankr. N.D. Texas Case No. 08-33417 Chapter 11 Petition filed July 16, 2008 Filed as Pro Se In Re Jason A. Avery aka Norcal Construction Bankr. N.D. Calif. Case No. 08-11413 Chapter 11 Petition filed July 16, 2008 Filed as Pro Se In Re Rodney Reagan Rife Bankr. E.D. Texas Case No. 08-10367 Chapter 11 Petition filed July 16, 2008 See http://bankrupt.com/misc/txeb08-10367.pdf In Re Charles R. DiJulio Bankr. D. Ariz. Case No. 08-08852 Chapter 11 Petition filed July 17, 2008 See http://bankrupt.com/misc/azb08-08852.pdf In Re David Gregg, Sr. & Elizabeth Gregg Bankr. D. Ariz. Case No. 08-08908 Chapter 11 Petition filed July 17, 2008 See http://bankrupt.com/misc/azb08-08908.pdf In Re 535 Third Avenue, LLC Bankr. D. Ariz. Case No. 08-12750 Chapter 11 Petition filed July 17, 2008 See http://bankrupt.com/misc/azb08-12750.pdf In Re Gaiser Heating & Cooling, Inc. Bankr. S.D. Ind. Case No. 08-08492 Chapter 11 Petition filed July 17, 2008 See http://bankrupt.com/misc/insb08-08492.pdf In Re Atlanta Chicken & Biscuit, Inc. Bankr. E.D. Mich. Case No. 08-22076 Chapter 11 Petition filed July 17, 2008 See http://bankrupt.com/misc/mieb08-22076.pdf In Re D&B Properties of Belleville, Inc. aka D.P. Properties of Belleville, Inc. Bankr. E.D. Mich. Case No. 08-57303 Chapter 11 Petition filed July 17, 2008 See http://bankrupt.com/misc/mieb08-57303.pdf n Re J.O.B. Water Street Corp. Bankr. D. N.H. Case No. 08-12009 Chapter 11 Petition filed July 17, 2008 See http://bankrupt.com/misc/nhb08-12009.pdf In Re Country Hearth, Inc. dba Marlybone Pub Bankr. D. N.J. Case No. 08-23417 Chapter 11 Petition filed July 17, 2008 See http://bankrupt.com/misc/njb08-23417.pdf In Re Home Repair Services, LLC Bankr. D. N.J. Case No. 08-23420 Chapter 11 Petition filed July 17, 2008 See http://bankrupt.com/misc/njb08-23420.pdf In Re Julie Dee Torres dba Julia's Cafe Bankr. D. N.M. Case No. 08-12302 Chapter 11 Petition filed July 17, 2008 See http://bankrupt.com/misc/nmb08-12302.pdf In Re Les Poissoniers, Inc. Bankr. S.D. N.Y. Case No. 08-12747 Chapter 11 Petition filed July 17, 2008 See http://bankrupt.com/misc/nysb08-12747.pdf In Re Gary W. Williams & Linda K. Williams Bankr. W.D. Penn. Case No. 08-24668 Chapter 11 Petition filed July 17, 2008 See http://bankrupt.com/misc/pawb08-24668.pdf In Re Vaughan Contracting, Inc. Bankr. W.D. Penn. Case No. 08-24673 Chapter 11 Petition filed July 17, 2008 See http://bankrupt.com/misc/pawb08-24673.pdf In Re Elkview Development, Inc. Bankr. N.D. W.V. Case No. 08-01099 Chapter 11 Petition filed July 17, 2008 Filed as Pro Se In Re Frederick Michael Jarnagin Bankr. D. Ariz. Case No. 08-08956 Chapter 11 Petition filed July 18, 2008 See http://bankrupt.com/misc/azb08-08956.pdf In Re Birmingham Hardwood Imports, Inc. Bankr. E.D. Mich. Case No. 08-57353 Chapter 11 Petition filed July 18, 2008 See http://bankrupt.com/misc/mieb08-57353.pdf In Re Carpenter Lake Development, Inc. dba Double JJ Realty Bankr. W.D. Mich. Case No. 08-06294 Chapter 11 Petition filed July 18, 2008 See http://bankrupt.com/misc/miwb08-06294.pdf In Re Carpenter Ridge, Inc. Bankr. W.D. Mich. Case No. 08-06295 Chapter 11 Petition filed July 18, 2008 See http://bankrupt.com/misc/miwb08-06295.pdf In Re Double J.J. Resort Ranch, Inc. Bankr. W.D. Mich. Case No. 08-06296 Chapter 11 Petition filed July 18, 2008 See http://bankrupt.com/misc/miwb08-06296.pdf In Re American Appaloosas, Inc. Bankr. W.D. Mich. Case No. 08-06298 Chapter 11 Petition filed July 18, 2008 See http://bankrupt.com/misc/miwb08-06298.pdf In Re OUTDOOResources, Inc. Bankr. W.D. Mich. Case No. 08-06299 Chapter 11 Petition filed July 18, 2008 See http://bankrupt.com/misc/miwb08-06299.pdf In Re James D. Bernt dba Critter Bernts Trucking dba Bernt Trucking & Karen A. Bernt Bankr. D. Neb. Case No. 08-41623 Chapter 11 Petition filed July 18, 2008 See http://bankrupt.com/misc/neb08-41623.pdf In Re Robert Deiro & Associates, Inc. dba Deiro Auctioneers Bankr. D. Nev. Case No. 08-17893 Chapter 11 Petition filed July 18, 2008 See http://bankrupt.com/misc/nvb08-17893.pdf In Re Piazza Chiropractic Associates, Ltd. Bankr. E.D. Penn. Case No. 08-14590 Chapter 11 Petition filed July 18, 2008 See http://bankrupt.com/misc/paeb08-14590.pdf In Re Maurice R. Strawn, Jr. Bankr. W.D. Penn. Case No. 08-70785 Chapter 11 Petition filed July 18, 2008 See http://bankrupt.com/misc/pawb08-70785.pdf In Re Samuel Franco Bankr. D. N.J. Case No. 08-23484 Chapter 11 Petition filed July 18, 2008 Filed as Pro Se In Re 531 Franklin Street Revocable Trust Bankr. W.D. N.Y. Case No. 08-13133 Chapter 11 Petition filed July 18, 2008 Filed as Pro Se In Re Daniel J. Moore & Jeannine K. Moore Bankr. W.D. Wash. Case No. 08-43430 Chapter 11 Petition filed July 18, 2008 See http://bankrupt.com/misc/wawb08-43430.pdf In Re Mr. Pizza Man Ocean, L.P. Bankr. N.D. Calif. Case No. 08-31327 Chapter 11 Petition filed July 22, 2008 See http://bankrupt.com/misc/canb08-31327.pdf In Re Boss Group, L.L.C. Bankr. S.D. Fla. Case No. 08-20145 Chapter 11 Petition filed July 22, 2008 See http://bankrupt.com/misc/flsb08-20145.pdf In Re Unicare Home Health, Inc. Bankr. E.D. Mich. Case No. 08-32984 Chapter 11 Petition filed July 22, 2008 See http://bankrupt.com/misc/mieb08-32984.pdf In Re Kelly Shane Cleveland dba Webb City Florist Bankr. W.D. Mo. Case No. 08-30608 Chapter 11 Petition filed July 22, 2008 See http://bankrupt.com/misc/miwb08-30608.pdf In Re Tarver, Inc. Bankr. D. Neb. Case No. 08-81813 Chapter 11 Petition filed July 22, 2008 See http://bankrupt.com/misc/nvb08-81813.pdf In Re Cheryl Armenio-Stazinski Bankr. D. Mass. Case No. 08-15367 Chapter 11 Petition filed July 22, 2008 Filed as Pro Se ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com/ On Thursdays, the TCR delivers a list of recently filed chapter 11 cases involving less than $1,000,000 in assets and liabilities delivered to nation's bankruptcy courts. The list includes links to freely downloadable images of these small-dollar petitions in Acrobat PDF format. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland, USA. Raphael M. Palomino, Shimero R. Jainga, Ronald C. Sy, Joel Anthony G. Lopez, Cecil R. Villacampa, Melanie C. Pador, Ludivino Q. Climaco, Jr., Loyda I. Nartatez, Tara Marie A. Martin, Joseph Medel C. Martirez, Ma. Cristina I. Canson, Christopher G. Patalinghug, and Peter A. Chapman, Editors. Copyright 2008. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $775 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***