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/raid1/www/Hosts/bankrupt/TCR_Public/090130.mbx T R O U B L E D C O M P A N Y R E P O R T E R Friday, January 30, 2009, Vol. 13, No. 29 Headlines 107 ZELZAH: Voluntary Chapter 11 Case Summary ABITIBIBOWATER INC: Names Richard B. Evans as Board Chairman AIRTRAN HOLDINGS: Posts $273.8 Million Full Year 2008 Loss ALLIED CAPITAL: Fitch Downgrades Issuer Default Rating to 'BB' ALLIED CAPITAL: Moody's Downgrades Senior Unsec. Rating to 'Ba2' ALTERNATE FUELS: Case Summary & Five Largest Unsecured Creditors AMCORE FINANCIAL: Weak Asset Quality Cues Fitch's Junk Ratings AMOR DE BRAZIL: Files for Chapter 7 Liquidation AMR CORP: 8 US Airlines Post 2008 Losses Totaling $19.6 Billion ANTARTICA CFO: Moody's Junks Rating on EUR29.250 Mil. Notes ARES VII: Fitch Junks Ratings on $51 Million Class C Notes ATA AIRLINES: To Sell Reagan Airport Slots to Airtran for $1.34MM AVIS BUDGET: Rental Car Rental Industry Also Wants to Access TARP BANK OF AMERICA: Andrew Cuomo to Probe Directors & Shareholders BANKUNITED FSB: Weiss Ratings Assigns "Very Weak" E- Rating BARBARA BAUER: Voluntary Chapter 11 Case Summary BLACK GAMING: Amends Credit Deal, Wells Fargo Forbears Till Feb. BOSTON SCIENTIFIC: Posts $2.43-Bil Net Loss in 4th Quarter 2008 BRIGHAM EXPLORATION: S&P Downgrades Corp. Credit Rating to 'B-' BUDGET TOWING: Voluntary Chapter 11 Case Summary CABLEVISION SYSTEMS: Harbinger Et Al. Disclose Equity Stake CAMPBELL RESOURCES: Files for Bankruptcy Protection in Canada CASCADE GRAIN: Files for Chapter 11 Bankruptcy in Oregon CASCADE GRAIN: Case Summary & 20 Largest Unsecured Creditors CHESAPEAKE ENERGY: Fitch Assigns 'BB' Ratings on Note Offering CHESAPEAKE ENERGY: Moody's Assigns 'Ba3' Rating on $1 Bil. Notes CHESAPEAKE ENERGY: S&P Assigns 'BB' Rating on $500 Mil. Notes CHINA HEALTH: Amends & Restates Lease and Note with Lei Guo CHINA HEALTH: Eight Executives Disclose Equity Stake CIFG ASSURANCE: S&P Raises Ratings on 8 Classes of Notes to 'BB' CITIGROUP INC: Treasury Deal May Further Restrict Operations CLEARPOINT BUSINESS: Interim COO Says Not Owning Equity Stake CLEARPOINT BUSINESS: Taps Brian Delle Donne as Interim COO COLONIAL BANCGROUP: Reports $825 Million 4th Quarter Net Loss COLONIAL BANCGROUP: Fitch Cuts Issuer Default Rating to 'BB' COLONIAL BANCGROUP: Moody's Cuts Bank Strength Rating to 'D' COMSTOCK HOMEBUILDING: Mathis Partners' Bankruptcy Case Dismissed COMSTOCK HOMEBUILDING: Nasdaq Extends Suspension of Trading COMSTOCK HOMEBUILDING: Restructures $13.5-Mil. Penderbrook Debt CONTINENTAL AIRLINES: Posts $585 Million Full Year 2008 Loss CORD BLOOD: Independence Blue Cross Discloses 4.86% Equity Stake CUPERTINO SQUARE: To Seek Plan Confirmation on March 31 DBSI INC: DBSI Landsowne's Voluntary Chapter 11 Case Summary DELTA AIR: Posts $8.9 Billion Full Year 2008 Loss DOT VN INC: Names Kenneth Le as Strategic Advisory Board Member EAD SANTA NELLA: Voluntary Chapter 11 Case Summary EASTMAN KODAK: To Cut Up to 18% of Workforce; Posts $137MM Loss EDGEWATER FOODS: Posts $346,946 Net Loss in Quarter ended Nov. 30 ENTERPRISE RENT-A-CAR: Rental Car Firms Also Want to Access TARP FAIRFAX FINANCIAL: S&P Raises Sr. Unsec. Debt Rating From 'BB+' FANNIE MAE: Eight Officers Dispose of Shares to Pay Taxes FLYING J: Big West to Wind Down Rosedale Highway Operations FORD MOTOR: Posts $5.9BB Net Loss in Quarter ended December 31 GENCORP INC: Board Approves Kathleen Redd's Appointment as CFO GIANT CARPET: Declares Bankruptcy, Lists $5.2MM in Liabilities GOLD & HONEY: Voluntary Chapter 15 Case Summary GOODY'S LLC: Former Worker Sues Co. for Unpaid Wages, Benefits GOTTSCHALK INC: Taps DJM Asset as Real Estate Consultant GOTTSCHALK INC: Taps FD U.S. as Communications Advisor GOTTSCHALK INC: Taps Financo Co. as Investment Banker GEORGIA-PACIFIC LLC: Fitch Affirms Issuer Default Rating to 'B+' GIBRALTAR INDUSTRIES: S&P Downgrades Corp. Credit Rating to 'BB-' GMAC LLC: Moody's Downgrades Ratings on 14 Classes of Securities GMAC LLC: Moody's Takes Rating Actions on Floorplan Notes GUAM POWER: Fitch Affirms 'BB+' Rating on $375 Mil. Notes HERTZ GLOBAL: Rental Car Industry Also Wants Access to TARP HEXION SPECIALTY: Finalizes Severance Agreement With Sarah Coffin HEXION SPECIALTY: Earnings Uncertainty Cues S&P's Junk Rating HINES HORTICULTURE: Court Confirms Black Diamond-Backed Plan HPG INTERNATIONAL: Can Use $1.2 Million BofA Facility on Interim INERGY LP: Moody's Assigns 'B1' Rating on $200 Mil. Senior Notes INERGY LP: S&P Assigns Issue-Level Rating at 'B+' INTERSTATE BAKERIES: GE Capital Facility Reduced by $20 Million IRVINE SENSORS: Files Amendment to Annual Report LANDMARK HOMES: Case Summary & 20 Largest Unsecured Creditors LEAR CORP: Violates Loan Covenant; In Talks with Primary Lenders LEAR CORP: Posts $689.9 Million Net Loss for Full-Year 2008 LEHMAN BROTHERS: Examiner Anton Valukas Begins Investigation LEHMAN BROTHERS: Replaced As Admin. Agent Under Jarden Facility MATHIS PARTNERS: Bankruptcy Case Dismissed; FDIC Assumes Loan MERISANT WORLDWIDE: Taps Blackstone as Financial Advisor MERRILL CORPORATION: S&P Affirms 'B' Corporate Credit Rating MIDLAND FOOD: Reports Dec. Profit, Asks for More Time for Plan MODAVOX INC: Posts $1.2MM Net Loss in Nine Months Ended Nov. 30 MORTGAGES LTD: DS Hearing on Investors Committee Plan Set March 4 MOTOR COACH: Ct. Confirms Plan; FMA Subscribes to Rights Offering NATIONAL HERITAGE: Files for Chapter 11 Bankruptcy Protection NAVISTAR INTERNATIONAL: Harbinger Et Al. Discloses Equity Stake NAVISTAR INTERNATIONAL: OppenheimerFunds Discloses 8.94% Stake NAVISTAR INTERNATIONAL: To Close Indianapolis Engine Plant NEWARK GROUP: Liquidity Pressures Prompt Moody's Junk Ratings NORTEL NETWORKS: Oplink Discloses $805,000 in Receivables NORTEL NETWORKS: Ends Joint Pact with Alvarion for Mobile WiMAX NORTHWEST AIRLINES: Delta Posts $8.9 Billion Full Year 2008 Loss OCEANOGRAFIA SA: Fitch Downgrades Issuer Default Rating to 'B-' PARMALAT SPA: US Court Lets Lawsuit Against Deloitte to Proceed PERFUMANIA HOLDINGS: To Pay Default Interest on $250MM Credit PILGRIM'S PRIDE: Can Hire Baker & McKenzie as Special Counsel PILGRIM'S PRIDE: Files Schedules of Assets and Liabilities PILGRIM'S PRIDE: Gets Go-Signal to Hire Weil Gotshal as Counsel PILGRIM'S PRIDE: Panel Taps Andrews Kurth as Bankruptcy Counsel PILGRIM'S PRIDE: Files Amendment to Annual Report POLAROID CORP: Names Genii as Lead Bidder for Brand & Key Assets POLAROID CORP: Gets Permission to Access Lenders' Cash Collateral PROGRESSIVE GAMING: Enter Into Various Pacts With Private Equity QPC LASERS: Receives Notice of Default from 10% Debenture Holders REGAL ENTERTAINMENT: Moody's Keeps 'Ba3' Corporate Family Rating ROBERT L'ABBATE: Case Summary & Eight Largest Unsecured Creditors ROYCE INTERNATIONAL: Files Bare-Bones Chapter 11 Petition SAFENET INC: S&P Keeps 'B' Corp. Credit Rating; Outlook Positive SEMGROUP LP: J. Catsimatidis May Present Plan by January 31 SEMGROUP LP: Serves Subpoenas to Former Executives SEMGROUP LP: J. Aron to Tender $89.7-Mil. to Bankruptcy Estate SEMGROUP LP: Oklahoma Producers Seek An Accounting of Deliveries SENTINEL MANAGEMENT: Survives BNY Opposition to $500MM Suit SMURFIT-STONE: Seeks March 27 Extension to File Schedules SPARKS REGIONAL: Liquidity Declines Spur Moody's Junk Ratings STAR TRIBUNE: U.S. Trustee Forms 7-Member Creditors Committee SUPERIOR OFFSHORE: Court Confirms Plan, Denies Conversion Motion TALLYGENICOM LP: Taps Donlin Recano as Claims and Noticing Agent THERMADYNE HOLDINGS: Moody's Affirms Corp. Family Rating to 'B3' TOYOTA OF AUGUSTA: Files for Chapter 7 Liquidation TRANSNATIONAL AUTOMOTIVE: Nov. Balance Sheet Upside-Down by $2MM TRIBUNE COMPANY: Fitch Affirms 'D' Issuer Default Rating TUSKEENA OXFORD: Case Summary & 16 Largest Unsecured Creditors TWEETER HOME: Seeks Release of $300,000 Utility Reserve TWEETER OPCO: Gets Permission to Use Lenders' Cash Collateral TWEETER OPCO: Court Rules on Disposition of Leases, Other Assets TWEETER OPCO: Court Sets May 26 As General Claims Bar Date TWEETER OPCO: Sec. 341 Meeting of Creditors Slated for Feb. 25 UAL CORP: 8 US Airlines Post 2008 Losses Totaling $19.6 Billion US AIRWAYS: Posts $2.21 Billion Full Year 2008 Loss VANGENT INC: Moody's Changes Outlook to Negative; Keeps B2 Rating VCSP LLC: Case Summary & 20 Largest Unsecured Creditors VITRO SAB: Not Certain on $45MM Interest Payment Due Feb. 1 WESTAFF INC: Auber Investments Et Al. Disclose 8.98% Equity Stake WESTAFF INC: Negotiating With Koosharem on Acquisition Proposal WHOLE FOODS: FTC Halts AntiTrust Suit to 2007 Wild Oats Buy WIRELESS AGE: Challenge of Subsidiary Receivership Dismissed YELLOWSTONE MOUNTAIN: Pre-Bankruptcy Lenders Want Sale of Assets * SEC Charges ProTrust With TARP Purported Investments Fraud * S&P Updates Its Ratings Criteria On Exchange Offers * Auto Dealers Fear Industry Might Collapse * Gov't Tries to Rescue Financial Institutions & Homebuyers * Investors' Buying Into Junk Bond Deals Eases Funding Concerns * Rental Car Companies Seek Financial Assistance From Gov't * Eight of 9 US Airlines Post 2008 Losses Totaling $19.6 Billion * BOOK REVIEW: Beyond the Quick Fix: Managing Five Tracks To Organizational Success ********* 107 ZELZAH: Voluntary Chapter 11 Case Summary --------------------------------------------- Debtor: 107 Zelzah Inc. 9142 Woodley Ave North Hills, CA 91343 Bankruptcy Case No.: 09-10566 Type of Business: The company is a single asset real estate debtor. Chapter 11 Petition Date: January 20, 2009 Court: United States Bankruptcy Court Central District Of California (San Fernando Valley) Judge: Geraldine Mund Debtor's Counsel: Shawna S. Nazari, Esq. 4854 Van Nuys Blvd Ste 5 Sherman Oaks, CA 91403 Tel: (818) 385-0797 Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $1,000,001 to $10,000,000 A full-text copy of the Debtor's petition, including its largest unsecured creditors, is available for free at: http://bankrupt.com/misc/nysb08-15173.pdf The petition was signed by Reza Safaie, President of the company. ABITIBIBOWATER INC: Names Richard B. Evans as Board Chairman ------------------------------------------------------------ AbitibiBowater Inc. appointed Richard B. Evans to the position of chairman of the board of directors of the company, effective Feb. 1, 2009. Mr. Evans is a director of AbitibiBowater and a member of the board of directors of Rio Tinto plc and Rio Tinto Ltd. He has disclosed his retirement from the Rio Tinto Boards, effective in April. Additionally, Mr. Evans is chief executive of Rio Tinto Alcan until Feb. 1, 2009, when he will retire from this role. He is the former CEO of Alcan Inc., chairman of the board of the International Aluminium Institute and past Chairman of the U.S. Aluminum Association, and a director of the Canadian Council of Chief Executives. A graduate of Oregon State University with a Bachelor's degree in engineering, he also holds a Master's in management from the Stanford University Graduate School of Business. Mr. Evans and his wife have been residents of Montreal, Canada since 2001. "We are fortunate to have someone of the calibre of Dick Evans to assume the Chairmanship of AbitibiBowater," stated David J. Paterson, president and chief executive officer. "As we continue our work to better position the Company, we will benefit from [Mr. Evans'] extensive experience and business insight." The company also disclosed that John W. Weaver has resigned as non-executive chair of AbitibiBowater, effective Feb. 1, 2009. To permit an orderly transition, he will remain as a director but will not stand for re-election at the company's next Annual Stockholders' Meeting. Mr. Weaver was president and CEO of Abitibi-Consolidated Inc. from 1999-2007, prior to being appointed executive chairman of AbitibiBowater in October 2007. "[Mr. Weaver] is an industry leader and has always worked diligently to manage through challenging times," Mr. Paterson commented. "He was instrumental in the creation of AbitibiBowater, and on behalf of all company stakeholders, I wish [Mr. Weaver] the very best and thank him for his invaluable dedication and contributions." Additionally, Gordon D. Giffin will retire from the board of directors, effective immediately. Mr. Giffin has served on the company's Audit, and Environment, Health and Safety committees. He is a senior partner with the law firm McKenna, Long & Aldridge LLP. "I would also like to extend my thanks and appreciation to Gordon for his wise counsel and support," stated Mr. Paterson. About AbitibiBowater Inc. Headquartered in Montreal, Canada, AbitibiBowater Inc. -- http://www.abitibibowater.com/-- produces a wide range of newsprint, commercial printing papers, market pulp and wood products. It is the eighth largest publicly traded pulp and paper manufacturer in the world. AbitibiBowater owns or operates 27 pulp and paper facilities and 34 wood products facilities located in the United States, Canada, the United Kingdom and South Korea. Marketing its products in more than 90 countries, the company is also among the world's largest recyclers of old newspapers and magazines, and has more third-party certified sustainable forest land than any other company in the world. AbitibiBowater's shares trade under the stock symbol ABH on both the New York Stock Exchange and the Toronto Stock Exchange. As reported in the Troubled Company Reporter on Nov. 13, 2008, AbitibiBowater Inc. reported a net loss of US$302 million on sales of US$1.7 billion for the third quarter 2008. These results compare with a net loss of US$142 million on sales of US$815 million for the third quarter of 2007, which consisted only of Bowater Incorporated. The company's 2008 third quarter results reflect the full quarter results for Abitibi-Consolidated Inc. and Bowater Incorporated as a combined company after their combination on Oct. 29, 2007. As reported by the Troubled Company Reporter on Jan. 23, 2009, AbitibiBowater Inc. and its subsidiaries Abitibi- Consolidated Inc. and Bowater Inc. received on January 20 two-notch downgrades from Moody's Investors Service that took the rating one step lower than the demotions issued in December by Standard & Poor's, Bloomberg's Bill Rochelle notes. As reported by yesterday's Troubled Company Reporter, Moody's Investors Service downgraded the corporate family rating of AbitibiBowater Inc.'s subsidiaries Abitibi-Consolidated Inc. and Bowater Incorporated to Caa3 from Caa1. The rating action, according to Moody's, was prompted by AbitibiBowater's weakened liquidity position and the deteriorating economic and industry conditions. "The Caa3 corporate family ratings of Abitibi and Bowater reflect a heightened probability of default in the near term given the anticipated challenges of refinancing or paying down their significant short term debt obligations through asset sales, either of which may prove to be difficult in the current market environment." The ratings of both Abitibi and Bowater also reflect the accelerating decline in demand for newsprint and other paper grades manufactured by both companies as consumers continue to migrate to online news and other forms of electronic media. AIRTRAN HOLDINGS: Posts $273.8 Million Full Year 2008 Loss ---------------------------------------------------------- Eight of the nine major U.S. airlines that have disclosed fourth quarter and full year 2008 results have posted losses aggregating $19.6 billion. Only Southwest Airlines posted a net profit. Net Profit Net Profit Full Year 2008 Full Year 2007 -------------- -------------- Delta Air Lines, Inc. ($8,900,000,000) $1,600,000,000 AMR Corp. (2,100,000,000) 504,000,000 Southwest Air Lines 178,000,000 645,000,000 UAL Corp. (5,348,000,000) 403,000,000 US Airways Group Inc. (2,210,000,000) 427,000,000 Continental Airlines Inc. (585,000,000) 459,000,000 Alaska Air Group Inc. (135,900,000) 124,300,000 Skywest Inc. -- -- JetBlue Airways Corp. (76,000,000) 41,000,000 AirTran Holdings, Inc. (273,829,000) 52,683,000 Skywest is expected to release its fourth quarter 2008 results on February 11. The figures provided by JetBlue were pre-tax profit (or losses). Net Profit Net Profit 4th Quarter '08 4th Quarter '07 --------------- --------------- Delta Air Lines, Inc. ($1,400,000,000) ($70,000,000) AMR Corp. (340,000,000) (69,000,000) UAL Corp. (1,303,000,000) (53,000,000) Southwest Airlines (56,000,000) 111,000,000 US Airways (541,000,000) (79,000,000) Continental Airlines (266,000,000) (32,000,000) Alaska Air Group Inc. (75,200,000) (7,400,000) Skywest Inc. -- -- Jetblue Airways Corp. (49,000,000) (3,000,000) AirTran Holdings, Inc. (118,391,000) (2,171,000) High Fuel Jet Prices The airlines said high fuel prices for most of 2008 have contributed to their losses. AMR, the parent of American Airlines, said that historically high and volatile jet fuel prices continued to challenge it in the fourth quarter of 2008. AMR paid $133 million and $2.7 billion more for fuel in the fourth quarter and for all of 2008, respectively, than it would have paid at prevailing prices from the corresponding prior-year periods. Delta faced over $2 billion in increased fuel costs in 2008. While fuel prices dropped in the fourth quarter 2008, Delta paid for high fuel prices due to its fuel hedging contracts. Delta would have reported a $167 million net profit excluding special items in the December 2008 quarter, if fuel had been purchased at market prices. UAL said the historic peak in prices and the impact on hedges driven by the rapid decline resulted in a $2.9 billion increase in cost compared to 2007 fuel prices. UAL recorded $370 million in cash losses on fuel hedges that settled in the quarter, as the recent fall in fuel prices drove losses on hedges put in place earlier in the year to mitigate the steep increase in prices that had occurred in the second and third quarters of 2008. In addition, the company also recorded non-cash, net mark-to-market losses on its fuel hedges of $566 million. US Airways Group Chairman and CEO Doug Parker stated, "Like other airlines that have reported before us, our financial results reflect the staggering increase in fuel prices that we faced throughout most of 2008. In fact, had our 2008 fuel price including realized gains and losses on fuel hedging instruments remained at 2007 levels, the company's fuel expense would have been approximately $1.4 billion lower. Lower Revenues Due to Recession Delta Air Lines, which completed its merger with Northwest Airlines in 2008, said that during the fourth quarter, on a combined basis, passenger revenue fell 1%, or $54 million, compared to the prior year period due to a 4% decline in capacity, partially offset by a 3% increase in unit revenue. These results reflect the weakening of the revenue environment during the quarter caused by the global economic recession. According to UAL, total passenger revenue for the quarter decreased 8.7% year-over- year as consolidated capacity declined 10.6% , consolidated yield increased 2.4% and load factor decreased 0.3 points. Continental Airlines, which have been mentioned in possible merger talks with other U.S. airlines in 2008, said weakening economic conditions and highly volatile fuel prices presented financial challenges for the airline in the fourth quarter 2008. Continental recorded a fourth quarter net loss of $266 million. Dave Barger, JetBlue's CEO, said that while he was appointed to report a loss, he has been satisfied with JetBlue's performance in 2008. "Against the backdrop of record fuel prices and unprecedented economic challenges, we effectively managed our capacity and strengthened our network. We also made significant progress in our efforts to further enhance the JetBlue experience for our customers. JetBlue's industry-leading unit revenue growth throughout the year reflects the outstanding work of our crewmembers. "2008 was an especially tough and challenging year," said Bob Fornaro, AirTran Airways' chairman, president and chief executive officer. "We thank our dedicated, hard-working Crew Members and our loyal customers for helping us overcome the many obstacles we faced in 2008. Our Crew Members continue to strive to provide exceptional customer service, and a high-quality product while offering value to the traveling public. Despite the industry challenge shifting from high oil costs to concerns regarding consumer demand, our 2008 initiatives have us well positioned to return to profitability in 2009." Liquidity, Bankruptcy Concerns Delta, UAL and AirTran said that they have strengthened their liquidity that would allow them to face the challenges of 2009. Michael Lowry, project manager for AVIATION WEEK's Top- Performing Companies report, said in September 2008 that USAirways, AMR, Northwest Airlines, AirTran and Continental would have high bankruptcy risk in 2009. The September report also said that USAir was a high risk to file for bankruptcy again in 2008 -- it had entered and exited bankruptcy protection twice -- but USAir has been able, so far, to survive the crisis. Only smaller airlines filed for bankruptcy in 2008. These included Frontier Airlines, Skybus Airlines Inc., Aloha Airgroup Inc. and ATA Airlines Inc., who made its second Chapter 11 filing. Northwest Airlines has completed its merger with Delta Air to form one of the world's largest airlines. Delta noted that as of Dec. 31, 2008, it had $6.1 billion in total liquidity and cash collateral posted with hedge counterparties. As of Dec. 31, 2007, Delta had $3.3 billion in cash, cash equivalents and short-term investments. UAL said it completed several transactions during the fourth quarter that helped strengthen its liquidity. It raised $215 million from aircraft financing transactions that closed during the quarter along with $66 million in proceeds from asset sales. The company also received net proceeds of $107 million through equity issuances during the quarter. AirTran noted that it ended the fourth quarter with $340.5 million in unrestricted cash and investments, its highest year-end balance since 2005. 2009 Outlook Most of the airlines expect weak revenues in 2008, but expect those revenues to be offset by lower fuel prices and savings from cost cutting measures. Some of the airlines have also disclosed capacity cuts for 2009. AMR has decided not to use MD-80s to backfill flying associated with the seven 737s that no longer will be delivered in 2009. Largely as a result of this decision, the company's 2009 mainline capacity will decline by more than one percentage point compared to previous guidance provided in October. "Our fourth quarter and full-year 2008 results reflect the difficulties all airlines faced last year, but we believe our steps to reduce capacity, bolster liquidity, and improve revenue helped us better manage the challenges of record fuel prices and a weak economy," said AMR Chairman and CEO Gerard Arpey. "While significant hurdles remain, I am guardedly optimistic we can regain momentum in 2009," Mr. Arpey said. "Despite the difficult economic environment, we expect to be solidly profitable in 2009 driven by lower fuel costs, capacity discipline, and merger synergies," said Richard Anderson, Delta's chief executive officer. "Delta people have a great track record for achieving their goals, and I am confident that 2009 will be another successful year." "Delta's proactive decision to reduce domestic capacity during 2008 mitigated the impact of the decline in demand we saw over the course of the fourth quarter. We expect the worldwide economy to be difficult throughout 2009; however, if fuel prices remain at current levels, we believe the benefit of lower fuel prices will more than offset the revenue decline." said Edward Bastian, Delta's president. "Delta has the tools required to manage through these tough economic times -- with the broadest, most diverse network in the industry; an estimated $2 billion in annual merger synergies to be obtained; best-in-class costs; a solid liquidity balance; unmatched fleet flexibility; and the discipline and drive of the new Delta team." Delta projects that consolidated passenger revenue in 2009 will be down 4% to $4.8 billion. Fuel price will be $2.15 per gallon. During the December 2008 quarter, Delta hedged 58% of its fuel consumption, resulting in an average fuel price of $2.90 per gallon -- included in the fuel price is $507 million in fuel hedge losses in the fourth quarter. In 2007, when Delta paid $2.21 a gallon, it noted that its operating results were significantly impacted by changes in the price and availability of aircraft fuel. In 2007, its average fuel price per gallon rose 5% to $2.21, as compared to an average price of $2.10 in 2006, which was 15% higher than our average price of $1.79 in 2005. UAL believes that for full year 2009 revenues will be down 8% to 7%. United said it is on track to complete the previously announced removal of 100 aircraft from its fleet by the end of 2009. United added it is taking additional steps in 2009 to reduce overhead costs. The company will further reduce the number of salaried and management employees by approximately 1,000 positions by the end of 2009. This is in addition to the 1,500 positions the company announced in the second quarter, and when completed, will bring the total reduction in its salaried and management staff to approximately 2,500, or nearly 30%, since the beginning of 2008. "Last year was by any measure a challenging year -- defined by unprecedented volatility and unpredictability, but for United it was also characterized by steady and durable improvements," said Glenn Tilton, United's chairman, president and CEO. "Our management team made timely decisions that resulted in fundamental improvements across our business, which will hold us in good stead in 2009." Alaska Air Group, which operates Alaska Air and Horizon Air, noted that excluding special items, it had net income of $16.4 million in the 4th quarter of 2008 compared to a $17.9 million net loss in the same period in 2007. "In a year of unprecedented volatility that included soaring fuel prices and an economic meltdown, we were pleased to eke out a small profit for 2008, excluding special items, and be one of only a few major airlines to do so," said Bill Ayer, Alaska Air Group's chairman and chief executive officer. "Our concerted efforts to control costs, improve our operation and tailor our schedule to better match customer demand have prepared us to face whatever hurdles the current year brings." According to Mr. Parker, USAir CEO, measures executed by the airlines before aimed at offsetting high fuel prices in 2008 have significantly softened the blow from the economic downturn that the airline industry now faces. "As we begin the new year, US Airways is well prepared for a difficult global macroeconomic environment. We are running a great operation, have restructured our business model through the introduction of new fees, reduced capacity and increased our liquidity. With the help of falling fuel prices, we believe we are well positioned for the challenges ahead," concluded Mr. Parker. Larry Kellner, Continental's chairman and chief executive officer, said, "While there are continuing hard times ahead, thanks to our team, we are well-positioned to maintain our place as an industry leader." Continental said it will inaugurate daily nonstop service between New York and Shanghai in March 2009. For the full year 2009, JetBlue expects to report an operating margin between 12 and 14%. Capacity, according to JetBlue, for the full year 2009 is expected to decrease between zero and 2% over 2008 and stage length is expected to decrease about 6% over full year 2008. Full Year 2008 Net Profit for Southwest The usually profitable Southwest Airlines also posted a fourth quarter loss -- $56,000,000 net loss. However, Southwest noted that excluding special charges and other items, its fourth quarter 2008 net income was $61 million, bringing it to its 71st consecutive quarter of profitability. Gary C. Kelly, CEO of Southwest, stated: "We are very proud to report another profitable year in one of the most difficult years in aviation's 100-year-plus history. We certainly had our challenges in 2008, but thanks to the extraordinary efforts and Warrior Spirit of our People, we persevered to report our 36th consecutive year of profitability." "We celebrated many operational successes throughout 2008 and enhanced our already exceptional Brand and Customer Experience. With one full year of our new boarding system and Business Select product offering, the Customer response has been overwhelmingly favorable. We've made significant advancements in our revenue management and network optimization capabilities. And, we've made great progress on the technology side to lay the foundation for improved Customer Service, a new southwest.com, a new Rapid Rewards program, and international codeshare agreements with WestJet to Canada and Volaris to Mexico. "Despite the difficult credit markets, we were able to boost our liquidity by $1.1 billion during fourth quarter 2008 through several financing transactions to end the year with $1.8 billion in unrestricted cash and short-term investments. After yearend, we raised an additional $173 million in cash upon the closing of the second tranche of our sale and leaseback transaction for an additional five of our 737-700 aircraft. "Due to the rapid collapse in energy prices during fourth quarter 2008, we substantially reduced our net fuel hedge position to approximately ten percent of our estimated fuel gallons in each year from 2009 through 2013. Based on this current 2009 portfolio and future market prices for energy (as of January 20, 2009), we estimate our economic fuel costs per gallon, including fuel taxes, to be approximately $1.80 and under $1.90, for first quarter and full year 2009, respectively. This current full year 2009 projection is more than $1 billion lower than we were projecting last summer for 2009. About AirTran Airways AirTran Airways, a subsidiary of AirTran Holdings, Inc. (NYSE: AAI), a Fortune 1000 company, is ranked number one in the 2008 Airline Quality Rating study. The airline offers coast-to-coast flights, North America's newest all-Boeing fleet, friendly service and Business Class and complimentary XM Satellite Radio on every flight. To book a flight, visit http://www.airtran.com. * * * The Troubled Company Reporter said on Aug. 29, 2008, that Standard & Poor's Ratings Services has lowered its ratings on AirTran Holdings Inc., including the corporate credit rating, which it lowered to 'CCC+' from 'B-'. At the same time, S&P removed the ratings from CreditWatch, where they had been placed with negative implications on May 22, 2008. The outlook is stable. About Delta Air Lines With its acquisition of Northwest Airlines, Atlanta, Georgia-based Delta Air Lines (NYSE: DAL) -- http://www.delta.com/or http://www.nwa.com/-- is now the world's largest airline. From its hubs in Atlanta, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-JFK, Salt Lake City and Tokyo-Narita, Delta, its Northwest subsidiary and Delta Connection carriers offer service to more than 376 destinations worldwide in 66 countries and serves more than 170 million passengers each year. Delta's marketing alliances allow customers to earn and redeem either SkyMiles or WorldPerks on more than 16,000 daily flights offered by SkyTeam and other partners. The merger closed on October 29, 2008. Prior to the merger, Delta was the world's second-largest airline in terms of passengers carried and Northwest was the world's fourth largest airline. Northwest and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington, represented the Northwest Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors retained Scott L. Hazan, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C. as its bankruptcy counsel. When the Northwest Debtors filed for bankruptcy, they listed $14.4 billion in total assets and $17.9 billion in total debts. On May 21, 2007, the Court confirmed the Northwest Debtors' amended plan. That amended plan took effect May 31, 2007. (Northwest Airlines Bankruptcy News Issue No. 114; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). Delta 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, represented the Delta Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provided the Delta Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provided 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, served as the Committee's financial advisors. On April 25, 2007, the Court confirmed the Delta 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; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). About United Airlines United Airlines (NASDAQ: UAUA) operates more than 3,000* flights a day on United and United Express to more than 200 U.S. domestic and international destinations from its hubs in Los Angeles, San Francisco, Denver, Chicago and Washington, D.C. With key global air rights in the Asia-Pacific region, Europe and Latin America, United is one of the largest international carriers based in the United States. United also is a founding member of Star Alliance, which provides connections for our customers to 912 destinations in 159 countries worldwide. United's 49,500 employees reside in every U.S. state and in many countries around the world. News releases and other information about United can be found at the company's Web site at united.com. * * * As reported in the Troubled Company Reporter on July 29, 2008, Standard & Poor's Ratings Services lowered its ratings on UAL Corp. and subsidiary United Air Lines Inc. (both rated B- /Negative/--), including lowering the long-term corporate credit ratings on both entities to 'B-' from 'B', and removed the ratings from CreditWatch, where they had been placed with negative implications May 22, 2008, as part of an industrywide review. The outlook is negative. About US Airways US Airways, along with US Airways Shuttle and US Airways Express, operates more than 3,100 flights per day and serves 200 communities in the U.S., Canada, Europe, the Caribbean and Latin America. The airline employs nearly 34,000 aviation professionals worldwide and is a member of the Star Alliance network, which offers our customers more than 16,500 daily flights to 912 destinations in 159 countries worldwide. Travel + Leisure Magazine named US Airways as one of the top-three airlines for 2008 in on- time performance for the year (based on Department of Transportation data for Sept. 1, 2007 through Aug. 31, 2008). And for the tenth consecutive year, the airline received a Diamond Award for maintenance training excellence from the Federal Aviation Administration (FAA) for its Charlotte, North Carolina hub line maintenance facility. For more company information, visit usairways.com. (LCCF) About JetBlue New York-based JetBlue Airways has created a new airline category based on value, service and style. Known for its award-winning service and free TV as much as its low fares, JetBlue is now pleased to offer customers Lots of Legroom and super-spacious Even More Legroom seats. JetBlue introduced complimentary in-flight e- mail and instant messaging services on aircraft "BetaBlue," a first among U.S. domestic airlines. JetBlue is also America's first and only airline to offer its own Customer Bill of Rights, with meaningful and specific compensation for customers inconvenienced by service disruptions within JetBlue's control. Visit www.jetblue.com/promise for details. JetBlue serves 52 cities with 600 daily flights. New service to San Jose, Costa Rica, begins in 2009. With JetBlue, all seats are assigned, all travel is ticketless, all fares are one-way, and an overnight stay is never required. For information or reservations call 1-800- JETBLUE (1-800-538-2583) or visit www.jetblue.com. About Continental Airlines Based in Houston, Texas, Continental Airlines Inc. (NYSE: CAL) -- http://continental.com/-- is the world's fifth largest airline. Continental, together with Continental Express and Continental Connection, has more than 3,000 daily departures throughout the Americas, Europe and Asia, serving 140 domestic and 139 international destinations. More than 550 additional points are served via SkyTeam alliance airlines. With more than 46,000 employees, Continental has hubs serving New York, Houston, Cleveland and Guam, and together with Continental Express, carries approximately 69 million passengers per year. * * * The Troubled Company Reporter said on Aug. 13, 2008, that Standard & Poor's Ratings Services took various actions on its ratings on Continental Airlines Inc. (B/Negative/B-3). S&P affirmed its 'B' long-term corporate credit rating, 'B-3' short-term corporate credit rating, all ratings on unsecured debt and on selected enhanced equipment trust certificates. S&P lowered S&P's ratings on other enhanced equipment trust certificates, particularly those secured by regional jets, and raised other ratings. All ratings were removed from CreditWatch, where they were placed with negative implications May 22, 2008, as part of an industrywide review. The rating outlook is negative. Continental Airlines, Inc. reported a working capital deficit of US$202 million, with current assets of US$4.713 billion and current liabilities of US$4.915 billion. At Dec. 31, 2007, the Company had a positive working capital of US$112 million, with US$4.561 billion in current assets and US$4.449 billion in current liabilities. As of Sept. 30, 2008, the Company had US$2.9 billion in unrestricted cash, cash equivalents and short-term investments, which is US$83 million higher than at Dec. 31, 2007. At Sept. 30, 2008, the Company also had US$164 million of restricted cash, cash equivalents and short-term investments, which is primarily collateral for estimated future workers' compensation claims, credit card processing contracts, letters of credit and performance bonds. Restricted cash, cash equivalents and short- term investments at Dec. 31, 2007, totaled US$179 million. Additionally, the Company held student loan-related auction rate securities reported as long-term investments at Sept. 30, 2008 with a par value of US$147 million and a fair value of US$130 million. ALLIED CAPITAL: Fitch Downgrades Issuer Default Rating to 'BB' -------------------------------------------------------------- Fitch Ratings has downgraded Allied Capital Corporation's Issuer Default Rating and debt ratings: -- Long-term IDR downgraded to 'BB' from 'BBB'; -- Senior unsecured debt downgraded to 'BB' from 'BBB'; and -- Secured debt downgraded to 'BB' from 'BBB'. All ratings are on Rating Watch Negative. Approximately $1.9 billion of debt is affected by these actions. The downgrade reflects the expectation that Allied will be in violation of its 200% asset coverage requirement following the recognition of significant unrealized portfolio depreciation in the fourth quarter of 2008. The reduction in asset coverage will result in a covenant violation on Allied's revolving credit facility and private notes, which will result in an event of default, unless the company can successfully re-negotiate covenants with debt holders. The reduction in asset coverage will also violate Business Development Company requirements, which means that Allied will be unable to borrow additional funds, and dividend declarations will be limited until it is back above 200%. In December 2008, Allied obtained relief on its tangible net worth and interest coverage covenants in exchange for a higher interest yield and a security interest in a large portion of its assets. Allied planned to de-leverage materially in coming quarters in order to build the cushion on its asset coverage ratio, but market events in the 2008 fourth quarter have had a significant affect on portfolio valuation. Should Allied obtain relief from debt holders, Fitch believes the company will be looking to sell assets in order to de-leverage. Proceeds from asset sales are likely to be below management's estimate of intrinsic value given the current environment and Allied's relatively weak bargaining position. Fitch believes this process will take some time to complete, and Allied will be unable to take advantage of attractive investment opportunities should the market begin to turn in 2009. The resolution of the Rating Watch Negative will be driven by Allied's ability to obtain covenant waivers from private debt holders in a timely manner; however, even if successful, the Rating Outlook will likely be Negative given volatile market conditions. Failure to successfully re-negotiate covenants will result in an event of default on private notes and the revolving credit facility and could lead to an acceleration of payments on public notes outstanding. Rating stability will be driven by stabilization of market spreads and valuation multiples, the ability to de-lever in coming quarters in order to obtain compliance with asset coverage, and Allied's ability to access the debt and equity markets to raise capital when market conditions improve. ALLIED CAPITAL: Moody's Downgrades Senior Unsec. Rating to 'Ba2' ---------------------------------------------------------------- Moody's Investors Service downgraded Allied Capital Corporation's senior unsecured rating to Ba2 and placed its ratings under review for further downgrade. The downgrade and review for downgrade follows Allied's announcement of potential covenant violations in its private notes and revolving credit facility which could accelerate maturity of these obligations if forbearance is not provided by the lenders under these agreements. Allied does not have alternative liquidity sources to service acceleration of these debts, however Moody's believe it is likely the company will receive some form of forbearance, at least temporarily, in relation to these violations. This is the second time in the past quarter Allied has needed to seek amendments to these agreements. Although Allied may be successful in obtaining additional amendments, this announcement signals that the company's business model carries significant event risk in times of economic stress. "Moody's believes Allied's business model characteristics -- highly levered and illiquid investments, exposure to market-to-market accounting and an inability to retain capital due to dividend requirements - are inconsistent with an investment grade rating," said Moody's Vice President and Senior Credit Officer Craig Emrick. Allied announced that it believes its asset coverage ratio (the ratio of assets to debt) will be less than 200% at December 31, 2008 and that it will be unable to complete the process of granting to its private notes and revolving credit facility a first priority lien on its assets by January 30, 2009. Either of these would represent a covenant violation that could accelerate maturity of this debt. At September 30, 2008 approximately $1.1 billion of private notes were outstanding and $170 million drawn on the revolving credit facility. Allied was in danger of violating the minimum net worth covenants in certain of these agreements at the end of third quarter but was able to successfully amend such requirements. However, in the current environment, it is uncertain if Allied will be able to structure a new covenant package that reduces the risk of future covenant violations. Maintenance of a coverage ratio greater than 200% is also required under the terms of Allied's public notes and the Investment Company Act of 1940. However, the consequences of violating these requirement is limited to the company being unable to incur additional indebtedness. Moody's does not believe violations of the covenants in Allied's private notes and revolving credit facility would trigger cross-default in the company's public notes. Allied's announcement that its asset coverage ratio could fall below 200% signals that the company believes they will report a sizeable fourth quarter loss. This would represent Allied's fifth quarterly loss in the past six quarters. Positives to the company's credit quality are 1) its expertise and scale in private equity investing, 2) diversification (both by geography and business sector) and granularity of its investment portfolio, and 3) large equity base as mandated by business development company regulation. During its review, Moody's will focus on the company's ability to renegotiate the covenants in its private notes and revolving credit facility. Additionally, the review will focus on trends in portfolio asset quality in the fourth quarter. The last rating action was on November 10, 2008 when the ratings were downgraded to Baa3 from Baa2 and placed on review for downgrade. Downgrades: Issuer: Allied Capital Corporation -- Issuer Rating, Downgraded to Ba2 from Baa3 -- Senior Unsecured Regular Bond/Debenture, Downgraded to Ba2 from Baa3 -- Senior Unsecured Shelf, Downgraded to (P)Ba2 from (P)Baa3 Allied Capital Corporation is based in Washington DC and reported total assets of $4.6 billion at September 30, 2008. ALTERNATE FUELS: Case Summary & Five Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Alternate Fuels, Inc. 2706 E. 8th Pittsburg, KS 66762 Bankruptcy Case No.: 09-20173 Type of Business: The Debtor engages in surface coal mining. Chapter 11 Petition Date: January 28, 2009 Court: District of Kansas (Kansas City) Debtor's Counsel: Gary H. Hanson, Esq. gary@stumbolaw.com 2887 Macvicar Topeka, KS 66611 Tel: (785) 267-3410 Total Assets: $4,910,807 Total Debts: $10,969,807 The Debtor's Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Travelers Casualty & indemnity contract $1,036,348 Surety Co One Tower Square Hartford, CT 06183 Continental Casualty indemnity contract $998,839 Company 333 S Wabash Ave. Chicago, IL 60685-4107 Beachner indemnity contract $677,250 Construction Company, Inc P.O. Box 128 Sixth and Central St. Paul, KS 66771 State of Missouri $512,209 Missouri Department of Natural Resources John Warmack loan $22,692 The petition was signed by Larry W. Pommier, president. AMCORE FINANCIAL: Weak Asset Quality Cues Fitch's Junk Ratings -------------------------------------------------------------- Fitch Ratings has downgraded these long-term Issuer Default Ratings and Individual Ratings on AMCORE Financial, Inc., and AMCORE Bank, N.A.: AMFI -- Long-term IDR to 'CCC' from 'BB-'; -- Individual to 'E' from 'D'. AMCORE Bank -- Long-term IDR to 'B-' from 'BB'; -- Individual to 'E' from 'C/D'. The rating downgrade reflects AMFI's weak asset quality, pressured capital and parent company liquidity positions, and an increased reliance on wholesale funding. The ratings at the bank and holding company highlight Fitch's view that AMFI is under significant financial pressure. Its financial flexibility is becoming more limited and meaningful actions to address weaknesses highlighted below are likely needed in the near term to avoid further strain. AMFI's level of problem assets deteriorated again during fourth quarter-2008 due to the continued weakening of the economic environment. Nonperforming assets now represent a considerable 75% of equity and reserves. Fitch notes that AMFI has taken several steps to enhance its credit risk management function during the year. Nonetheless, problem assets, including loans 90 days or more past due, have increased to $225 million during 2008, while the reserve for loan losses has increased only $83 million. The trend in and level of problem assets, combined with the weakening economic environment, suggests the potential for elevated credit costs to continue well into 2009. Regulatory capital ratios do not afford much cushion above regulatory well-capitalized guidelines. Although AMFI indicated that the company continues to explore capital raising activities, no assurances can be made during this difficult operating environment. Consequently, additional losses and high loan loss provisioning needs in 2009 will pressure the bank's regulatory and other capital measures. Fitch notes that there are currently numerous government initiatives available to the banking industry providing liquidity and capital. Although the regulatory programs would likely provide relief to AMFI, the government's willingness to provide capital to AMFI is uncertain at this time. The lower rating for the holding company relative to the bank highlights Fitch's view that the more acute and immediate challenges are present at the holding company level. The parent company liquidity profile also remains under strain. With approximately $10 million in cash as of Dec. 31, 2008 and no bank dividend capacity in the foreseeable future, AMFI's ability to meet parent obligations is challenged. AMFI has taken some steps to address this issue and is currently attempting to execute additional actions to enhance parent company flexibility. Fitch also notes that over the past twelve months, AMFI has increased its reliance on wholesale funding. Bank-issued deposit funding was down 18% for the year, while wholesale funding was up 42% during 2008. As of Sept. 30, 2008, AMFI reported $1.1 billion in brokered deposits, or 28% of total deposits. AMFI's ability to issue brokered deposits could become more difficult if the bank falls below well-capitalized status, thereby requiring a waiver from the regulators and less flexibility for AMFI to freely establish interest rates for its deposit products. Fitch has downgraded these ratings: AMFI -- Long-term IDR to 'CCC' from 'BB-'; -- Short-term IDR to 'C' from 'B'; -- Individual to 'E' from 'D'. AMCORE Bank, N.A. -- Long-term IDR to 'B-' from 'BB'; -- Short-term IDR to 'C' from 'B'; -- Individual to 'E' from 'C/D'; -- Long-term deposits to 'B' from 'BB'. In addition, Fitch has affirmed these: AMFI -- Support '5'; -- Support Floor 'NF'. AMCORE Bank, N.A. -- Support '5'; -- Support Floor 'NF'; -- Short-term deposits 'B'. AMOR DE BRAZIL: Files for Chapter 7 Liquidation ----------------------------------------------- Joyce Smith at The Kansas City Star reports that Amor de Brazil of Kansas City LLC has filed for Chapter 7 liquidation in the U.S. Bankruptcy Court in Kansas City, leaving clients holding almost $50,000 in gift certificates. Kansas City Star relates that gift certificate holders are now Amor de Brazil's unsecured creditors. Court documents say that total outstanding gift certificates were more than $48,634. According to Kansas City Star, Amor de Brazil listed $452,056 in assets and $219,760 in liabilities. The report says that Amor de Brazil's gross sales in 2007 were $1.5 million with net losses at $216,641. Kansas City Star states that the Amor de Brazil restaurant at 11920 Metcalf Avenue, Overland Park, closed two weeks ago. Former Kansas City Chiefs football player Neil Smith, who previously ran Copeland's of New Orleans before changing it to Amor de Brazil in 2007, is listed as a guarantor of the lease, while Al Copeland Jr. is listed as manager, according to Kansas City Star. Amor de Brazil of Kansas City LLC is a Brazilian barbecue restaurant that featured a prix-fixe menu offering unlimited helpings of meat roasted over an open flame and carved tableside by gaucho chefs. AMR CORP: 8 US Airlines Post 2008 Losses Totaling $19.6 Billion --------------------------------------------------------------- Eight of the nine major U.S. airlines that have disclosed fourth quarter and full year 2008 results have posted losses aggregating $19.6 billion. Only Southwest Airlines posted a net profit. Net Profit Net Profit Full Year 2008 Full Year 2007 -------------- -------------- Delta Air Lines, Inc. ($8,900,000,000) $1,600,000,000 AMR Corp. (2,100,000,000) 504,000,000 Southwest Air Lines 178,000,000 645,000,000 UAL Corp. (5,348,000,000) 403,000,000 US Airways Group Inc. (2,210,000,000) 427,000,000 Continental Airlines Inc. (585,000,000) 459,000,000 Alaska Air Group Inc. (135,900,000) 124,300,000 Skywest Inc. -- -- JetBlue Airways Corp. (76,000,000) 41,000,000 AirTran Holdings, Inc. (273,829,000) 52,683,000 Skywest is expected to release its fourth quarter 2008 results on February 11. The figures provided by JetBlue were pre-tax profits (or losses). Net Profit Net Profit 4th Quarter '08 4th Quarter '07 --------------- --------------- Delta Air Lines, Inc. ($1,400,000,000) ($70,000,000) AMR Corp. (340,000,000) (69,000,000) UAL Corp. (1,303,000,000) (53,000,000) Southwest Airlines (56,000,000) 111,000,000 US Airways (541,000,000) (79,000,000) Continental Airlines (266,000,000) (32,000,000) Alaska Air Group Inc. (75,200,000) (7,400,000) Skywest Inc. -- -- Jetblue Airways Corp. (49,000,000) (3,000,000) AirTran Holdings, Inc. (118,391,000) (2,171,000) High Fuel Jet Prices The airlines said high fuel prices for most of 2008 have contributed to their losses. AMR, the parent of American Airlines, said that historically high and volatile jet fuel prices continued to challenge it in the fourth quarter of 2008. AMR paid $133 million and $2.7 billion more for fuel in the fourth quarter and for all of 2008, respectively, than it would have paid at prevailing prices from the corresponding prior-year periods. Delta faced over $2 billion in increased fuel costs in 2008. While fuel prices dropped in the fourth quarter 2008, Delta paid for high fuel prices due to its fuel hedging contracts. Delta would have reported a $167 million net profit excluding special items in the December 2008 quarter, if fuel had been purchased at market prices. UAL said the historic peak in prices and the impact on hedges driven by the rapid decline resulted in a $2.9 billion increase in cost compared to 2007 fuel prices. UAL recorded $370 million in cash losses on fuel hedges that settled in the quarter, as the recent fall in fuel prices drove losses on hedges put in place earlier in the year to mitigate the steep increase in prices that had occurred in the second and third quarters of 2008. In addition, the company also recorded non-cash, net mark-to-market losses on its fuel hedges of $566 million. US Airways Group Chairman and CEO Doug Parker stated, "Like other airlines that have reported before us, our financial results reflect the staggering increase in fuel prices that we faced throughout most of 2008. In fact, had our 2008 fuel price including realized gains and losses on fuel hedging instruments remained at 2007 levels, the company's fuel expense would have been approximately $1.4 billion lower. Lower Revenues Due to Recession Delta Air Lines, which completed its merger with Northwest Airlines in 2008, said that during the fourth quarter, on a combined basis, passenger revenue fell 1%, or $54 million, compared to the prior year period due to a 4% decline in capacity, partially offset by a 3% increase in unit revenue. These results reflect the weakening of the revenue environment during the quarter caused by the global economic recession. According to UAL, total passenger revenue for the quarter decreased 8.7% year-over- year as consolidated capacity declined 10.6%, consolidated yield increased 2.4% and load factor decreased 0.3 points. Continental Airlines, which have been mentioned in possible merger talks with other U.S. airlines in 2008, said weakening economic conditions and highly volatile fuel prices presented financial challenges for the airline in the fourth quarter 2008. Continental recorded a fourth quarter net loss of $266 million. Dave Barger, JetBlue's CEO, said that while he was appointed to report a loss, he has been satisfied with JetBlue's performance in 2008. "Against the backdrop of record fuel prices and unprecedented economic challenges, we effectively managed our capacity and strengthened our network. We also made significant progress in our efforts to further enhance the JetBlue experience for our customers. JetBlue's industry-leading unit revenue growth throughout the year reflects the outstanding work of our crewmembers. "2008 was an especially tough and challenging year," said Bob Fornaro, AirTran Airways' chairman, president and chief executive officer. "We thank our dedicated, hard-working Crew Members and our loyal customers for helping us overcome the many obstacles we faced in 2008. Our Crew Members continue to strive to provide exceptional customer service, and a high-quality product while offering value to the traveling public. Despite the industry challenge shifting from high oil costs to concerns regarding consumer demand, our 2008 initiatives have us well positioned to return to profitability in 2009." Liquidity, Bankruptcy Concerns Delta, UAL and AirTran said that they have strengthened their liquidity that would allow them to face the challenges of 2009. Michael Lowry, project manager for AVIATION WEEK's Top- Performing Companies report, said in September 2008 that USAirways, AMR, Northwest Airlines, AirTran and Continental would have high bankruptcy risk in 2009. The September report also said that USAir was a high risk to file for bankruptcy again in 2008 -- it had entered and exited bankruptcy protection twice -- but USAir has been able, so far, to survive the crisis. Only smaller airlines filed for bankruptcy in 2008. These included Frontier Airlines, Skybus Airlines Inc., Aloha Airgroup Inc. and ATA Airlines Inc., who made its second Chapter 11 filing. Northwest Airlines has completed its merger with Delta Air to form one of the world's largest airlines. Delta noted that as of Dec. 31, 2008, it had $6.1 billion in total liquidity and cash collateral posted with hedge counterparties. As of Dec. 31, 2007, Delta had $3.3 billion in cash, cash equivalents and short-term investments. UAL said it completed several transactions during the fourth quarter that helped strengthen its liquidity. It raised $215 million from aircraft financing transactions that closed during the quarter along with $66 million in proceeds from asset sales. The company also received net proceeds of $107 million through equity issuances during the quarter. AirTran noted that it ended the fourth quarter with $340.5 million in unrestricted cash and investments, its highest year-end balance since 2005. 2009 Outlook Most of the airlines expect weak revenues in 2008, but expect those revenues to be offset by lower fuel prices and savings from cost cutting measures. Some of the airlines have also disclosed capacity cuts for 2009. AMR has decided not to use MD-80s to backfill flying associated with the seven 737s that no longer will be delivered in 2009. Largely as a result of this decision, the company's 2009 mainline capacity will decline by more than one percentage point compared to previous guidance provided in October. "Our fourth quarter and full-year 2008 results reflect the difficulties all airlines faced last year, but we believe our steps to reduce capacity, bolster liquidity, and improve revenue helped us better manage the challenges of record fuel prices and a weak economy," said AMR Chairman and CEO Gerard Arpey. "While significant hurdles remain, I am guardedly optimistic we can regain momentum in 2009," Mr. Arpey said. "Despite the difficult economic environment, we expect to be solidly profitable in 2009 driven by lower fuel costs, capacity discipline, and merger synergies," said Richard Anderson, Delta's chief executive officer. "Delta people have a great track record for achieving their goals, and I am confident that 2009 will be another successful year." "Delta's proactive decision to reduce domestic capacity during 2008 mitigated the impact of the decline in demand we saw over the course of the fourth quarter. We expect the worldwide economy to be difficult throughout 2009; however, if fuel prices remain at current levels, we believe the benefit of lower fuel prices will more than offset the revenue decline." said Edward Bastian, Delta's president. "Delta has the tools required to manage through these tough economic times -- with the broadest, most diverse network in the industry; an estimated $2 billion in annual merger synergies to be obtained; best-in-class costs; a solid liquidity balance; unmatched fleet flexibility; and the discipline and drive of the new Delta team." Delta projects that consolidated passenger revenue in 2009 will be down 4% to $4.8 billion. Fuel price will be $2.15 per gallon. During the December 2008 quarter, Delta hedged 58% of its fuel consumption, resulting in an average fuel price of $2.90 per gallon -- included in the fuel price is $507 million in fuel hedge losses in the fourth quarter. In 2007, when Delta paid $2.21 a gallon, it noted that its operating results were significantly impacted by changes in the price and availability of aircraft fuel. In 2007, its average fuel price per gallon rose 5% to $2.21, as compared to an average price of $2.10 in 2006, which was 15% higher than our average price of $1.79 in 2005. UAL believes that for full year 2009 revenues will be down 8% to 7%. United said it is on track to complete the previously announced removal of 100 aircraft from its fleet by the end of 2009. United added it is taking additional steps in 2009 to reduce overhead costs. The company will further reduce the number of salaried and management employees by approximately 1,000 positions by the end of 2009. This is in addition to the 1,500 positions the company announced in the second quarter, and when completed, will bring the total reduction in its salaried and management staff to approximately 2,500, or nearly 30% , since the beginning of 2008. "Last year was by any measure a challenging year -- defined by unprecedented volatility and unpredictability, but for United it was also characterized by steady and durable improvements," said Glenn Tilton, United's chairman, president and CEO. "Our management team made timely decisions that resulted in fundamental improvements across our business, which will hold us in good stead in 2009." Alaska Air Group, which operates Alaska Air and Horizon Air, noted that excluding special items, it had net income of $16.4 million in the 4th quarter of 2008 compared to a $17.9 million net loss in the same period in 2007. "In a year of unprecedented volatility that included soaring fuel prices and an economic meltdown, we were pleased to eke out a small profit for 2008, excluding special items, and be one of only a few major airlines to do so," said Bill Ayer, Alaska Air Group's chairman and chief executive officer. "Our concerted efforts to control costs, improve our operation and tailor our schedule to better match customer demand have prepared us to face whatever hurdles the current year brings." According to Mr. Parker, USAir CEO, measures executed by the airlines before aimed at offsetting high fuel prices in 2008 have significantly softened the blow from the economic downturn that the airline industry now faces. "As we begin the new year, US Airways is well prepared for a difficult global macroeconomic environment. We are running a great operation, have restructured our business model through the introduction of new fees, reduced capacity and increased our liquidity. With the help of falling fuel prices, we believe we are well positioned for the challenges ahead," concluded Parker. Larry Kellner, Continental's chairman and chief executive officer, said, "While there are continuing hard times ahead, thanks to our team, we are well-positioned to maintain our place as an industry leader." Continental said it will inaugurate daily nonstop service between New York and Shanghai in March 2009. For the full year 2009, JetBlue expects to report an operating margin between 12 and 14% . Capacity, according to JetBlue, for the full year 2009 is expected to decrease between zero and 2% over 2008 and stage length is expected to decrease about 6% over full year 2008. Full Year 2008 Net Profit for Southwest The usually profitable Southwest Airlines also posted a fourth quarter loss -- $56,000,000 net loss. However, Southwest noted that excluding special charges and other items, its fourth quarter 2008 net income was $61 million, bringing it to its 71st consecutive quarter of profitability. Gary C. Kelly, CEO of Southwest, stated: "We are very proud to report another profitable year in one of the most difficult years in aviation's 100-year-plus history. We certainly had our challenges in 2008, but thanks to the extraordinary efforts and Warrior Spirit of our People, we persevered to report our 36th consecutive year of profitability." "We celebrated many operational successes throughout 2008 and enhanced our already exceptional Brand and Customer Experience. With one full year of our new boarding system and Business Select product offering, the Customer response has been overwhelmingly favorable. We've made significant advancements in our revenue management and network optimization capabilities. And, we've made great progress on the technology side to lay the foundation for improved Customer Service, a new southwest.com, a new Rapid Rewards program, and international codeshare agreements with WestJet to Canada and Volaris to Mexico. "Despite the difficult credit markets, we were able to boost our liquidity by $1.1 billion during fourth quarter 2008 through several financing transactions to end the year with $1.8 billion in unrestricted cash and short-term investments. After yearend, we raised an additional $173 million in cash upon the closing of the second tranche of our sale and leaseback transaction for an additional five of our 737-700 aircraft. "Due to the rapid collapse in energy prices during fourth quarter 2008, we substantially reduced our net fuel hedge position to approximately ten percent of our estimated fuel gallons in each year from 2009 through 2013. Based on this current 2009 portfolio and future market prices for energy (as of January 20, 2009), we estimate our economic fuel costs per gallon, including fuel taxes, to be approximately $1.80 and under $1.90, for first quarter and full year 2009, respectively. This current full year 2009 projection is more than $1 billion lower than we were projecting last summer for 2009. About AirTran Airways AirTran Airways, a subsidiary of AirTran Holdings, Inc. (NYSE: AAI), a Fortune 1000 company, is ranked number one in the 2008 Airline Quality Rating study. The airline offers coast-to-coast flights, North America's newest all-Boeing fleet, friendly service and Business Class and complimentary XM Satellite Radio on every flight. To book a flight, visit http://www.airtran.com. * * * The Troubled Company Reporter said on Aug. 29, 2008, that Standard & Poor's Ratings Services has lowered its ratings on AirTran Holdings Inc., including the corporate credit rating, which it lowered to 'CCC+' from 'B-'. At the same time, S&P removed the ratings from CreditWatch, where they had been placed with negative implications on May 22, 2008. The outlook is stable. About Delta Air Lines With its acquisition of Northwest Airlines, Atlanta, Georgia-based Delta Air Lines (NYSE: DAL) -- http://www.delta.com/or http://www.nwa.com/-- is now the world's largest airline. From its hubs in Atlanta, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-JFK, Salt Lake City and Tokyo-Narita, Delta, its Northwest subsidiary and Delta Connection carriers offer service to more than 376 destinations worldwide in 66 countries and serves more than 170 million passengers each year. Delta's marketing alliances allow customers to earn and redeem either SkyMiles or WorldPerks on more than 16,000 daily flights offered by SkyTeam and other partners. The merger closed on October 29, 2008. Prior to the merger, Delta was the world's second-largest airline in terms of passengers carried and Northwest was the world's fourth largest airline. Northwest and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington, represented the Northwest Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors retained Scott L. Hazan, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C. as its bankruptcy counsel. When the Northwest Debtors filed for bankruptcy, they listed $14.4 billion in total assets and $17.9 billion in total debts. On May 21, 2007, the Court confirmed the Northwest Debtors' amended plan. That amended plan took effect May 31, 2007. (Northwest Airlines Bankruptcy News Issue No. 114; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). Delta 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, represented the Delta Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provided the Delta Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provided 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, served as the Committee's financial advisors. On April 25, 2007, the Court confirmed the Delta 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; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). About United Airlines United Airlines (NASDAQ: UAUA) operates more than 3,000* flights a day on United and United Express to more than 200 U.S. domestic and international destinations from its hubs in Los Angeles, San Francisco, Denver, Chicago and Washington, D.C. With key global air rights in the Asia-Pacific region, Europe and Latin America, United is one of the largest international carriers based in the United States. United also is a founding member of Star Alliance, which provides connections for our customers to 912 destinations in 159 countries worldwide. United's 49,500 employees reside in every U.S. state and in many countries around the world. News releases and other information about United can be found at the company's Web site at united.com. * * * As reported in the Troubled Company Reporter on July 29, 2008, Standard & Poor's Ratings Services lowered its ratings on UAL Corp. and subsidiary United Air Lines Inc. (both rated B- /Negative/--), including lowering the long-term corporate credit ratings on both entities to 'B-' from 'B', and removed the ratings from CreditWatch, where they had been placed with negative implications May 22, 2008, as part of an industrywide review. The outlook is negative. About US Airways US Airways, along with US Airways Shuttle and US Airways Express, operates more than 3,100 flights per day and serves 200 communities in the U.S., Canada, Europe, the Caribbean and Latin America. The airline employs nearly 34,000 aviation professionals worldwide and is a member of the Star Alliance network, which offers our customers more than 16,500 daily flights to 912 destinations in 159 countries worldwide. Travel + Leisure Magazine named US Airways as one of the top-three airlines for 2008 in on- time performance for the year (based on Department of Transportation data for Sept. 1, 2007 through Aug. 31, 2008). And for the tenth consecutive year, the airline received a Diamond Award for maintenance training excellence from the Federal Aviation Administration (FAA) for its Charlotte, North Carolina hub line maintenance facility. For more company information, visit usairways.com. (LCCF) About JetBlue New York-based JetBlue Airways has created a new airline category based on value, service and style. Known for its award-winning service and free TV as much as its low fares, JetBlue is now pleased to offer customers Lots of Legroom and super-spacious Even More Legroom seats. JetBlue introduced complimentary in-flight e- mail and instant messaging services on aircraft "BetaBlue," a first among U.S. domestic airlines. JetBlue is also America's first and only airline to offer its own Customer Bill of Rights, with meaningful and specific compensation for customers inconvenienced by service disruptions within JetBlue's control. Visit www.jetblue.com/promise for details. JetBlue serves 52 cities with 600 daily flights. New service to San Jose, Costa Rica, begins in 2009. With JetBlue, all seats are assigned, all travel is ticketless, all fares are one-way, and an overnight stay is never required. For information or reservations call 1-800- JETBLUE (1-800-538-2583) or visit www.jetblue.com. About Continental Airlines Based in Houston, Texas, Continental Airlines Inc. (NYSE: CAL) -- http://continental.com/-- is the world's fifth largest airline. Continental, together with Continental Express and Continental Connection, has more than 3,000 daily departures throughout the Americas, Europe and Asia, serving 140 domestic and 139 international destinations. More than 550 additional points are served via SkyTeam alliance airlines. With more than 46,000 employees, Continental has hubs serving New York, Houston, Cleveland and Guam, and together with Continental Express, carries approximately 69 million passengers per year. * * * The Troubled Company Reporter said on Aug. 13, 2008, that Standard & Poor's Ratings Services took various actions on its ratings on Continental Airlines Inc. (B/Negative/B-3). S&P affirmed its 'B' long-term corporate credit rating, 'B-3' short-term corporate credit rating, all ratings on unsecured debt and on selected enhanced equipment trust certificates. S&P lowered S&P's ratings on other enhanced equipment trust certificates, particularly those secured by regional jets, and raised other ratings. All ratings were removed from CreditWatch, where they were placed with negative implications May 22, 2008, as part of an industrywide review. The rating outlook is negative. Continental Airlines, Inc. reported a working capital deficit of US$202 million, with current assets of US$4.713 billion and current liabilities of US$4.915 billion. At Dec. 31, 2007, the Company had a positive working capital of US$112 million, with US$4.561 billion in current assets and US$4.449 billion in current liabilities. As of Sept. 30, 2008, the Company had US$2.9 billion in unrestricted cash, cash equivalents and short-term investments, which is US$83 million higher than at Dec. 31, 2007. At Sept. 30, 2008, the Company also had US$164 million of restricted cash, cash equivalents and short-term investments, which is primarily collateral for estimated future workers' compensation claims, credit card processing contracts, letters of credit and performance bonds. Restricted cash, cash equivalents and short- term investments at Dec. 31, 2007, totaled US$179 million. Additionally, the Company held student loan-related auction rate securities reported as long-term investments at Sept. 30, 2008 with a par value of US$147 million and a fair value of US$130 million. ANTARTICA CFO: Moody's Junks Rating on EUR29.250 Mil. Notes ----------------------------------------------------------- Moody's Investors Service announced that it has downgraded these debt securities of Antarctica CFO I Limited: EUR 29,250,000 Class B Deferrable Floating Rate Notes due 2014 -- Current Rating: Ba3, on review for possible downgrade -- Prior Rating: Ba1, on review for possible downgrade EUR 29,250,000 Class C Deferrable Floating Rate Notes due 2014 -- Current Rating: Caa2, on review for possible downgrade -- Prior Rating: B3, on review for possible downgrade Originally rated on 30 July 2007, Antarctica CFO I Limited is a collateralized fund obligation backed by equity interests in a diversified fund of hedge funds. The fund is managed by Antarctica Asset Management Ltd. The last rating action on the affected securities was on December 22, 2008 when several debt tranches were downgraded and all debt tranches remained on review for possible downgrade. The rating actions reflect concern over the vehicle's ability to liquidate portfolio assets under stressed market conditions within the covenanted timeframe. Moody's incorporated an increase in suspensions and gating of redemptions within hedge funds at the underlying portfolio level into its rating analysis. A negative annual drift of 5% was utilized to reflect the recent downward trend in the returns of portfolios of hedge funds. A single factor volatility assumption of 11% was used to simulate the NAV process along with the standard volatility stresses. ARES VII: Fitch Junks Ratings on $51 Million Class C Notes ---------------------------------------------------------- Fitch Ratings downgrades four classes of notes issued by Ares VII, Ltd./Corp. Additionally, Fitch assigns outlooks to three classes. These rating actions are effective immediately: -- $141,248,208 class A-1a downgraded to 'AA' from 'AAA'; Outlook Stable; -- $161,022,957 class A-1b downgraded to 'AA' from 'AAA'; Outlook Stable; -- $36,000,000 class B downgraded to 'BBB' from 'A'; Outlook Stable; -- $51,000,000 class C downgraded to 'CCC' from 'BBB-'. Ares VII is a cash flow collateralized loan obligation that closed in May 2003 and is managed by Ares Management, LLC. Ares VII is currently in its amortization period which began in May 2008. The portfolio is comprised of 85.6% senior secured loans with the remainder of the portfolio being second lien loans. The three largest Fitch industry concentrations in Ares VII are computer & electronics (12.9%), broadcasting & media (12.4%) and health care (10.9%). The downgrades to the classes A-1a, A-1b, B and C notes are the result of negative credit migration in the portfolio. According to the latest trustee report dated Dec. 24, 2008, the average credit quality of the portfolio is 'B/B-' compared to 'B+' at last review in January of 2008. Approximately 11.6% and 34.5% of the portfolio is either on Rating Watch Negative or has a Negative Outlook, respectively, by at least one rating agency. In accordance with Fitch's Corporate CDO criteria, Fitch makes standard adjustments for any names on Rating Watch Negative or Outlook Negative, reducing such ratings for default analysis by two and one notch, respectively. Of the portfolio, 16.5% was rated 'CCC+' or lower as reported by the trustee. Defaulted securities account for 2.8% of the portfolio. As a result of the deterioration in the portfolio, the class C overcollateralization test is failing at 93.4% vs. the threshold of 100.5%. Class C received $19.2 million in additional coupon and participation payments in addition to the stated coupon through the Nov. 12, 2008 distribution date. Due to the current failure of the C OC Test, these distributions in excess of the class C stated coupon which is positioned below the C OC Test cure payments in the interest waterfall have ceased and are unlikely to continue in the future. Since May 2008, the classes A-1a and A-1b paid down $8.8 and $10 million, respectively. While this amortization has improved credit enhancement levels for these classes, the expected losses on defaulted and distressed assets offset this positive development. Furthermore, the pace of the future paydowns is likely to slow as refinancings by the underlying loan obligors is likely to become more challenging. Included in the review, Fitch conducted cash flow modeling to measure the breakeven default rates relative to the cumulative default rates associated with the current ratings of the note liabilities. The cash flow model incorporates the transaction's structural features and updated default timing and interest rate scenarios. The ratings of the classes A-1a and A-1b notes address the likelihood that investors will receive full and timely payments of interest per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the class B and C notes address the likelihood that investors will receive ultimate and compensating interest payments, excluding the class C additional coupon and participation payments, per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. ATA AIRLINES: To Sell Reagan Airport Slots to Airtran for $1.34MM ----------------------------------------------------------------- ATA Airlines Inc., which has sold most of its assets to Southwest Airlines, Inc., seeks approval from the U.S. Bankruptcy Court for the Southern District of Indiana to sell its takeoff and landing operating slots at the Ronald Reagan Airport to AirTran Airways, Inc. for $1.34 million. ATA Airlines disclosed in court papers that it has inked a purchase agreement with AirTran for the acquisition of its two daily takeoff and landing operating slots at the Ronald Reagan Airport for $1.34 million. The airline, however, will offer the slots for public bidding in a move to rake in more profit. The slots are among those assets comprising ATA Airlines' business, which the company previously offered for bidding. However, the letter of intent executed by the airline and Southwest Airlines Co., which submitted the highest offer to acquire the business, excludes the slots as among those assets to be purchased. ATA Airlines subsequently engaged in talks with AirTran for the sale of the slots, which eventually led to the signing of the purchase agreement. Under the deal, ATA Airlines and AirTran agreed that the slots be paid in 17 equal monthly installments of $20,000, with a balloon payment of $1 million due on June 30 next year. The slots will serve as collateral for AirTran's obligation to pay the airline. A full-text copy of the agreement is available for free at: http://bankrupt.com/misc/ATAPurchaseAgreement.pdf ATA Airlines currently leases the airport slots to AirTran at a monthly rent of $20,000. The terms of the lease are set to expire on Dec. 31, 2010. Bidding Procedures ATA Airlines will offer the slots for public bidding in order to maximize their sale price. If the airline receives bids, an auction will be conducted Jan. 28, 2009. The hearing on the proposed sale has also been scheduled for Jan. 28. Interested buyers willing to participate in the auction must submit a bid conforming to these requirements: (1) The competing offer must be submitted in the form of a mark-up of the purchase agreement. The bid must be for all of the slots; bids on individual slots will not be accepted. (2) The competing offer must include a purchase price in an amount not less than $100,000 greater than the purchase price offered by AirTran. (3) Competing offers must be cash offers without any financing contingencies and cannot be subject to further due diligence. (4) Competing offers must be submitted so as to be received by Jan. 26, 2009, at 5:00 p.m. (prevailing eastern time) by mail, hand-delivery, facsimile, or electronic mail to: ATA Airlines, Inc. c/o Haynes and Boone, LLP Attn: Kourtney P. Lyda 1 Houston Center 1221 McKinney Street, Suite 2100 Houston, Texas 77010 Facsimile: (713) 236-5687 Email: kourtney.lyda@haynesboone.com JPMorgan Chase Bank, N.A. c/o Simpson Thacher & Bartlett LLP Attn: Kathrine A. McLendon 425 Lexington Avenue New York, New York 10017 Facsimile: (212) 455-2502 Email: kmclendon@stblaw.com The Official Committee of Unsecured Creditors a c/o Otterbourg, Steindler, Houston & Rosen P.C. 230 Park Avenue New York, New York 10169 Facsimile: (917) 368-7139 Email: ssoll@oshr.com Office of the United States Trustee Attn: Ronald J. Moore 101 West Ohio Street, Suite 1000 Indianapolis, Indiana 46204 Facsimile: (317) 226-6356 Email: ronald.moore@usdoj.gov Bidding at the auction will proceed in minimum bid increments of $100,000. A buyer may submit an incremental bid that is less than $100,000, but only by announcing that the bid is its highest or otherwise best bid and, if topped, that buyer can no longer participate in the auction. Bidding will continue to be in $100,000 minimum bid increments. Subject to court approval, ATA Airlines will announce the buyer that offered the highest bid and the buyer that submitted the next highest bid upon conclusion of the auction. If for any reason the buyer that submitted the highest bid fails to timely consummate the sale, ATA Airlines may consummate the sale to the buyer that has submitted the next highest bid. If ATA Airlines does not receive bids on or before the deadline, the Court may authorize the sale of the slots to AirTran at the hearing. About ATA Airlines Headquartered in Indianapolis, Indiana, ATA Airlines, Inc., was a diversified passenger airline operating in two principal business lines -- a low cost carrier providing scheduled passenger service that leverages a code share agreement with Southwest Airlines; and a charter operator that focused primarily on providing charter service to the U.S. government and military. ATA is a wholly owned subsidiary of New ATA Acquisition, Inc. -- a wholly owned subsidiary of New ATA Investment, Inc., which in turn, is a wholly owned subsidiary of Global Aero Logistics Inc. ATA Acquisition also owns another holding company subsidiary, World Air Holdings, Inc., which it acquired through merger on August 14, 2007. World Air Holdings owns and operates two other airlines, North American Airlines and World Airways. ATA Airlines and its affiliates filed for Chapter 11 protection on Oct. 26, 2004 (Bankr. S.D. Ind. Case Nos. 04-19866, 04-19868 through 04-19874). The Honorable Basil H. Lorch III confirmed the Debtors' plan of reorganization on Jan. 31, 2006. The Debtors' emerged from bankruptcy on Feb. 28, 2006. Global Aero Logistics acquired certain of ATA's operations after its first bankruptcy. The remaining ATA affiliates that were not substantively consolidated in the company's first bankruptcy case were sold or otherwise liquidated. ATA Airlines filed for Chapter 22 on April 2, 2008 (Bankr. S.D. Ind. Case No. 08-03675), citing the unexpected cancellation of a key contract for ATA's military charter business, which made it impossible for ATA to obtain additional capital to sustain its operations or restructure the business. ATA discontinued all operations subsequent to the bankruptcy filing. ATA's Chapter 22 bankruptcy petition lists assets and liabilities each in the range of $100 million to $500 million. The Debtor is represented in its Chapter 22 case by Haynes and Boone, LLP, and Baker & Daniels, LLP, as bankruptcy counsel. The United States Trustee for Region 10 appointed five members to the Official Committee of Unsecured Creditors. Otterbourg, Steindler, Houston & Rosen, P.C., serves as bankruptcy counsel to the Committee. FTI Consulting, Inc., acts as the panel's financial advisors. The Court gave ATA Airlines Inc. until Feb. 26, 2009, to file its Chapter 11 plan and April 27, 2009, to solicit acceptances of that plan. ATA Airlines submitted to the Court its Chapter 11 Plan of Reorganization and accompanying Disclosure Statement on Dec. 12, 2008, two weeks after it completed the sale of its key assets to Southwest Airlines Inc. (ATA Airlines Bankruptcy News; Bankruptcy Creditors' Services Inc. http://bankrupt.com/newsstand/or 215/945-7000). AVIS BUDGET: Rental Car Rental Industry Also Wants to Access TARP ----------------------------------------------------------------- Paulo Prada at The Wall Street Journal reports that Avis Budget Group Inc., Hertz Global Holdings Inc., Enterprise Rent-A-Car Co., and other rental car companies are asking the Congress to let them use Troubled Asset Relief Program funds to finance new auto purchases. WSJ relates that stagnant credit markets, declining demand for travel, and the automobile industry's hardships have made it hard for rental car companies to find buyers for their used automobiles and secure financing to purchase new ones to replace them. According to WSJ, the House of Representatives included a clause in a TARP reform bill that it passed to the Senate last week to give the government the authority to back loans to rental car companies and other fleet purchasers. WSJ states that the rental car industry is the U.S. auto industry's biggest customer, buying as many as 1.8 million new vehicles per year. The report quoted Steven Adamske -- a spokesperson for House Financial Services Committee chairperson Barney Frank -- as saying, "If our desire is to get car buying and credit flowing again, enabling people who buy hundreds of cars at a time is a good way to do it." About Avis Budget Group, Inc. Avis Budget Group (NYSE: CAR) -- www.avisbudgetgroup.com --is a leading provider of vehicle rental services, with operations in more than 70 countries. Through its Avis and Budget brands, the company is the largest general-use vehicle rental company in each of North America, Australia, New Zealand and certain other regions based on published airport statistics. Avis Budget Group is headquartered in Parsippany, N.J. and has more than 28,000 employees. Dow Jones Newswires says that Standard & Poor's Ratings Service and Fitch Ratings both downgraded Avis Budget's credit rating to junk in October 2008, citing long-lasting weakness in the auto industry and refinancing concerns. BANK OF AMERICA: Andrew Cuomo to Probe Directors & Shareholders --------------------------------------------------------------- Susanne Craig at The Wall Street Journal reports that New York Attorney General Andrew Cuomo will expand his probe on the bonuses paid by Merrill Lynch & Co. to shareholders and directors. Citing a person familiar with the matter, WSJ relates that Mr. Cuomo wants to know whether directors and shareholders were misled about huge losses at Merrill Lynch, before its merger with Bank of America. The report states that some Merrill Lynch directors have denied being aware of the losses. According to WSJ, the source said that Mr. Cuomo will question former Merrill Lynch CEO John Thain on what he told Merrill Lynch directors about the losses in December 2008. Mr. Cuomo, says the report, wants to know why Merrill Lynch didn't publicly disclose that its condition was deteriorating. WSJ states that Mr. Cuomo would include BofA Chairperson and CEO Kenneth Lewis in his investigation. WSJ quoted a person familiar with the matter as saying, "We plan to look at the fiduciary duty of these two men [Messrs. Lewis and Thain] and others at various points in this saga. Looking at Bank of America, if they did a bad deal and didn't tell anyone, it not only hurt shareholders, it hurt taxpayers because of the government funding that has been extended to the bank." Mr. Cuomo's office, according to WSJ, is considering remedies like: -- trying to recover bonuses already paid, -- imposing fines, or -- alleging securities-law violations. Mr. Cuomo said in a statement that BofA faces a "$4 billion question" about "why it failed to stop Merrill Lynch from issuing year-end bonuses as it was taking over the company." About Bank of America Bank of America is one of the world's largest financial institutions, serving individual consumers, small and middle market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk- management products and services. The company provides unmatched convenience in the United States, serving more than 59 million consumer and small business relationships with more than 6,100 retail banking offices, nearly 18,700 ATMs and award-winning online banking with nearly 29 million active users. Following the acquisition of Merrill Lynch on January 1, 2009, Bank of America is among the world's leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to more than 4 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients in more than 40 countries. Bank of America Corporation stock is a component of the Dow Jones Industrial Average and is listed on the New York Stock Exchange. BANKUNITED FSB: Weiss Ratings Assigns "Very Weak" E- Rating ----------------------------------------------------------- Weiss Ratings has assigned its E- rating to Coral Gables, Fla.- based UnitedBank, FSB. Weiss says that the institution currently demonstrates what it considers to be significant weaknesses and has also failed some of the basic tests Weiss uses to identify fiscal stability. "Even in a favorable economic environment," Weiss says, "it is our opinion that depositors or creditors could incur significant risks." BankUnited is chartered as a savings association and primarily regulated by the Office of Thrift Supervision. Deposits have been insured by the Federal Deposit Insurance Corporation since Oct. 3, 1984. BankUnited's maintains a Web site at http://www.bankunited.com/and has 86 branches located in Florida. At Sept. 30, 2008, BankUnited disclosed $14.5 billion in assets and $13.6 billion in liabilities in its regulatory filings. BARBARA BAUER: Voluntary Chapter 11 Case Summary ------------------------------------------------ Debtor: Barbara Jean Bauer 4800 Encino Road Encino, CA 91316 Bankruptcy Case No.: 09-10508 Chapter 11 Petition Date: January 20, 2009 Court: United States Bankruptcy Court Central District Of California (San Fernando Valley) Judge: Maureen Tighe Debtor's Counsel: Jerome Bennett Friedman, Esq. 1900 Avenue of the Stars Ste 1800 Los Angeles, CA 90067-4409 Tel: (310) 552-9292 Fax: (310) 552-9291 Email: jfriedman@hkemlaw.com Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $1,000,001 to $10,000,000 The Debtor's Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ American Express - $107,081 Diners Club - 47,333 Rintals, Smoot, Jaenicke & Rees 42,000 The petition was signed by Barbara Jean Bauer. BLACK GAMING: Amends Credit Deal, Wells Fargo Forbears Till Feb. ----------------------------------------------------------------- Black Gaming, LLC, and its subsidiaries and Wells Fargo Foothill, Inc., entered into a First Amendment to Forbearance, Consent and Third Amendment to Credit Agreement. The First Amendment amends the Forbearance, Consent and Third Amendment to Credit Agreement between the Company and Wells Fargo Foothill dated Nov. 3, 2008. Pursuant to the First Amendment, the termination date of the forbearance agreement was extended from Jan. 15, 2009, to Feb. 2, 2009. No other provisions of the Forbearance Agreement were amended, and except as modified by the First Amendment, the terms of the Forbearance Agreement remain in full force and effect in accordance with their respective terms. A full-text copy of the First Amendment Forbearance, Consent And Third Amendment to Credit Agreement is available for free at: http://ResearchArchives.com/t/s?38c2 The Nov. 3, 2008 Forbearance Agreement amended a revolving credit facility provided by Wells Fargo. The Forbearance Agreement provides, among other things, for: 1. The LIBOR Rate Margin has been increased to 5% from 3.50%, and the Base Rate Margin has been increased to 5% from 2%. Therefore, the interest rate premium payable in respect of loans available under the Credit Agreement has been increased accordingly; 2. The minimum EBITDA covenant has been reduced from $15.0 million to $10.0 million for the September 2008 through December 2008 reporting periods; 3. The Borrowing Base multiple has been increased from 1.0x to 1.5x from the execution of the Forbearance Agreement until January 15, 2009; 4. The Company has been allowed to temporarily shut down a currently operating casino during the Forbearance Period Grace Period for Notes Ends Feb. 14 On Jan. 15, 2009, Black Gaming failed to make the $5.625 million interest payment then due to the holders of the $125 million 9.0% Senior Secured Notes due 2012 issued by its subsidiaries Virgin River Casino Corporation, RBG, LLC and B & B B, Inc. The Company is in discussions with an ad hoc committee of holders of the Notes regarding the Company's financial alternatives. Under the terms of the Indenture, dated December 20, 2004, governing the Notes, the Issuers have a grace period of 30 days from the payment due date with respect to the interest payment before the nonpayment becomes an event of default under the Indenture. There is no right to accelerate the obligations under the Notes based on the nonpayment unless interest remains unpaid upon expiration of the grace period. In the event that the interest payment is not made prior to the expiration of the 30-day grace period, then the aggregate principal amount of the Notes, plus the unpaid interest payment and any other amounts due and owing on the Notes could be declared immediately due and payable by the Trustee under the Indenture or by holders of 25% or more of the aggregate principal amount of the Notes. Failure to make the interest payment on the Notes within the 30- day grace period would also constitute an event of default under the $66 million aggregate principal amount of 12.75% Senior Subordinated Discount Notes due 2013 issued by the Issuers. There is no right to accelerate the obligations under the Discount Notes based on the nonpayment of interest on the Notes unless the obligations under the Notes are accelerated prior to their stated maturity. In such event, the aggregate principal amount of the Discount Notes, plus accrued and unpaid interest, if any, and any other amounts due and owing on the Discount Notes could be declared immediately due and payable by the Trustee under the indenture governing the Discount Notes or by holders of 25% or more of the aggregate principal amount of the Discount Notes. Failure to make the interest payment on the Notes within the 30- day grace period would also constitute an event of default under the Wells Fargo Foothill Facility. In the event the interest payment is not made and the Company is unable to obtain a forbearance or waiver under the Credit Agreement, Wells Fargo would be able to declare the Company's obligations under the Credit Agreement immediately due and payable. As of Jan. 15, 2009, the Company's aggregate obligations under the Credit Agreement subject to acceleration were approximately $14.9 million. About Black Gaming, LLC Headquartered in Las Vegas, Nevada, Black Gaming, LLC -- http://www.blackgaming.com/-- through its subsidiaries, engages in the ownership and operation of casino hotels. Its casino properties include CasaBlanca Hotel & Casino, Oasis Hotel & Casino, and Virgin River Hotel & Casino, which are located in Mesquite, Nevada. The company also owns the Virgin River Convention Center in Mesquite, Nevada, which is used as a special events facility and for overflow hotel traffic from its other properties. Black Gaming's properties also offer amenities, including championship golf courses, spas, a bowling center, a movie theater, both gourmet and casual restaurants, and banquet and conference facilities. Founded in 1988, the company has 2,300 employees. At Sept. 30, 2008, the company's balance sheet showed total assets of $166.3 million and total liabilities of $221.4 million, resulting in a members' deficit of $55.1 million. For three months ended Sept. 30, 2008, the company posted net loss of $10.1 million compared with net loss of $7.9 million for the same period in the previous year. For nine months ended Sept. 30, 2008, the company posted a net loss of $34.4 million compared with a net loss of $12.1 million for the same period in the previous year. As of Sept. 30, 2008, and Dec. 31, 2007, cash and cash equivalents were $11.2 million and $9.5 million. Additionally, the Foothill Facility is substantially fully drawn as only approximately $0.2 million was available under the Foothill Facility at Sept. 30, 2008. * * * As reported by the Troubled Company Reporter on Jan. 20, 2009, Moody's Investors Service downgraded Black Gaming LLC's corporate family and probability of default ratings to Ca from Caa3 following the announcement that it did not make the January 15, 2009 scheduled interest payment on its 9% senior secured notes due 2012. Moody's also lowered the ratings for the 9% senior secured notes to Caa3 from Caa2 and the 12.75% senior subordinated notes to C from Ca. The SGL-4 speculative grade liquidity rating was affirmed. The outlook remains negative. BOSTON SCIENTIFIC: Posts $2.43-Bil Net Loss in 4th Quarter 2008 --------------------------------------------------------------- Boston Scientific Corporation has disclosed financial results for the fourth quarter and full year ended December 31, 2008, as well as guidance for net sales and earnings per share for the first quarter of 2009. "During the quarter, we continued to gain share in our cardiac rhythm management and drug-eluting stent businesses, driven by the approval and successful launch of important new products," said Jim Tobin, President and Chief Executive Officer of Boston Scientific. "Throughout the year, we made progress in critical areas across the Company and positioned ourselves well for the future. We've transformed quality, revitalized our pipeline, streamlined the organization, strengthened our financial fundamentals and diversified our product portfolio. We will build on this solid foundation in 2009 and beyond." Fourth Quarter 2008 Net sales for the fourth quarter of 2008 were $2.002 billion, which included sales from divested businesses of $7 million, as compared to net sales of $2.152 billion for the fourth quarter of 2007, which included sales from divested businesses of $145 million. Excluding the impact of foreign currency and sales from divested businesses, net sales increased two percent over the prior period. Despite the company's strong financial performance, changes in CRM market demand since our acquisition of Guidant -- coupled with the recent disruptions in the credit and equity markets -- have caused us to write down $2.7 billion of goodwill associated with the acquisition. This is a non-cash charge that has no impact on our debt covenants. The amount of the charge is subject to finalization during the first quarter of 2009. "This write-down in no way diminishes our confidence in our CRM business," said Mr. Tobin. "CRM is growing, it is taking market share, and it will be a key driver of the company's sales and earnings growth going forward." Reported net loss for the fourth quarter of 2008 was $2.430 billion, or $1.62 per share. Reported results included intangible asset impairments, acquisition-, divestiture-, litigation- and restructuring-related net charges, and amortization expense (after-tax) of $2.750 billion, or $1.83 per share, which consisted of: -- $2.681 billion ($2.689 billion pre-tax) of intangible asset impairment charges, associated primarily with a write-down of goodwill; -- $25 million ($22 million pre-tax) of purchased research and development charges, associated primarily with the company's acquisition of Labcoat, Ltd.; -- $27 million ($34 million pre-tax) of restructuring charges associated with the company's on-going expense and head count reduction initiatives; -- $109 million of discrete tax benefits related to certain tax positions associated with acquisition-, divestiture-, litigation- and restructuring-related charges; and -- $126 million ($134 million pre-tax) of amortization expense. Adjusted net income for the fourth quarter of 2008 excluding these charges was $320 million, or $0.21 per share. Reported net loss for the fourth quarter of 2007 was $458 million, or $0.31 per share. Reported results included intangible asset impairments, acquisition-, divestiture-, litigation- and restructuring-related charges and amortization expense (after-tax) of $813 million, or $0.55 per share. Adjusted net income for the fourth quarter of 2007 excluding these charges was $355 million, or $0.24 per share. Full Year 2008 Net sales for the full year 2008 were $8.050 billion, which included sales from divested businesses of $69 million, as compared to net sales of $8.357 billion in 2007, which included sales from divested businesses of $553 million. Reported net loss for 2008 was $2.072 billion, or $1.38 per share. Reported results for 2008 included intangible asset impairments, acquisition-, divestiture-, litigation- and restructuring-related charges, and amortization expense (after-tax) of $3.289 billion, or $2.19 per share, which consisted of: -- $2.810 billion ($2.844 billion pre-tax) of intangible asset impairment charges, associated primarily with a write-down of goodwill; -- a $184 million gain ($250 million pre-tax) related to the receipt of an acquisition-related milestone payment from Abbott Laboratories; -- $44 million ($43 million pre-tax) of net purchased research and development charges, associated primarily with the company's acquisitions of CryoCor, Inc., and Labcoat, Ltd.; -- $100 million of charges ($133 million pre-tax) associated with the company's ongoing expense and head count reduction initiatives; -- a $185 million gain ($250 million pre-tax), associated with the sale of certain non-strategic businesses; -- $54 million of net losses ($80 million pre-tax) in connection with the sale of the company's non-strategic investments; -- $238 million of litigation-related charges ($334 million pre-tax) resulting primarily from a ruling by a federal judge in a patent infringement case brought against the company by Johnson & Johnson; -- $27 million of discrete tax benefits related to certain tax positions associated with prior period acquisition-, divestiture-, litigation- and restructuring-related charges; and -- $439 million of amortization expense ($543 million pre- tax). Adjusted net income for 2008, excluding these charges, was $1.217 billion, or $0.81 per share. Reported net loss for 2007 was $495 million, or $0.33 per share. Reported results for 2007 included intangible asset impairments, acquisition-, divestiture-, litigation- and restructuring-related charges, and amortization expense (after-tax) of $1.652 billion, or $1.10 per share. Adjusted net income for 2007, excluding these charges was $1.157 billion, or $0.77 per share. Guidance for First Quarter 2009 The company estimates net sales for the first quarter of 2009 of between $1.950 billion and $2.070 billion. Adjusted earnings, excluding acquisition-, divestiture-, litigation- and restructuring-related charges and amortization expense, are estimated to range between $0.15 and $0.20 per share. The company estimates net income on a GAAP basis of between $0.05 and $0.11 per share. BOSTON SCIENTIFIC CORPORATION CONDENSED CONSOLIDATED GAAP RESULTS OF OPERATIONS (Unaudited) Three Months Ended December 31, In millions, except per share data 2008 2007 Net sales $2,002 $2,152 Cost of products sold 630 635 Gross profit 1,372 1,517 Operating expenses: Selling, general and administrative expenses 640 704 Research and development expenses 257 256 Royalty expense 59 51 Amortization expense 134 153 Intangible asset impairments 2,689 21 Purchased research and development 22 13 Loss on assets held for sale 208 Restructuring charges 19 176 Litigation-related charges 365 3,820 1,947 Operating loss (2,448) (430) Other income (expense): Interest expense (107) (137) Other, net (2) (29) Loss before income taxes (2,557) (596) Income tax benefit (127) (138) Net loss $(2,430) $(458) Net loss per common share - basic $(1.62) $(0.31) Net loss per common share - assuming dilution $(1.62) $(0.31) Weighted average shares outstanding -basic 1,501.5 1,490.8 Weighted average shares outstanding - assuming dilution 1,501.5 1,490.8 Year Ended December 31, In millions, except per share data 2008 2007 Net sales $8,050 $8,357 Cost of products sold 2,469 2,342 Gross profit 5,581 6,015 Operating expenses: Selling, general and administrative expenses 2,566 2,909 Research and development expenses 1,006 1,091 Royalty expense 203 202 Amortization expense 543 620 Intangible asset impairments 2,844 21 Acquisition-related milestone (250) Purchased research and development 43 85 Gain on divestitures (250) Loss on assets held for sale 560 Restructuring charges 78 176 Litigation-related charges 334 365 7,117 6,029 Operating loss (1,536) (14) Other income (expense): Interest expense (468) (570) Other, net (58) 15 Loss before income taxes (2,062) (569) Income tax expense (benefit) 10 (74) Net loss $(2,072) $(495) Net loss per common share - basic $(1.38) $(0.33) Net loss per common share - assuming dilution $(1.38) $(0.33) Weighted average shares outstanding - basic 1,498.5 1,486.9 Weighted average shares outstanding - assuming dilution 1,498.5 1,486.9 December 31, In millions 2008 2007 (Unaudited) ASSETS ------ Current assets: Cash and cash equivalents $1,641 $1,452 Trade accounts receivable, net 1,402 1,502 Inventories 853 725 Deferred income taxes 931 679 Assets held for sale 13 1,119 Other current assets 607 464 Total current assets 5,447 5,941 Property, plant and equipment, net 1,728 1,715 Investments 113 317 Other assets 181 157 Intangible assets, net 19,611 23,067 ------- ------- $27,080 $31,197 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt $2 $256 Accounts payable and accrued expenses 2,828 2,680 Liabilities associated with assets held for sale 39 Other current liabilities 380 275 Total current liabilities 3,210 3,250 Long-term debt 6,743 7,933 Deferred income taxes 2,262 2,284 Other long-term liabilities 1,727 2,633 Stockholders' equity 13,138 15,097 ------- ------- $27,080 $31,197 About Boston Scientific Boston Scientific -- http://www.bostonscientific.com/-- is a worldwide developer, manufacturer and marketer of medical devices whose products are used in a broad range of interventional medical specialties. As reported by the Troubled Company Reporter on Oct. 10, 2008, Standard & Poor's Ratings Services said that the U.S. Supreme Court's rejection of an appeal by Boston Scientific Corp. (BB+/Negative/--) regarding the $703 million jury finding (U.S. District Court in Delaware) will have no impact on the rating. Boston Scientific continues to explore other avenues of appeal. In the event that it was unsuccessful, the company had $1.6 billion of cash as of June 30, 2008. The TCR reported on Jan. 27, 2009 that founders of Boston Scientific Corp. disposed of $484 million in shares to repay loans after other assets were frozen by the Lehman Brothers Holdings Inc. bankruptcy. Peter Nicholas, Boston Scientific's chairman and founding chief executive officer, and John Abele, 71, a director and co-founder, have sold almost half their stake, or 4.2 percent of company stock, since Oct. 7. BRIGHAM EXPLORATION: S&P Downgrades Corp. Credit Rating to 'B-' --------------------------------------------------------------- Standard & Poor's Ratings Services said that it lowered its corporate credit rating on Brigham Exploration Co. to 'B-' from 'B'. The outlook is negative. At the same time, Standard & Poor's lowered the issue-level rating on the company's senior unsecured debt to 'CCC+' from 'B-'. The recovery rating remains at '5', indicating modest (10% to 30%) recovery in the event of a payment default. "The downgrade reflects our concerns about falling hydrocarbon prices, and our expectations that Brigham's cash flow, credit metrics, and liquidity will worsen in the near-term," said Standard & Poor's credit analyst Amy Eddy. "In particular, if prices remain low Brigham could face challenges in complying with its minimum interest coverage covenant of 3x." In addition, the company has more than 50% outstanding under its $145 million borrowing-based revolving line of credit. Any reduction to this facility could quickly impair the company's liquidity. As of Sept. 30, 2008, Austin, Texas-based Brigham had $247 million in adjusted total debt. Brigham's vulnerable risk profile incorporates its small, geographically concentrated reserve base of 140.2 billion cubic feet equivalent, a majority of which (76%) is natural gas and more than half (51%) is proved undeveloped. More than 60% of Brigham's production and reserves (87 bcfe) is in the onshore Gulf Coast region. The geographic concentration in this area also results in a short reserve life of slightly more than five years on a proved developed basis. This combination weighs on Brigham's business profile because these assets are fast producing and require constant reinvestment to offset steep decline curves. However, the company balances its Gulf Coast assets with significant reserves in the Anadarko Basin (35 bcfe) and smaller positions in the Rockies (11 bcfe) and West Texas (8 bcfe). Furthermore, Brigham's large percentage of proved undeveloped reserves and considerable acreage in the Williston Basin should provide a source of growth. The negative outlook reflects S&P's expectation that near-term cash flow, credit metrics, and liquidity will be poor based on lower commodity prices. S&P could take further negative rating actions if Brigham's liquidity deteriorates from current levels. BUDGET TOWING: Voluntary Chapter 11 Case Summary ------------------------------------------------ Debtor: Budget Towing Inc. of St. Paul 1145 Homer Street St. Paul, MN 55116 Bankruptcy Case No.: 09-30353 Chapter 11 Petition Date: January 21, 2009 Court: United States Bankruptcy Court District of Minnesota (St. Paul) Judge: Nancy C. Dreher Debtor's Counsel: Thomas Flynn, Esq. Larkin Hoffman Daly & Lindgren 7900 Xerxes Ave. South, Suite 1500 Bloomington, MN 55431 Tel: (952) 896-3362 Email: tflynn@larkinhoffman.com Estimated Assets: $0 to $50,000 Estimated Debts: $1,000,001 to $10,000,000 A full-text copy of the Debtor's petition, including its largest unsecured creditors, is available for free at: http://bankrupt.com/misc/mnb09-30353.pdf The petition was signed by e/Beverly C. Carlson, President of the company. CABLEVISION SYSTEMS: Harbinger Et Al. Disclose Equity Stake ----------------------------------------------------------- Harbinger Capital Partners Master Fund I, Ltd., et al., disclosed in a regulatory filing dated January 28, 2009, that they have reduced their exposure to Cablevision Systems Corp. as part of their ongoing portfolio management and rebalancing. As of January 27, 2009, Harbinger, et al., may be deemed to beneficially own these shares of Cablevision NY Group Class A Common Stock: Shares Beneficially Company Owned Percentage ------- ------------ ---------- Harbinger Capital Partners 10,841,958 4.6% Master Fund I, Ltd. Harbinger Capital Partners 10,841,958 4.6% Offshore Manager, L.L.C. HMC Investors, L.L.C. 10,866,958 4.6% Harbinger Capital Partners 6,621,868 2.8% Special Situations Fund, L.P. Harbinger Capital Partners 6,621,868 2.8% Special Situations GP, LLC HMC - New York, Inc. 6,621,868 2.8% Harbert Management Corporation 6,621,868 2.8% Philip Falcone 17,463,826 7.5% Raymond J. Harbert 17,488,826 7.5% Michael D. Luce 17,488,826 7.5% The percentage is based on the number of outstanding shares -- 233,754,025 -- the company reported as of October 31, 2008. Harbinger Capital Partners Offshore Manager, L.L.C. is the investment manager of Harbinger Capital Partners Master Fund I, Ltd. HMC Investors, L.L.C., is its managing member. HMC - New York, Inc., is the managing member of Harbinger Capital Partners Special Situations GP, LLC, which is the general partner of the Harbinger Capital Partners Special Situations Fund, L.P. Harbert Management Corporation is the parent of HMC - New York, Inc. Philip Falcone is a member of HMC Investors, a shareholder of HMC and the portfolio manager of the Master Fund and the Special Fund. Raymond J. Harbert is also a member of HMC Investors and a shareholder of HMC. Michael D. Luce is a member of HMC Investors and a shareholder of HMC. About Cablevision Systems Corp. Headquartered in Bethpage, New York, Cablevision Systems Corp. (NYSE: CVC) -- is a cable operator in the United States that operates cable programming networks, entertainment businesses and telecommunications companies. Through its wholly owned subsidiary, Rainbow Media Holdings LLC, Cablevision owns interests in and manages numerous national and regional programming networks, the Madison Square Garden sports and entertainment businesses, and cable television advertising sales companies. Through Cablevision Lightpath Inc., its wholly owned subsidiary, the company provides telephone services and Internet access to the business market. At September 30, 2008, the company's consolidated balance sheet showed $9.7 billion in total assets and $14.6 billion in total liabilities, resulting in a $4.9 billion total stockholders' deficit. * * * As disclosed in the Troubled Company Reporter on June 6, 2008, Standard & Poor's Ratings Services affirmed all its ratings, including its 'BB' corporate credit rating, on based Cablevision Systems Corp., a major cable operator in the New York City metropolitan area, and its subsidiaries. The outlook is negative. On June 2, 2008, the TCR reported that Moody's Investors Service assigned a B1 rating to the proposed new $500 million of senior unsecured debt to be issued by Cablevision Systems Corporation's subsidiary CSC Holdings, Inc. Existing ratings for the company and CSC were also affirmed. The rating outlook remains stable. CAMPBELL RESOURCES: Files for Bankruptcy Protection in Canada ------------------------------------------------------------- The Canadian Press reports that Campbell Resources Inc. said that it has filed for court protection from creditors, after financing problems resulted in the shutdown of its Copper Rand mine. Campbell Resources discontinued mining operations at its Copper Rand mine on Dec. 31, 2008. The decision to terminate operations at Copper Rand was originally announced on Sept. 9, 2008. Campbell Resources also suspended its bulk sample exploration program at the Corner Bay property in October 2008 because of extreme difficulties in securing financing in the current marketplace and the decline in copper prices. Manpower resources are being reduced to care and maintenance levels. The superior court in Quebec granted the initial order for bankruptcy protection under the federal Companies' Creditors Arrangement Act, The Canadian Press relates, citing Campbell Resources. Campbell Resources said in a statement that it hasn't decided on a restructuring plan, but the management will provide updates throughout the court-supervised process. Campbell Resources also announced that it is now listed on the NEX under the symbol CCH.H-X. The NEX is a new and separate board of TSX Venture Exchange which provides a trading forum for listed companies that have fallen below TSX Venture's ongoing listing standards. Headquartered in Montreal, Canada, Campbell Resources Inc. (Symbol: CCH) -- http://www.ressourcescampbell.com-- operates a mining company. CASCADE GRAIN: Files for Chapter 11 Bankruptcy in Oregon -------------------------------------------------------- Bloomberg News reports that Cascade Grain Products LLC made a voluntary petition under Chapter 11 in the United States Bankruptcy Court for the District of Oregon. Bloomberg says the company did not disclose events leading to bankruptcy. The company owes about $3.59 million to it unsecured creditors including Gavilon Grain LLC asserted $1.8 million; Northstar Chemical Inc. asserted $570,442; and Novozymes North America Inc. asserted $434,055, court documents shows. The company posted assets and debts between $100 million and $500 million each. Bloomberg relates the company said on Jan. 15, 2009, that its Clatskanie plant will temporarily cease operation but it will continue to operate within a few weeks. Ethanol produces were compelled to cut capacity this month through shutdowns or delays a volatile corn prices curtailed profit, source notes. Ethanol producer Northeast Biofuels LP and its affiliates filed for bankruptcy citing a contractor's inability to deliver a properly operating ethanol plant facility, according to the Troubled Company Reporter on Jan. 15, 2009. About Cascade Grain Headquar Vancouver, Washingto, Cascade Grain Products LLC -- http://www.cascadegrain.com-- is a wholly-owned subsidiary of Berggruen BioFuels Holdings, LLC, a Berggruen Holdings company. CASCADE GRAIN: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: Cascade Grain Products, LLC 8513 NE Hazel Dell Avenue, Suite 201 Vancouver, WA 98665 Bankruptcy Case No.: 09-30508 Type of Business: The Debtor is a wholly-owned subsidiary of Berggruen BioFuels Holdings, LLC, a Berggruen Holdings company. The Debtors was formed in July 1999. The project is fully financed and began construction in Clatskanie, Oregon on the Columbia River in May 2006. The Debtor is a greenfield construction of a 108 MGPY undenatured fuel-grade ethanol plant. It started commercial operation in June 2008. The project is located on a 43.62 acre site in Port Westward. Port Westward is located at the 53 mile marker of the Columbia River and has a 1,200 foot long deep draft dock, giving the Project ready access to both ocean-going and Columbia River barge transportation. The Delta-T/TIC alliance is the project's EPC provider. The Debtor has a business plan which emphasizes close relationships with its suppliers of feedstock for plant operations, its customers, regulatory agencies, and the local community. In addition to Delta-T/TIC, the Debtor's current partners include Gavilon, Land O'Lakes, Eco-Energy, Northwest Natural Gas, and BNSF Railroad. See: http://www.cascadegrain.com/ Chapter 11 Petition Date: January 28, 2009 Court: District of Oregon Judge: Elizabeth L. Perris Debtor's Counsel: Douglas R. Pahl, Esq. dpahl@perkinscoie.com Perkins Coie LLP 1120 NW Couch St., 10th Floor Portland, OR 97209-4128 Tel: (503) 727-2087 Estimated Assets: $100 million to $500 million Estimated Debts: $100 million to $500 million The Debtor's Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Gavilon Grain LLC trade vendor $1,834,182 11 ConAgra Drive, Ste. 5022 Omaha, NE 68102 Tel: (888) 428-8723 Northstar Chemical Inc. trade vendor $570,442 14200 SW Tualatin Sherwood Rd. Sherwood, OR 97140 Tel: (503) 625-3770 Novozymes North America Inc. trade vendor $434,055 77 Perrys Chapel Church Rd. Franklinton, NC 27525 Tel: (919) 494-3000 North American Bioproducts trade vendor $105,218 Corporate Support Center Portland & Western Railroad trade vendor $103,450 Ostrander Rock Construction trade vendor $83,490 Chadbourne & Parke LLP trade vendor $79,667 GEA Barr-Rosin Inc. trade vendor $63,395 PhibroChem trade vendor $58,800 Nalco trade vendor $52,028 Inspectorate America Corp. trade vendor $45,538 Jammie's Environmental trade vendor $38,960 Vescom Corporation trade vendor $29,147 Nixon Peabody LLP professional $24,423 services Motion Industries trade vendor $24,415 Applied Industrial Tech. Inc. trade vendor $14,699 Alfa Laval trade vendor $13,203 Natural Resource Group LLC trade vendor $12,133 Wilcox & Flegel trade vendor $10,382 Argo International trade vendor $9,073 The petition was signed by was signed by president Charles Carlson. CHESAPEAKE ENERGY: Fitch Assigns 'BB' Ratings on Note Offering -------------------------------------------------------------- Fitch Ratings has assigned a 'BB' rating to Chesapeake Energy Corporation's proposed senior note offering. Fitch has also affirmed Chesapeake's Issuer Default Rating and outstanding debt ratings: -- IDR at 'BB'; -- Senior unsecured debt at 'BB'; -- Senior secured revolving credit facility and hedge facilities at 'BBB-'; -- Convertible preferred stock at 'B+'. The Rating Outlook remains Negative. During its review of Chesapeake in October 2008, Fitch cited both short and long term concerns about Chesapeake. Short-term concerns focus primarily on liquidity issues following Chesapeake's full drawn down of its senior credit facility. The current debt offering should reduce these concerns as proceeds are expected to be used to repay credit facility borrowings and not be re-borrowed. Additional liquidity improvements stem from Chesapeake's execution of a fourth volumetric production payment, the Marcellus shale joint venture agreement with StatoilHydro ASA and the company's successful efforts to remove its knockout hedges and therefore increase 2009 cash flow visibility. Chesapeake successfully executed a $460 million credit facility associated with the company's midstream operations during the fourth quarter and reduced outstanding convertible debt balances. Cash balances ended the year over $1.7 billion and serve as a good indication of the company's ability to cut capital expenditures and leasehold activity in the current commodity price environment. Additional factors supporting Chesapeake's liquidity stem from the lack of near-term debt maturities. Chesapeake's next long-term debt maturity is in 2013, while its $3.5 billion credit facility matures in 2012. As of Sept. 30, 2008, Chesapeake was in full compliance with all debt covenants and is expected to be in compliance as of Dec. 31, 2008 despite the $1.8 billion in asset impairment charges during the fourth quarter of 2008. Chesapeake's revolver contains both a debt-to-total cap test, measured at 0.59 times (x) as of Sept. 30, 2008, versus the covenant requirement of 0.70x, and a debt-to-EBITDA test measured at 2.19x at Sept. 30, 2008, versus the covenant requirement of 3.75x. Chesapeake was also in compliance with the incurrence covenant test in its senior bonds (pre-2005 issues) as of Sept. 30, 2008. Unrealized hedging gains and losses are excluded from the covenant calculations and the company also has carve-outs in the credit facility for ceiling-test write-down impacts on the capitalization calculation. It is important to note that Chesapeake's credit facility contains a borrowing base which is subject to periodic redeterminations. As banks review their internal commodity price assumptions used for lending purposes, risks remain for these to be lowered due to the current commodity price levels and economic conditions. Chesapeake has currently pledged approximately 60% of assets toward the credit facility and maintains the flexibility to increase security levels in order to maintain the current borrowing base as commodity prices remain at lower levels. Fitch's primary concerns continue to focus on the longer-term issues regarding Chesapeake's credit profile, including the company's aggressive growth strategy, high leverage as measured by debt/proven developed producing, the significant use of off- balance sheet financings, the potential for weaker production levels stemming from reduced capital expenditures and Chesapeake's strategy to monetize producing properties and reinvest proceeds into leaseholds which require significant capital expenditures before production materializes. Additionally, as Chesapeake has focused growth efforts on the newly discovered Haynesville shale, Fitch believes the company faces higher levels of operational risk as this strategy carries with it increased risk of weaker than expected drilling results. Continued positive operational announcements over time will mitigate this risk. Chesapeake's next debt maturity isn't until 2013 ($364 million of 7.5% senior notes) which limits the company's ability to significantly reduce debt near-term. Fitch expects Chesapeake to reduce revolver borrowings following the current debt issuance and for the company to continue to maintain reduced capital expenditure levels such that re-borrowing on the facility is not needed. Ultimately, Fitch would expect Chesapeake to use internal cash flows to fund the continued development of its asset base. In addition to high levels of on-balance sheet debt levels, Chesapeake has also accelerated its use of off-balance sheet financings to continue to fund the company's aggressive growth. These off-balance sheet financing sources have come in the form of volumetric production payments and sale-leaseback transactions. As Chesapeake moves forward, it expects to continue to utilize VPPs as a source of financing. Because these sales result in a continued obligation to produce by Chesapeake, Fitch continues to consider this structure to have some 'debt-like' features. Chesapeake's ratings continue to be supported by the size and low risk profile of its oil and gas reserves which now approximate 12.1 trillion cubic feet equivalent. In addition, Chesapeake continues to post very robust reserve replacement results. Both organic reserve replacement and production growth remain strong and support the company's ability to support higher leverage levels. Chesapeake's one-year reserve replacement rate at year-end 2008 is estimated to be 239%. Both the strong reserve replacement metrics and the onshore location of Chesapeake's reserves highlight the low risk nature of the company's reserves. Chesapeake is an Oklahoma City-based company focused on the exploration, production and development of natural gas. The company's proved reserves remain predominantly natural gas and are based 100% in the U.S. Chesapeake's operations are concentrated primarily in the Mid-Continent, South Texas, the Permian Basin and the Appalachia Basin. The company's reserve growth in recent years reflects the company's aggressive acquisition strategy and consistent success through the drill-bit. CHESAPEAKE ENERGY: Moody's Assigns 'Ba3' Rating on $1 Bil. Notes ---------------------------------------------------------------- Moody's Investors Service assigned a Ba3 (LGD 4; 69%) rating to Chesapeake Energy's pending $1 billion offering of senior unsecured notes due 2015. Moody's also affirmed CHK's Ba2 Corporate Family Rating, its SGL-3 Speculative Grade Liquidity rating, and its other existing debt ratings but changed the LGD statistics to LGD 4; 69% from LGD 4; 62%. Net note proceeds will repay secured borrowings under CHK's $3.5 billion secured borrowing base bank revolver. The rating outlook remains stable pending Moody's normal annual review of CHK's year-end 2008 results and 10-K, including the standard FAS 69 disclosures. The review will cover the reserve risk mix, components of finding and development costs and any implications for the future, net book and adjusted leverage after several forms of asset monetizations, as well as an update on CHK's prospects for leverage reduction, asset monetizations, and containing capital spending. The ratings are supported by CHK's strong natural gas and oil price hedging coverage for 2009, the work CHK has done to strengthen its credit and liquidity profile, and continued sound production trends. The degree of strengthening in hand will be more fully gauged after full year-end results are available. Nevertheless, after a year of many strategic transactions (major joint ventures, asset sales, equity and debt offerings, and four volumetric production payments), CHK has improved its operating risk profile, fortified its liquidity, and reduced its 2009 production growth target, and capital spending budget. CHK also reports that it has removed a large proportion of its knock-out hedge portfolio, albeit at a cost, removing the risk that a large proportion of production could end up unhedged if certain minimum natural gas price points were penetrated. As long as CHK remains leveraged and in aggressive expansion mode, a hedging program that does not include knockouts or similar features would be supportive to the ratings. CHK also sustained its track record of debt conversions to equity, converting $765 million of convertible debt to common equity during fourth quarter 2008. One major factor incorporated into CHK's ratings and stable outlook is its goal of restraining capital spending to within cash flow. In CHK's formation of three major drilling joint ventures, in which it sold minority working interest positions in some of its most promising plays, CHK considerably reduced its drilling risk and its capital needs. It may also have improved the odds that its 2009 reserve replacement costs would be materially lower than its elevated 2008 replacement costs. The joint ventures were formed in three areas CHK views to be core intermediate term growth engines: the Haynesville Shale, Woodford Shale, and Marcellus Shale/Appalachian Basin. In forming the drilling joint ventures, CHK shed major risk exposures and spending obligations. At a time when it was already fully leveraged for the rating, and natural gas and oil markets were expected to remain cyclically weak, CHK faced multiple proportionally large and highly capital intensive unconventional resource developments. The ratings are restrained by very full leverage for the ratings, a highly challenging and uncertain sector outlook, weak natural gas prices (especially at the wellhead level in key basins widely discounted from benchmark natural gas prices), a reduced pool of unpledged reserves with which to cushion against the risk of negative borrowing base redeterminations, elevated reserve replacement costs, a penchant for aggressive growth and large strategic transactions, and a highly complex financial structure. Moody's estimates that CHK's leverage Nevertheless, these transactions have positioned CHK strongly with a very large highly diversified drilling inventory and ample opportunity to improve basin efficiencies, in multiple major plays, adding to its strong core positions in those basins. As of September 30, 2008, CHK fully drew down its $3.5 billion secured corporate revolver as a precaution at a time of elevated risk in the banking sector. Its subsequent forth quarter joint venture and volumetric production payment transactions added to its resulting large cash balance. Moody's believes CHK is soundly covered on its bank revolver covenants. CHK's ratings or outlook are not affected by its announced $1.7 billion full cost ceiling test write down. Neither book fixed assets nor net worth factor into Moody's rating methodology for independent exploration and production companies. Moody's utilizes operating performance, leverage, volumetric scale, and diversification measures that encapsulate E&P's total capital outlays, the reserve and production response to that capital reinvestment, the combined unit economics of production and reinvestment, and leverage on a range of reserve, production, and free cash flow measures. Moody's last rating action for CHK dates from May 20, 2008, at which time Moody's assigned ratings to its new senior unsecured note and contingent convertible senior unsecured note offerings, affirmed CHK's ratings, and moved its rating outlook to stable from negative. Chesapeake Energy is headquartered in Oklahoma City, Oklahoma. CHESAPEAKE ENERGY: S&P Assigns 'BB' Rating on $500 Mil. Notes ------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB' issue rating and '4' recovery rating to oil and gas exploration and production company Chesapeake Energy Corp.'s proposed $500 million senior unsecured notes due 2016. Proceeds will repay outstanding bank debt. The ratings on Chesapeake are unaffected by the company's preliminary fourth-quarter 2008 operational and financial results, and its announcement that it expects to report a $1.7 billion noncash impairment charge. As of Sept. 30, 2008, Oklahoma City-based Chesapeake had $14 billion of balance sheet debt. Ratings List Chesapeake Energy Corp. Corporate credit rating BB/Stable/-- New Rating $500 million senior unsecured notes due 2016 BB Recovery rating 4 CHINA HEALTH: Amends & Restates Lease and Note with Lei Guo ----------------------------------------------------------- China Health Resource, Inc., disclosed in a regulatory filing with the Securities and Exchange Commission that the company and Lei Guo, the trustee under a Property Trust Agreement dated Dec. 16, 2008, agreed to amend and restate a Convertible Promissory Note dated as of December 30, 2008, in the original sum of $5,710,994, after agreement of revised terms relating to the conversion mechanism. The remaining terms and conditions of the Note are otherwise unaffected. On Dec. 19, 2008, the company and Mr. Guo entered into a Contract of Lease of Property for forestry property of 3,262 acres located in Heiwengtang Valley, Xianping Forestry, Pingwu County, Mianyang City, Sichuan Province, People's Republic of China. The Trustee, a PRC citizen, holds the Leased Property pursuant to a Property Trust Agreement under Chinese law, dated Dec. 16, 2008, the trustor and beneficiary of which is Sichuan Yinfa Resource Development Co., Ltd., a PRC company. The company's president, Mr. Jiayin Wang, is the controlling shareholder and founder of Yinfa Resource. The company will use the Leased Property for commercial planting. The term of the Lease Agreement began on Dec. 30, 2008, and will expire on Dec. 30, 2039. The Note is expected to be issued to the Trustee on Dec. 30, 2008, in the principal amount of $5,710,994, with interest at the rate of 4% per annum. As amended and restated, the principal amount and all accrued but unpaid interest will automatically be converted in 4 tranches into shares of Common Stock on the after dates and at the fixed prices. The Conversion Price is not subject to any adjustment in the event of any stock split, stock dividend, reverse stock split or similar recapitalization event affecting the shares. The Mandatory Conversions will be implemented as: 1) On March 30, 2009, outstanding principal in the amount of $2,500,000, plus accrued but unpaid interest to the date of conversion, at the Conversion Price of $0.20 per share of the Common Stock; 2) On Dec. 30, 2009, outstanding principal in the amount of $1,000,000, plus accrued but unpaid interest to the date of conversion, at the Conversion Price of $0.40 per share of the Common Stock; 3) On March 30, 2010, outstanding principal in the amount of $1,000,000, plus accrued but unpaid interest to the date of conversion, at the Conversion Price of $1.00 per share of the Common Stock; and 4) On Dec. 30, 2010, the balance of the outstanding principal in the amount of $1,210,994, plus accrued but unpaid interest to the date of conversion, at the Conversion Price of $1.50 per share of the Common Stock. A full-text copy of the Amended and Restated Convertible Promissory Note is available for free at: http://ResearchArchives.com/t/s?38c0 About China Health Headquartered in Si Chuan Province, P.R. China, China Health Resource Inc. fka. Voice Diary Inc. (OTC BB: CHRI) -- was incorporated in the State of Delaware on Feb. 26, 2002. Through its wholly owned subsidary, Yin Fa, the company operates as a pharmaceutical company focused on developing and commercializing the Dahurian Angelica Root, one of the more popular traditional Chinese medicines. Dahurian Angelica Root is a popular herb employed extensively as an ingredient in food, medicine and cosmetics. Going Concern Doubt Lake & Associates, CPA's LLC, in Boca Raton, Florida, expressed substantial doubt about China Health Resource Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the year ended Dec. 31, 2007. The auditing firm reported that the company has suffered recurring losses and has yet to generate an internal cash flow. CHINA HEALTH: Eight Executives Disclose Equity Stake ---------------------------------------------------- Eight of China Health Resource Inc.'s executives disclosed in a regulatory filing with the Securities and Exchange Commission their beneficial ownership of the company's shares of common stock: Shares Beneficially Name and Position Owned ----------------- ------------ Wang Ji Guan, President 199,500 Class A Common Stock Wang Jiayin, Director, 10% Owner, President 1,000 Class A Common Stock Zhong Ying, Director, Chief Financial Officer 0 Zhou Yi, Director, Chief Financial Officer 0 Wang Gewei, Director 0 Wang Bing, Director 0 Guo Lei, 10% Owner 0 Chen Jiang, Chief Executive Officer 0 The number of shares outstanding of the company's common stock as of Nov. 15, 2008, was (i) 99,288,894 shares of Class A Common Stock of par value $0.01 and (ii) 2,000 shares of Class B Common Stock of par value US $0.01. About China Health Headquartered in Si Chuan Province, P.R. China, China Health Resource Inc. fka. Voice Diary Inc. (OTC BB: CHRI) -- was incorporated in the State of Delaware on Feb. 26, 2002. Through its wholly owned subsidary, Yin Fa, the company operates as a pharmaceutical company focused on developing and commercializing the Dahurian Angelica Root, one of the more popular traditional Chinese medicines. Dahurian Angelica Root is a popular herb employed extensively as an ingredient in food, medicine and cosmetics. Going Concern Doubt Lake & Associates, CPA's LLC, in Boca Raton, Florida, expressed substantial doubt about China Health Resource Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the year ended Dec. 31, 2007. The auditing firm reported that the company has suffered recurring losses and has yet to generate an internal cash flow. CIFG ASSURANCE: S&P Raises Ratings on 8 Classes of Notes to 'BB' ---------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on eight CIFG Assurance North America Inc. insurance-supported medium-term note issues, and removed the ratings from CreditWatch with developing implications, where they were placed Aug. 26, 2008. These rating actions follow S&P's Jan. 22, 2009, raising of S&P's financial strength rating on CIFG to 'BB' from 'B'. The ratings are based solely on the full financial guarantee insurance policies provided by CIFG, which guarantee the timely payment of interest and principal according to the transaction's terms. Under S&P's criteria, the issue rating on an insured bond reflects the higher of the rating on the bond insurer (monoline) or Standard & Poor's underlying rating on the securities. Since these transactions do not have SPURs, however, the raised ratings are based solely on the insurance policies that CIFG provides. Ratings Raised And Removed From Creditwatch Developing Republic Holdings Texas II L.P. Rating ------ Issuer CUSIP To From ------ ----- -- ---- 2008-A 760488AB2 BB B/Watch Dev 2008-B 760488AD8 BB B/Watch Dev 2008-C 760488AF3 BB B/Watch Dev Whitecap New York Growth Fund LLC Rating ------ Issuer CUSIP To From ------ ----- -- ---- 2004 96466TAA9 BB B/Watch Dev Whitecap New York Growth Fund II LLC Rating ------ Issuer CUSIP To From ------ ----- -- ---- 2005 96466QAA5 BB B/Watch Dev Whitecap Texas Opportunity Fund L.P. Rating ------ Issuer CUSIP To From ------ ----- -- ---- 2005 96466VAA4 BB B/Watch Dev Whitecap Texas Opportunity Fund II L.P. Rating ------ Issuer CUSIP To From ------ ----- -- ---- 2008A 96466YAA8 BB B/Watch Dev 2008B 96466YAB6 BB B/Watch Dev CITIGROUP INC: Treasury Deal May Further Restrict Operations ------------------------------------------------------------ David Enrich and Damian Paletta at The Wall Street Journal report that Citigroup Inc. regulatory agreement with the Treasury Department might cause the company greater restrictions in its operations. Citigroup spokesperson Shannon Bell has denied that the agreement, which was finalized at the end of last year, would restrict Citigroup's activities, WSJ says. According to WSJ, Citigroup has recently begun operating under the regulatory agreement it disclosed in December 2008, which is part of the government's rescue of the company. WSJ relates that the Treasury required Citigroup to disclose whether it or any of its subsidiaries are: -- subject to any cease-and-desist orders, -- memorandums of understanding, -- consent orders, or -- other enforcement actions or regulatory agreements. WSJ states that Citigroup didn't check a box indicating that it isn't operating under any such directives, but the document says, "Certain items previously disclosed to the company's appropriate federal banking agency." According to WSJ, the document didn't describe the nature of the regulatory agreement. About Citigroup Based in New York, Citigroup Inc. (NYSE: C) -- http://www.citigroup.com-- is organized into four major segments -- Consumer Banking, Global Cards, Institutional Clients Group, and Global Wealth Management. Citi had $2.0 trillion in total assets on $1.9 trillion in total liabilities as of Sept. 30, 2008. As reported in the Troubled Company Reporter on Nov. 25, 2008, the U.S. government entered into an agreement with Citigroup to provide a package of guarantees, liquidity access, and capital. As part of the agreement, the U.S. Treasury and the Federal Deposit Insurance Corporation will provide protection against the possibility of unusually large losses on an asset pool of approximately $306 billion of loans and securities backed by residential and commercial real estate and other such assets, which will remain on Citigroup's balance sheet. As a fee for this arrangement, Citigroup will issue preferred shares to the Treasury and FDIC. In addition and if necessary, the Federal Reserve will backstop residual risk in the asset pool through a non-recourse loan. CLEARPOINT BUSINESS: Interim COO Says Not Owning Equity Stake ------------------------------------------------------------- Brian Delle Donne, interim COO of Clearpoint Business Resources, Inc., disclosed in a Form 3 filing with the Securities and Exchange Commission that he does not beneficially own any of the company's common stock. The number of shares outstanding of Clearpoint's common stock as of Nov. 12, 2008, was 14,251,964. Based in Chalfont, Pennsylvania, ClearPoint Business Resources Inc., through its proprietary, technology-based iLabor network platform, provides its clients a comprehensive web-based portal to streamline the process involved in procurement and management of temporary labor through a network of ClearPoint-approved staffing vendors. Going Concern Doubt At Sept. 30, 2008, the company had an accumulated deficit of $53,918,532 and working capital deficiency of $8,904,950. For the nine months ended Sept. 30, 2008, the company incurred a net loss of $38,213,730. Although the company restructured its debt and obtained new financing in the second quarter of 2008, cash projected to be generated from operations may not be sufficient to fund operations and meet debt repayment obligations during the next twelve months. In order to meet its future cash and liquidity needs, the company may be required to raise additional financing. There is no assurance that the company will be successful in obtaining additional financing. If the company does not generate sufficient cash from operations or raise additional financing, there is substantial doubt about the ability of the company to continue as a going concern. CLEARPOINT BUSINESS: Taps Brian Delle Donne as Interim COO ---------------------------------------------------------- ClearPoint Business Resources, Inc., entered into a letter agreement with XRoads Solutions Group, LLC. Pursuant to the XRoads Agreement, among other matters, XRoads agreed to provide the services of Brian Delle Donne to serve as the company's interim chief operating officer. In the capacity, Mr. Delle Donne will have direct responsibility over the company's day to day operations and will report to Michael D. Traina, the company's chief executive officer. XRoads will submit bi-weekly oral or written progress reports to the company's board of directors. The term of the Engagement commenced on Jan. 13, 2009, and will continue for 4 months. The company agreed pay XRoads $50,000 per month for each of the first four months of Mr. Delle Donne's services and the parties will mutually agree to a new fee structure in the event Mr. Delle Donne serves beyond that period. The company also agreed to pay XRoads a monthly fee based upon achievement of certain increases in the company's earnings before interest, taxes, depreciation and amortization, calculated pursuant to the XRoads Agreement. The fee will be equal to 10% of increases in the company's monthly EBITDA during the term of the Engagement over the company's EBITDA for the month ended Jan. 31, 2009, capped at $50,000 per month. The company agreed to pay reasonable expenses incurred by XRoads for services related to the Engagement and remitted a retainer in the amount of $10,000 to XRoads for such purpose. As of Jan. 20, 2008, pursuant to the XRoads Agreement, the company paid XRoads $50,000 for the first monthly fee and the $10,000 retainer for reimbursement of expenses. Any amounts not paid by the company when due pursuant to the XRoads Agreement will bear interest at an annual rate of 12% or the maximum rate allowed by law, whichever is less. In addition, the company agreed to issue XRoads a warrant to purchase up to 100,000 shares of the company's common stock at the exercise price of $0.12 per share. The warrant will be held in escrow, to be released within 120 days of the date of the XRoads Agreement, and will be exercisable upon such release through Dec. 31, 2010. In the event the Engagement is extended, the company agreed to issue an additional warrant to purchase 75,000 shares of the company's common stock with an expiration date of April 30, 2011. In the event the company elects to pursue a financing, either in the form of debt or equity, within one year of the date of the XRoads Agreement, XRoads will serve as the company's non-exclusive financial advisor for such financing in accordance with the terms of the XRoads Agreement. If the financing is consummated pursuant to the terms set forth in the XRoads Agreement, the company agreed to pay XRoads a transaction fee based on the type and value of the transaction. The transaction fee will be prorated accordingly in the event the company retains an additional financial advisor in connection with the transaction, but such fee shall not be less than $75,000 if XRoads' efforts result in a bona fide financing alternative for the company. Either the company or XRoads may terminate the XRoads Agreement at any time with at least thirty days prior written notice. In the event of a material breach of the XRoads Agreement by either party, including, but not limited to, the company's failure to promptly pay amounts due for services rendered or for reimbursement of expenses, the non-breaching party may terminate the Engagement at any time thereafter upon 5 days advance notice. The XRoads Agreement also includes various representations, warranties, covenants and other provisions customary for a transaction of this nature. In accordance with the XRoads Agreement, Mr. Delle Donne has been serving as the company's chief operating officer since Jan. 13, 2009. Mr. Delle Donne has served as a Principal at XRoads, an operational and performance improvement advisory firm, since June 2008. Mr. Delle Donne also has served as a director of UMS Group, Inc., a worldwide management consulting firm, since 1999. Mr. Delle Donne served as the executive vice president and chief operating officer of Computer Horizons Corporation, an information technology staffing and solutions provider, from 2005 through 2007. Mr. Delle Donne worked as a private consultant after his service with Computer Horizons Corporation until joining XRoads. He also served as executive vice president and COO of RCM Technologies, Inc., a staffing services provider for various markets, from 1998 through 2005. He served as director and member of the executive committee of RCM Technologies, Inc. from 2000 through 2004. Mr. Delle Donne is a graduate of Brown University. About ClearPoint Business Resources Inc. Based in Chalfont, Pennsylvania, ClearPoint Business Resources Inc., through its proprietary, technology-based iLabor network platform, provides its clients a comprehensive web-based portal to streamline the process involved in procurement and management of temporary labor through a network of ClearPoint-approved staffing vendors. Going Concern Doubt At Sept. 30, 2008, the company had an accumulated deficit of $53,918,532 and working capital deficiency of $8,904,950. For the nine months ended Sept. 30, 2008, the company incurred a net loss of $38,213,730. Although the company restructured its debt and obtained new financing in the second quarter of 2008, cash projected to be generated from operations may not be sufficient to fund operations and meet debt repayment obligations during the next twelve months. In order to meet its future cash and liquidity needs, the company may be required to raise additional financing. There is no assurance that the company will be successful in obtaining additional financing. If the company does not generate sufficient cash from operations or raise additional financing, there is substantial doubt about the ability of the company to continue as a going concern. COLONIAL BANCGROUP: Reports $825 Million 4th Quarter Net Loss ------------------------------------------------------------- The Colonial BancGroup, Inc., reported a net loss for the quarter ended December 31, 2008, of $825 million, or $4.11 per share, and $880 million, or $4.71 per share, for the year ended December 31, 2008. Fourth quarter results included a non-cash charge of $575 million and a tax benefit of $40.6 million from the impairment charge, or $2.66 per share, net for goodwill impairment. Excluding the net goodwill impairment charge, operating loss for the quarter was $291 million, or $1.45 per share. "For the banking industry, the events of the past three months have no parallel in modern history. I want to emphasize that Colonial's predominant goal is to reduce stressed credits, whether through sales, charge-offs or loan workout efforts. The actions taken in the fourth quarter demonstrate our adherence to that goal," said Robert E. Lowder, Colonial's Chairman, CEO and President. Financial Stability Strategy and Capital The economic environment in Colonial's markets deteriorated significantly over the course of 2008. Colonial took proactive steps through the year to maintain its capital and strong liquidity positions: * Raised $350 million of common stock * Issued $250 million of subordinated debt * Sold $427 million of troubled assets * Provided $729 million for loan losses * Reduced risk weighted assets by $1.7 billion * Improved all key measures of liquidity Colonial has received preliminary approval to receive $553 million from the U.S. Treasury's Capital Purchase Program (TARP). Such participation is subject to Colonial's increasing equity by $300 million. "The Company is actively pursuing a variety of capital raising alternatives to increase equity by $300 million which would satisfy this condition of the TARP preliminary approval. The Company is currently in negotiations with several investors. One such investor group is SunTx Capital Partners of Dallas, Texas, with which the Company has signed a non-binding letter of intent with respect to a potential investment by SunTx Capital Partners and prospective co-investors of up to 24.9% of the Company's proforma capitalization with a price range per share of $1.00 to $1.50, subject to the negotiations of a definitive agreement and obtaining of necessary approvals," said Mr. Lowder. Colonial is working informally with its regulators to increase its capital ratios. It said that the anticipated receipt of TARP capital and additional equity will greatly improve its capital position consistent with regulatory expectations. The capital raising activities are expected to be completed in the first quarter of 2009. Liquidity Colonial's branch franchise of 347 locations continues to provide a strong funding base, as deposits fund 72% of total assets. Retail deposits at December 31, 2008 were $17.4 billion, an 11% annualized increase over September 30, 2008, and a 2% increase over December 31, 2007. At December 31, 2008, Colonial had cash balances of over $2 billion, a significant portion of which is at the Federal Reserve. Asset Quality During the fourth quarter 2008, Colonial continued its aggressive loan workout efforts and sold approximately $317 million of problem assets and transferred another $49 million to held for sale. As a result of the asset sales and continued declines in collateral values, Colonial charged-off $415 million in the fourth quarter of 2008. Total net charge-offs for 2008 were $643 million, or 4.16% of average loans. Colonial's provision for loan losses of $729 million for 2008 was in excess of annual net charge-offs, increasing the allowance for loan losses to 2.24% of net loans at December 31, 2008, from 1.50% at December 31, 2007. Nonperforming assets, excluding loans transferred to held for sale, were $661 million at December 31, 2008, a decline of $17 million from September 30, 2008. The ratio of nonperforming assets, excluding loans transferred to held for sale, to net loans, other real estate and repossessions at December 31, 2008 was 4.51%, compared to 4.43% at September 30, 2008. At December 31, 2008, 79% of Colonial's nonperforming assets were in the construction-related sector of the portfolio. Colonial has worked diligently to reduce the exposure to construction loans in its portfolio, and as of December 31, 2008, the balances had decreased $1.4 billion, or 22%, compared to December 31, 2007. Mortgage Warehouse Lending Warehouse lending is a critical link in the U.S. housing finance chain, providing short-term funding for mortgage loans that are eventually sold into the secondary market. Colonial's support of warehouse lending is essential to the industry. Colonial is a top 10 mortgage warehouse lender in the United States and is the market leader in the Southeast. Through this division, in 2008 Colonial provided approximately $70 billion of interim funding representing nearly 400,000 residential mortgage loans. The division is highly profitable with minimal credit losses. Net interest income Net interest income declined by $26 million from the third quarter of 2008, and the Company's net interest margin declined to 2.37% from 2.85% over this same period. The margin was negatively impacted by the buildup of Colonial's cash position for liquidity preservation, the decrease in earning assets from the Company's deleveraging strategy and customer migration to higher cost time deposits. Noninterest income Core noninterest income for 2008 decreased $8.6 million, or 4%, from 2007. The largest decline in noninterest income came from mortgage warehouse fees of $17 million as a result of the termination of the commercial paper conduit used to fund the mortgage warehouse division. This decrease was offset somewhat by an excellent year in revenue from mortgage banking origination and sales, which increased $15 million, or 101%, in 2008 over 2007 as a result of increased secondary market FHA and VA loan sales. Colonial continues to increase its mortgage origination staff to further diversify its production to agency products which have yielded higher volumes and margins. Another line of business that has performed well this year is wealth management services, which saw an increase in revenue of 7% in 2008 compared to 2007. Colonial 1st Colonial has engaged Harvest Earnings Group to spearhead a revenue enhancement and cost savings project which is named Colonial 1st. The program is designed to encourage Colonial employees to submit ideas that will result in earnings growth through revenue enhancements and expense reductions. To date, thousands of ideas have been generated, and at the conclusion of the project in late first quarter of 2009, the best ideas will be implemented. Colonial expects its results to be significant, based on the results achieved at similar sized institutions that have undertaken this program. Colonial anticipates cost savings of 5% to 8% of noninterest expense. Other Cost Savings In addition to the Colonial 1st initiative, Colonial has frozen salaries for executives in 2008 and 2009 and eliminated bonuses in 2008. Colonial also eliminated merit increases and non-production incentive plans for all employees in 2009. "These unprecedented times require the implementation of full-scale cost reduction efforts. Those efforts are ongoing and will require further scrutiny at all levels of the Company," said Mr. Lowder. Moody's Lowers Ratings Moody's Ratings has lowered Colonial BancGroup's senior rating from investment grade at Baa2 by six notches to B2, noting that non-performing loans increased 400% in the last year. Moody's Investors Service said it's "uncertain" the proposed $300 million equity investment can be arranged. According to Bloomberg's Bill Rochelle, Colonial BancGroup's stock tanked following the company's Jan. 28 announcement. The stock lost almost half its value Jan. 28, in the process making a 52-week low and closing at 85 cents, down 73 cents in New York Stock Exchange trading. The high over the last year was $16.06 Feb. 1, 2008. About Colonial BancGroup Colonial BancGroup -- http://www.colonialbank.com-- operates 347 branches in Florida, Alabama, Georgia, Nevada and Texas with over $26 billion in assets. The Company's common stock is traded on the New York Stock Exchange under the symbol CNB. In some newspapers, the stock is listed as ColBgp. COLONIAL BANCGROUP: Fitch Cuts Issuer Default Rating to 'BB' ------------------------------------------------------------ Fitch Ratings has downgraded the ratings of the Colonial Bancgroup, Inc., and its subsidiaries, and placed the ratings on Negative Watch. The degree of credit problems at CNB has accelerated beyond Fitch's expectations, with credit costs increasing beyond manageable levels, materially affecting the company's earnings, and causing net charge-offs to increase to 11.15% (annualized) for fourth-quarter 2008 (4Q'08). Although CNB has been aggressive in addressing its problem assets and has increased reserve levels, the downgrade largely reflects the prospect of prolonged credit stress, which Fitch believes will continue to hamper the company's performance and weigh heavily on its financial condition. The preponderance of credit concerns remains in CNB's residential real estate construction portfolio; the majority of the portfolio resides in the troubled Florida market, which drove non-performing assets to 4.83% at Dec. 31, 2008. The company did receive preliminary approval to participate in the Treasury's Capital Purchase Program, but it has yet to be funded. Receipt of the funds is contingent upon the company's ability to raise an additional $300 million in equity - a condition Fitch believes will be difficult to meet, considering the prevailing market environment. CNB has indicated that it is in the process of raising this external capital and has signed a non-binding letter of intent with a private equity firm (SunTx Capital Partners). Management anticipates completing the capital raising activities and accessing TARP capital funding by the end of 1Q'09. A positive resolution of the Negative Watch hinges upon CNB's receipt of the additional capital and the stabilization of asset quality deterioration. Conversely, should the company fail to raise the necessary capital and significant credit quality deterioration persist, multiple-notch downgrades would result. Fitch has downgraded these ratings with a Negative Watch: The Colonial BancGroup, Inc. -- Long-term Issuer Default Rating (IDR) to 'BB' from 'BBB-'; -- Short-term IDR to 'B' from 'F3'; -- Subordinated debt to 'BB-' from 'BB+' -- Individual to 'C/D' from 'C'. Colonial Bank, N.A. -- Long-term IDR to 'BB+' from 'BBB-'; -- Long-term deposits to 'BBB-' from 'BBB'; -- Short-term IDR to 'B' from 'F3'; -- Subordinated debt to 'BB' from 'BB+'; -- Individual to 'C/D' from 'C'. Colonial Capital Trust IV -- Preferred stock to 'BB' from 'BB+'. CBG Florida REIT -- Preferred stock to 'BB' from 'BB+'. In addition, Fitch has affirmed these ratings: Colonial BancGroup, Inc. -- Support '5'; -- Support Floor 'NF'. Colonial Bank, N.A. -- Short-term deposits 'F3'; -- Support '5'; -- Support Floor 'NF'. COLONIAL BANCGROUP: Moody's Cuts Bank Strength Rating to 'D' ------------------------------------------------------------ Moody's Investors Service downgraded the ratings of Colonial BancGroup (senior to B2 from Baa2) and its subsidiaries, including its lead bank, Colonial Bank (financial strength to D from C-, and long term bank deposits to Ba2 from Baa1). Following the downgrade, the ratings are on review for further downgrade. Moody's ratings action follows Colonial's announcement that it lost $825 million in the fourth quarter, as well as the company's disclosure that the $550 million of Tarp capital that it received preliminary approval for on December 2, 2008, is contingent on Colonial's raising $300 million of common equity. In Moody's view, it is uncertain if Colonial can raise the required capital. Although Colonial has a letter of intent from a private equity investor to purchase up to 24.9% of the company on a pro-forma basis, that falls well short of the $300 million target set for it by the U.S. government. The rating review will focus on the company's ability to raise the common equity. Colonial's sizable concentration in Florida commercial real estate, residential development in particular, is the cause of the magnitude of the downgrade. Colonial's CRE accounts for approximately 6 times tangible common equity, with construction lending comprising approximately 60% of total CRE. Colonial has seen more than a four-fold increase in nonperforming assets from the prior year end, largely in the residential construction and land portfolio. Given Moody's views of the likely credit costs in this portfolio, the rating agency believes there is significant risk of the firm becoming undercapitalized. Without fresh capital this puts severe pressure on the bank. If Colonial is successful and ultimately receives the Tarp funding, then Colonial's ratings could be confirmed. If on the other hand, Colonial is unsuccessful, its ratings will be further downgraded. Moody's last rating action on Colonial was on January 11, 2008, when the bank's financial strength rating was downgraded to C- from C and long term deposits to Baa1 from A3, and the outlook was changed to negative from stable. Colonial is headquartered in Montgomery, Alabama, and its reported assets were $26 billion at December 31, 2008. Downgrades: Issuer: CBG Florida REIT Corp. -- Preferred Stock Preferred Stock, Downgraded to Caa2 from Ba1, under review Issuer: Colonial BancGroup, Inc. (The) -- Issuer Rating, Downgraded to B2 from Baa2, under review -- Multiple Seniority Shelf, Downgraded to a range of (P)Caa2 to (P)Caa1 from a range of (P)Ba1 to (P)Baa3, under review -- Subordinate Regular Bond/Debenture, Downgraded to Caa1 from Baa3, under review Issuer: Colonial Bank -- Bank Financial Strength Rating, Downgraded to D from C-, under review -- Issuer Rating, Downgraded to Ba3 from Baa1, under review -- OSO Rating, Downgraded to NP from P-2 -- Deposit Rating, Downgraded to NP from P-2 -- OSO Senior Unsecured OSO Rating, Downgraded to Ba3 from Baa1, under review -- Subordinate Regular Bond/Debenture, Downgraded to B2 from Baa2, under review -- Senior Unsecured Deposit Rating, Downgraded to Ba2 from Baa1, under review Issuer: Colonial Capital Trust IV -- Preferred Stock Preferred Stock, Downgraded to Caa1 from Baa3, under review Outlook Actions: Issuer: CBG Florida REIT Corp. -- Outlook, Changed To Rating Under Review From Negative Issuer: Colonial BancGroup, Inc. (The) -- Outlook, Changed To Rating Under Review From Negative Issuer: Colonial Bank -- Outlook, Changed To Rating Under Review From Negative Issuer: Colonial Capital Trust IV -- Outlook, Changed To Rating Under Review From Negative COMSTOCK HOMEBUILDING: Mathis Partners' Bankruptcy Case Dismissed ----------------------------------------------------------------- Comstock Homebuilding Companies, Inc., says the bankruptcy filing of its Mathis Partners, LLC subsidiary in Atlanta, Georgia, has been dismissed. At this time, Mathis Partners has retained ownership of its sole asset, the Gates at Luberon property in Forsyth County, Georgia. Haven Trust Bank of Georgia, the lender to Mathis Partners related to the Gates at Luberon project was closed by the Federal Deposit Insurance Corporation in December 2008. The loan is now owned by the FDIC. The company is awaiting information from the FDIC regarding its intended handling of the loan. About Mathis Partners Reston, Virgina-based Mathis Partners, LLC -- http://www.comstockhomebuilding.com/-- is a single purpose limited liability company that is a wholly owned subsidiary of Comstock Homebuilding Cos., Inc. It was formed by Parker Chandler Homes, Inc., to develop the Gates of Luberon residential development project in Forstyth County, Georgia, with Haven Trust as its lender. It filed its chapter 11 petition on March 31, 2008 (Bankr. N.D. Ga. Case No. 08-65876). Judge Margaret Murphy presides over the case. Paul Reece Marr, Esq., at Paul Reece Marr, PC, represents the Debtor in its restructuring efforts. The Debtor estimated both its assets and debts to be between $1 million and $10 million. About Comstock Homebuilding Based in Reston, Viginia, Comstock Homebuilding Companies, Inc. (NasdaqGM: CHCI) -- http://www.comstockhomebuilding.com-- develops, builds and markets single-family homes, townhouses and condominiums in the Washington D.C., Raleigh, North Carolina and Atlanta, Georgia metropolitan markets. The company also provides certain management and administrative support services to certain related parties. * * * As reported in the Troubled Company Reporter on April 3, 2008, PricewaterhouseCoopers LLP raised substantial doubt about the ability of Comstock Homebuilding Companies, 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 stated that the company has experienced declining market conditions and has significant debt maturing during 2008. The Troubled Company Reporter said on July 11, 2008, that Comstock has retained FTI Consulting Inc. as advisor to the company with respect to strategic and financial alternatives in the face of a prolonged real estate downturn. On January 29, 2009, Comstock Homebuilding Companies, Inc. and Comstock Penderbrook, L.C., a wholly owned subsidiary of the Company, entered into a forbearance agreement with Guggenheim Corporate Funding with respect to the $13.5 million outstanding under the company's secured Penderbrook project loan. The company had receive a notice of default from Guggenheim on August 22, 2008. In connection with the forbearance agreement the original maturity date of the loan was extended from February 22, 2010 to March 6, 2011. The terms of the forbearance agreement provide for additional incremental extensions until March 6, 2012, provided certain unit delivery requirement thresholds are met. COMSTOCK HOMEBUILDING: Nasdaq Extends Suspension of Trading ----------------------------------------------------------- Comstock Homebuilding Companies, Inc., has received a notice from the Nasdaq of its determination to extend its suspension of the bid price and market value of publicly held shares requirements. Enforcement of these rules is now scheduled to resume April 20, 2009. As such, Comstock's delisting has been suspended until on or about July 27, 2009, unless either the Company regains compliance with the bid-price requirements or Nasdaq extends its enforcement suspension further. Based in Reston, Viginia, Comstock Homebuilding Companies, Inc. (NasdaqGM: CHCI) -- http://www.comstockhomebuilding.com-- develops, builds and markets single-family homes, townhouses and condominiums in the Washington D.C., Raleigh, North Carolina and Atlanta, Georgia metropolitan markets. The company also provides certain management and administrative support services to certain related parties. * * * As reported in the Troubled Company Reporter on April 3, 2008, PricewaterhouseCoopers LLP raised substantial doubt about the ability of Comstock Homebuilding Companies, 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 stated that the company has experienced declining market conditions and has significant debt maturing during 2008. The Troubled Company Reporter said on July 11, 2008, that Comstock has retained FTI Consulting Inc. as advisor to the company with respect to strategic and financial alternatives in the face of a prolonged real estate downturn. On January 29, 2009, Comstock Homebuilding Companies, Inc. and Comstock Penderbrook, L.C., a wholly owned subsidiary of the Company, entered into a forbearance agreement with Guggenheim Corporate Funding with respect to the $13.5 million outstanding under the company's secured Penderbrook project loan. The company had receive a notice of default from Guggenheim on August 22, 2008. In connection with the forbearance agreement the original maturity date of the loan was extended from February 22, 2010 to March 6, 2011. The terms of the forbearance agreement provide for additional incremental extensions until March 6, 2012, provided certain unit delivery requirement thresholds are met. COMSTOCK HOMEBUILDING: Restructures $13.5-Mil. Penderbrook Debt --------------------------------------------------------------- Comstock Homebuilding Companies, Inc., and Comstock Penderbrook, L.C., a wholly owned subsidiary of the Company, have entered into a forbearance agreement with Guggenheim Corporate Funding with respect to the $13.5 million outstanding under the company's secured Penderbrook project loan. The company had received a notice of default from Guggenheim on August 22, 2008. In connection with the forbearance agreement the original maturity date of the loan was extended from February 22, 2010, to March 6, 2011. The terms of the forbearance agreement provide for additional incremental extensions until March 6, 2012, provided certain unit delivery requirement thresholds are met. Under the terms of the forbearance agreement the interest rate in effect for each calendar year will be determined on the last day of the year, retroactively for the year, based upon the cumulative unit settlements during the year. The interest rate will start to step down from a high of LIBOR plus 1,400 bps to a floor of LIBOR plus 400 bps each year based on a range of seven to twenty unit settlements occurring in 2009 and a range of sixteen to twenty-six unit settlements in 2010. Prior to the execution of the forbearance agreement, the interest rate spread on the loan was fixed at 600 bps over LIBOR. In addition, the forbearance agreement provides Comstock a one-time option to retire the note prior to May 26, 2009 at a discount of between 9% and 16% based upon when the option is exercised. "This debt restructuring is in keeping with our previously announced plans to restructure a significant portion of our debts in recognition of difficult market conditions," said Christopher Clemente, Comstock's Chairman and Chief Executive Officer. "Since announcing in early 2008 our intent to focus on restructuring our debts we have been successful in restructuring over $142 million of debt. We believe that the arrangement we have reached with the lender at Penderbrook is particularly important because it allows for both the orderly completion of the project and the recovery of the significant amount of capital we have invested in the project. The substantial reduction in sales pace requirements incorporated into the forbearance agreement as compared to the requirements of the original loan provides an opportunity to operate the property substantially as a rental community while waiting for market conditions to stabilize and improve. We believe this is crucial to our efforts to preserve the value of the units we still hold in the community as well as the units previously delivered to our customers." "Regarding our efforts to stabilize the financial condition of Comstock, our actual outstanding debt at December 31, 2008, was approximately $98 million which represents a reduction of $73 million from year end 2007," Mr. Clemente continued. "In addition to reducing debt we significantly reduced overhead costs across the board including a reduction of overall compensation costs of more then 50% during 2008. To that end we will not be paying cash or stock bonuses in connection with 2008 results. Further, in an effort to align executive compensation with market realities, we have reduced planned executive compensation for 2009 as well. During 2009 we will remain focused on our goals of preserving and enhancing our liquidity, reducing costs, rebuilding backlog, generating cash flow and positioning Comstock for a return to profitability when the housing market recovers. We remain committed to achieving our goal of restoring shareholder value." The company also announced that Comstock Potomac Yard, LC, a wholly owned subsidiary of the Company and developer of the company's Eclipse at Potomac Yard project, has filed a $13.8 million civil lawsuit against its general contractor, Balfour Beatty Construction -- formerly Centex Construction. The lawsuit alleges, among other things, both that Balfour Beatty breached its contractual obligations on multiple occasions resulting in costly delays and that Balfour Beatty left significant warranty claims unaddressed. The trial is expected to occur in late 2009. About Comstock Homebuilding Based in Reston, Viginia, Comstock Homebuilding Companies, Inc. (NasdaqGM: CHCI) -- http://www.comstockhomebuilding.com-- develops, builds and markets single-family homes, townhouses and condominiums in the Washington D.C., Raleigh, North Carolina and Atlanta, Georgia metropolitan markets. The company also provides certain management and administrative support services to certain related parties. The Troubled Company Reporter said on July 11, 2008, that Comstock has retained FTI Consulting Inc. as advisor to the company with respect to strategic and financial alternatives in the face of a prolonged real estate downturn. Going Concern Doubt As reported in the Troubled Company Reporter on April 3, 2008, PricewaterhouseCoopers LLP raised substantial doubt about the ability of Comstock Homebuilding Companies, 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 stated that the company has experienced declining market conditions and has significant debt maturing during 2008. CONTINENTAL AIRLINES: Posts $585 Million Full Year 2008 Loss ------------------------------------------------------------ Eight of the nine major U.S. airlines that have disclosed fourth quarter and full year 2008 results have posted losses aggregating $19.6 billion. Only Southwest Airlines posted a net profit. Net Profit Net Profit Full Year 2008 Full Year 2007 -------------- -------------- Delta Air Lines, Inc. ($8,900,000,000) $1,600,000,000 AMR Corp. (2,100,000,000) 504,000,000 Southwest Air Lines 178,000,000 645,000,000 UAL Corp. (5,348,000,000) 403,000,000 US Airways Group Inc. (2,210,000,000) 427,000,000 Continental Airlines Inc. (585,000,000) 459,000,000 Alaska Air Group Inc. (135,900,000) 124,300,000 Skywest Inc. -- -- JetBlue Airways Corp. (76,000,000) 41,000,000 AirTran Holdings, Inc. (273,829,000) 52,683,000 Skywest is expected to release its fourth quarter 2008 results on February 11. The figures provided by JetBlue were pre-tax profit (or losses). Net Profit Net Profit 4th Quarter '08 4th Quarter '07 --------------- --------------- Delta Air Lines, Inc. ($1,400,000,000) ($70,000,000) AMR Corp. (340,000,000) (69,000,000) UAL Corp. (1,303,000,000) (53,000,000) Southwest Airlines (56,000,000) 111,000,000 US Airways (541,000,000) (79,000,000) Continental Airlines (266,000,000) (32,000,000) Alaska Air Group Inc. (75,200,000) (7,400,000) Skywest Inc. -- -- Jetblue Airways Corp. (49,000,000) (3,000,000) AirTran Holdings, Inc. (118,391,000) (2,171,000) High Fuel Jet Prices The airlines said high fuel prices for most of 2008 have contributed to their losses. AMR, the parent of American Airlines, said that historically high and volatile jet fuel prices continued to challenge it in the fourth quarter of 2008. AMR paid $133 million and $2.7 billion more for fuel in the fourth quarter and for all of 2008, respectively, than it would have paid at prevailing prices from the corresponding prior-year periods. Delta faced over $2 billion in increased fuel costs in 2008. While fuel prices dropped in the fourth quarter 2008, Delta paid for high fuel prices due to its fuel hedging contracts. Delta would have reported a $167 million net profit excluding special items in the December 2008 quarter, if fuel had been purchased at market prices. UAL said the historic peak in prices and the impact on hedges driven by the rapid decline resulted in a $2.9 billion increase in cost compared to 2007 fuel prices. UAL recorded $370 million in cash losses on fuel hedges that settled in the quarter, as the recent fall in fuel prices drove losses on hedges put in place earlier in the year to mitigate the steep increase in prices that had occurred in the second and third quarters of 2008. In addition, the company also recorded non-cash, net mark-to-market losses on its fuel hedges of $566 million. US Airways Group Chairman and CEO Doug Parker stated, "Like other airlines that have reported before us, our financial results reflect the staggering increase in fuel prices that we faced throughout most of 2008. In fact, had our 2008 fuel price including realized gains and losses on fuel hedging instruments remained at 2007 levels, the company's fuel expense would have been approximately $1.4 billion lower. Lower Revenues Due to Recession Delta Air Lines, which completed its merger with Northwest Airlines in 2008, said that during the fourth quarter, on a combined basis, passenger revenue fell 1%, or $54 million, compared to the prior year period due to a 4% decline in capacity, partially offset by a 3% increase in unit revenue. These results reflect the weakening of the revenue environment during the quarter caused by the global economic recession. According to UAL, total passenger revenue for the quarter decreased 8.7% year-over- year as consolidated capacity declined 10.6% , consolidated yield increased 2.4% and load factor decreased 0.3 points. Continental Airlines, which have been mentioned in possible merger talks with other U.S. airlines in 2008, said weakening economic conditions and highly volatile fuel prices presented financial challenges for the airline in the fourth quarter 2008. Continental recorded a fourth quarter net loss of $266 million. Dave Barger, JetBlue's CEO, said that while he was appointed to report a loss, he has been satisfied with JetBlue's performance in 2008. "Against the backdrop of record fuel prices and unprecedented economic challenges, we effectively managed our capacity and strengthened our network. We also made significant progress in our efforts to further enhance the JetBlue experience for our customers. JetBlue's industry-leading unit revenue growth throughout the year reflects the outstanding work of our crewmembers. "2008 was an especially tough and challenging year," said Bob Fornaro, AirTran Airways' chairman, president and chief executive officer. "We thank our dedicated, hard-working Crew Members and our loyal customers for helping us overcome the many obstacles we faced in 2008. Our Crew Members continue to strive to provide exceptional customer service, and a high-quality product while offering value to the traveling public. Despite the industry challenge shifting from high oil costs to concerns regarding consumer demand, our 2008 initiatives have us well positioned to return to profitability in 2009." Liquidity, Bankruptcy Concerns Delta, UAL and AirTran said that they have strengthened their liquidity that would allow them to face the challenges of 2009. Michael Lowry, project manager for AVIATION WEEK's Top- Performing Companies report, said in September 2008 that USAirways, AMR, Northwest Airlines, AirTran and Continental would have high bankruptcy risk in 2009. The September report also said that USAir was a high risk to file for bankruptcy again in 2008 -- it had entered and exited bankruptcy protection twice -- but USAir has been able, so far, to survive the crisis. Only smaller airlines filed for bankruptcy in 2008. These included Frontier Airlines, Skybus Airlines Inc., Aloha Airgroup Inc. and ATA Airlines Inc., who made its second Chapter 11 filing. Northwest Airlines has completed its merger with Delta Air to form one of the world's largest airlines. Delta noted that as of Dec. 31, 2008, it had $6.1 billion in total liquidity and cash collateral posted with hedge counterparties. As of Dec. 31, 2007, Delta had $3.3 billion in cash, cash equivalents and short-term investments. UAL said it completed several transactions during the fourth quarter that helped strengthen its liquidity. It raised $215 million from aircraft financing transactions that closed during the quarter along with $66 million in proceeds from asset sales. The company also received net proceeds of $107 million through equity issuances during the quarter. AirTran noted that it ended the fourth quarter with $340.5 million in unrestricted cash and investments, its highest year-end balance since 2005. 2009 Outlook Most of the airlines expect weak revenues in 2008, but expect those revenues to be offset by lower fuel prices and savings from cost cutting measures. Some of the airlines have also disclosed capacity cuts for 2009. AMR has decided not to use MD-80s to backfill flying associated with the seven 737s that no longer will be delivered in 2009. Largely as a result of this decision, the company's 2009 mainline capacity will decline by more than one percentage point compared to previous guidance provided in October. "Our fourth quarter and full-year 2008 results reflect the difficulties all airlines faced last year, but we believe our steps to reduce capacity, bolster liquidity, and improve revenue helped us better manage the challenges of record fuel prices and a weak economy," said AMR Chairman and CEO Gerard Arpey. "While significant hurdles remain, I am guardedly optimistic we can regain momentum in 2009," Mr. Arpey said. "Despite the difficult economic environment, we expect to be solidly profitable in 2009 driven by lower fuel costs, capacity discipline, and merger synergies," said Richard Anderson, Delta's chief executive officer. "Delta people have a great track record for achieving their goals, and I am confident that 2009 will be another successful year." "Delta's proactive decision to reduce domestic capacity during 2008 mitigated the impact of the decline in demand we saw over the course of the fourth quarter. We expect the worldwide economy to be difficult throughout 2009; however, if fuel prices remain at current levels, we believe the benefit of lower fuel prices will more than offset the revenue decline." said Edward Bastian, Delta's president. "Delta has the tools required to manage through these tough economic times -- with the broadest, most diverse network in the industry; an estimated $2 billion in annual merger synergies to be obtained; best-in-class costs; a solid liquidity balance; unmatched fleet flexibility; and the discipline and drive of the new Delta team." Delta projects that consolidated passenger revenue in 2009 will be down 4% to $4.8 billion. Fuel price will be $2.15 per gallon. During the December 2008 quarter, Delta hedged 58% of its fuel consumption, resulting in an average fuel price of $2.90 per gallon -- included in the fuel price is $507 million in fuel hedge losses in the fourth quarter. In 2007, when Delta paid $2.21 a gallon, it noted that its operating results were significantly impacted by changes in the price and availability of aircraft fuel. In 2007, its average fuel price per gallon rose 5% to $2.21, as compared to an average price of $2.10 in 2006, which was 15% higher than our average price of $1.79 in 2005. UAL believes that for full year 2009 revenues will be down 8% to 7%. United said it is on track to complete the previously announced removal of 100 aircraft from its fleet by the end of 2009. United added it is taking additional steps in 2009 to reduce overhead costs. The company will further reduce the number of salaried and management employees by approximately 1,000 positions by the end of 2009. This is in addition to the 1,500 positions the company announced in the second quarter, and when completed, will bring the total reduction in its salaried and management staff to approximately 2,500, or nearly 30% , since the beginning of 2008. "Last year was by any measure a challenging year -- defined by unprecedented volatility and unpredictability, but for United it was also characterized by steady and durable improvements," said Glenn Tilton, United's chairman, president and CEO. "Our management team made timely decisions that resulted in fundamental improvements across our business, which will hold us in good stead in 2009." Alaska Air Group, which operates Alaska Air and Horizon Air, noted that excluding special items, it had net income of $16.4 million in the 4th quarter of 2008 compared to a $17.9 million net loss in the same period in 2007. "In a year of unprecedented volatility that included soaring fuel prices and an economic meltdown, we were pleased to eke out a small profit for 2008, excluding special items, and be one of only a few major airlines to do so," said Bill Ayer, Alaska Air Group's chairman and chief executive officer. "Our concerted efforts to control costs, improve our operation and tailor our schedule to better match customer demand have prepared us to face whatever hurdles the current year brings." According to Mr. Parker, USAir CEO, measures executed by the airlines before aimed at offsetting high fuel prices in 2008 have significantly softened the blow from the economic downturn that the airline industry now faces. "As we begin the new year, US Airways is well prepared for a difficult global macroeconomic environment. We are running a great operation, have restructured our business model through the introduction of new fees, reduced capacity and increased our liquidity. With the help of falling fuel prices, we believe we are well positioned for the challenges ahead," concluded Parker. Larry Kellner, Continental's chairman and chief executive officer, said, "While there are continuing hard times ahead, thanks to our team, we are well-positioned to maintain our place as an industry leader." Continental said it will inaugurate daily nonstop service between New York and Shanghai in March 2009. For the full year 2009, JetBlue expects to report an operating margin between 12 and 14% . Capacity, according to JetBlue, for the full year 2009 is expected to decrease between zero and 2% over 2008 and stage length is expected to decrease about 6% over full year 2008. Full Year 2008 Net Profit for Southwest The usually profitable Southwest Airlines also posted a fourth quarter loss -- $56,000,000 net loss. However, Southwest noted that excluding special charges and other items, its fourth quarter 2008 net income was $61 million, bringing it to its 71st consecutive quarter of profitability. Gary C. Kelly, CEO of Southwest, stated: "We are very proud to report another profitable year in one of the most difficult years in aviation's 100-year-plus history. We certainly had our challenges in 2008, but thanks to the extraordinary efforts and Warrior Spirit of our People, we persevered to report our 36th consecutive year of profitability." "We celebrated many operational successes throughout 2008 and enhanced our already exceptional Brand and Customer Experience. With one full year of our new boarding system and Business Select product offering, the Customer response has been overwhelmingly favorable. We've made significant advancements in our revenue management and network optimization capabilities. And, we've made great progress on the technology side to lay the foundation for improved Customer Service, a new southwest.com, a new Rapid Rewards program, and international codeshare agreements with WestJet to Canada and Volaris to Mexico. "Despite the difficult credit markets, we were able to boost our liquidity by $1.1 billion during fourth quarter 2008 through several financing transactions to end the year with $1.8 billion in unrestricted cash and short-term investments. After yearend, we raised an additional $173 million in cash upon the closing of the second tranche of our sale and leaseback transaction for an additional five of our 737-700 aircraft. "Due to the rapid collapse in energy prices during fourth quarter 2008, we substantially reduced our net fuel hedge position to approximately ten percent of our estimated fuel gallons in each year from 2009 through 2013. Based on this current 2009 portfolio and future market prices for energy (as of January 20, 2009), we estimate our economic fuel costs per gallon, including fuel taxes, to be approximately $1.80 and under $1.90, for first quarter and full year 2009, respectively. This current full year 2009 projection is more than $1 billion lower than we were projecting last summer for 2009. About AirTran Airways AirTran Airways, a subsidiary of AirTran Holdings, Inc. (NYSE: AAI), a Fortune 1000 company, is ranked number one in the 2008 Airline Quality Rating study. The airline offers coast-to-coast flights, North America's newest all-Boeing fleet, friendly service and Business Class and complimentary XM Satellite Radio on every flight. To book a flight, visit http://www.airtran.com. * * * The Troubled Company Reporter said on Aug. 29, 2008, that Standard & Poor's Ratings Services has lowered its ratings on AirTran Holdings Inc., including the corporate credit rating, which it lowered to 'CCC+' from 'B-'. At the same time, S&P removed the ratings from CreditWatch, where they had been placed with negative implications on May 22, 2008. The outlook is stable. About Delta Air Lines With its acquisition of Northwest Airlines, Atlanta, Georgia-based Delta Air Lines (NYSE: DAL) -- http://www.delta.com/or http://www.nwa.com/-- is now the world's largest airline. From its hubs in Atlanta, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-JFK, Salt Lake City and Tokyo-Narita, Delta, its Northwest subsidiary and Delta Connection carriers offer service to more than 376 destinations worldwide in 66 countries and serves more than 170 million passengers each year. Delta's marketing alliances allow customers to earn and redeem either SkyMiles or WorldPerks on more than 16,000 daily flights offered by SkyTeam and other partners. The merger closed on October 29, 2008. Prior to the merger, Delta was the world's second-largest airline in terms of passengers carried and Northwest was the world's fourth largest airline. Northwest and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington, represented the Northwest Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors retained Scott L. Hazan, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C. as its bankruptcy counsel. When the Northwest Debtors filed for bankruptcy, they listed $14.4 billion in total assets and $17.9 billion in total debts. On May 21, 2007, the Court confirmed the Northwest Debtors' amended plan. That amended plan took effect May 31, 2007. (Northwest Airlines Bankruptcy News Issue No. 114; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). Delta 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, represented the Delta Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provided the Delta Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provided 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, served as the Committee's financial advisors. On April 25, 2007, the Court confirmed the Delta 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; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). About United Airlines United Airlines (NASDAQ: UAUA) operates more than 3,000* flights a day on United and United Express to more than 200 U.S. domestic and international destinations from its hubs in Los Angeles, San Francisco, Denver, Chicago and Washington, D.C. With key global air rights in the Asia-Pacific region, Europe and Latin America, United is one of the largest international carriers based in the United States. United also is a founding member of Star Alliance, which provides connections for our customers to 912 destinations in 159 countries worldwide. United's 49,500 employees reside in every U.S. state and in many countries around the world. News releases and other information about United can be found at the company's Web site at united.com. * * * As reported in the Troubled Company Reporter on July 29, 2008, Standard & Poor's Ratings Services lowered its ratings on UAL Corp. and subsidiary United Air Lines Inc. (both rated B- /Negative/--), including lowering the long-term corporate credit ratings on both entities to 'B-' from 'B', and removed the ratings from CreditWatch, where they had been placed with negative implications May 22, 2008, as part of an industrywide review. The outlook is negative. About US Airways US Airways, along with US Airways Shuttle and US Airways Express, operates more than 3,100 flights per day and serves 200 communities in the U.S., Canada, Europe, the Caribbean and Latin America. The airline employs nearly 34,000 aviation professionals worldwide and is a member of the Star Alliance network, which offers our customers more than 16,500 daily flights to 912 destinations in 159 countries worldwide. Travel + Leisure Magazine named US Airways as one of the top-three airlines for 2008 in on- time performance for the year (based on Department of Transportation data for Sept. 1, 2007 through Aug. 31, 2008). And for the tenth consecutive year, the airline received a Diamond Award for maintenance training excellence from the Federal Aviation Administration (FAA) for its Charlotte, North Carolina hub line maintenance facility. For more company information, visit usairways.com. (LCCF) About JetBlue New York-based JetBlue Airways has created a new airline category based on value, service and style. Known for its award-winning service and free TV as much as its low fares, JetBlue is now pleased to offer customers Lots of Legroom and super-spacious Even More Legroom seats. JetBlue introduced complimentary in-flight e- mail and instant messaging services on aircraft "BetaBlue," a first among U.S. domestic airlines. JetBlue is also America's first and only airline to offer its own Customer Bill of Rights, with meaningful and specific compensation for customers inconvenienced by service disruptions within JetBlue's control. Visit www.jetblue.com/promise for details. JetBlue serves 52 cities with 600 daily flights. New service to San Jose, Costa Rica, begins in 2009. With JetBlue, all seats are assigned, all travel is ticketless, all fares are one-way, and an overnight stay is never required. For information or reservations call 1-800- JETBLUE (1-800-538-2583) or visit www.jetblue.com. About Continental Airlines Based in Houston, Texas, Continental Airlines Inc. (NYSE: CAL) -- http://continental.com/-- is the world's fifth largest airline. Continental, together with Continental Express and Continental Connection, has more than 3,000 daily departures throughout the Americas, Europe and Asia, serving 140 domestic and 139 international destinations. More than 550 additional points are served via SkyTeam alliance airlines. With more than 46,000 employees, Continental has hubs serving New York, Houston, Cleveland and Guam, and together with Continental Express, carries approximately 69 million passengers per year. * * * The Troubled Company Reporter said on Aug. 13, 2008, that Standard & Poor's Ratings Services took various actions on its ratings on Continental Airlines Inc. (B/Negative/B-3). S&P affirmed its 'B' long-term corporate credit rating, 'B-3' short-term corporate credit rating, all ratings on unsecured debt and on selected enhanced equipment trust certificates. S&P lowered S&P's ratings on other enhanced equipment trust certificates, particularly those secured by regional jets, and raised other ratings. All ratings were removed from CreditWatch, where they were placed with negative implications May 22, 2008, as part of an industrywide review. The rating outlook is negative. Continental Airlines, Inc. reported a working capital deficit of US$202 million, with current assets of US$4.713 billion and current liabilities of US$4.915 billion. At Dec. 31, 2007, the Company had a positive working capital of US$112 million, with US$4.561 billion in current assets and US$4.449 billion in current liabilities. As of Sept. 30, 2008, the Company had US$2.9 billion in unrestricted cash, cash equivalents and short-term investments, which is US$83 million higher than at Dec. 31, 2007. At Sept. 30, 2008, the Company also had US$164 million of restricted cash, cash equivalents and short-term investments, which is primarily collateral for estimated future workers' compensation claims, credit card processing contracts, letters of credit and performance bonds. Restricted cash, cash equivalents and short- term investments at Dec. 31, 2007, totaled US$179 million. Additionally, the Company held student loan-related auction rate securities reported as long-term investments at Sept. 30, 2008 with a par value of US$147 million and a fair value of US$130 million. CORD BLOOD: Independence Blue Cross Discloses 4.86% Equity Stake ---------------------------------------------------------------- Independence Blue Cross disclosed in a regulatory filing dated January 26, 2009, that it may be deemed to beneficially own 14,685,366 shares of Cord Blood America, Inc.'s common stock or 4.86% of the total shares outstanding. Headquartered in West Hollywood, Calif., Cord Blood America Inc. (OTC BB: CBAI) -- http://www.cordblood-america.com/-- is an umbilical cord blood stem cell preservation company with a particular focus on the acquisition of customers in need of family based products and services. The company also provides television, radio and internet advertising services to businesses that sell family based products and services. The company operates two core businesses: -- Cord Partners Inc., CorCell Co. Inc., CorCell Ltd. ("Cord") operates the umbilical cord blood stem cell preservation operations, and -- Career Channel Inc. dba. Rainmakers International ("Rain") operates the television and radio advertising operations. As of September 30, 2008, the company's balance sheet showed total assets $5,492,547 and total current liabilities of $12, 815,847, resulting in total stockholders' deficit of $7,323,300. CBAI has experienced recurring net losses from operations, which losses have caused an accumulated deficit of approximately $23.4 million as of September 30, 2008. In addition, CBAI has a working capital deficit of approximately $12.7 million as of September 30, 2008. These factors, among others, raise substantial doubt about CBAI's ability to continue as a going concern. CUPERTINO SQUARE: To Seek Plan Confirmation on March 31 ------------------------------------------------------- Cupertino Square LLC will go to the U.S. Bankruptcy Court for the Northern District California on March 31, 2009, to seek confirmation of its Chapter 11 plan. According to Bloomberg's Bill Rochelle, the Plan provides up to 25% recovery for creditors holding unsecured claims aggregating $5.2 million. Lenders have signed a deal to acquire Cupertino Square, and will partly release $130 million of their secured claims as part of their bid. The company, however, is still entertaining competing bids, and will hold an auction by March 6 if qualified bids are received. About Cupertino Square Headquartered in Cupertino, California, Cupertino Square LLC operates shopping centers. The company and its affiliate, Vallco International Shopping Center LLC, filed for Chapter 11 protection on Sept. 2, 2008 (Bankr. N.D. Calif. Lead Case No.08-54897). Richard A. Lapping, Esq., at Thelen LLP, represents the Debtors in their restructuring efforts. The U.S. Trustee for Region 17 appointed creditor to serve on an Official Committee of Unsecured Creditors. Marianne Dickson, Esq., and Scott H. McNutt, Esq., at McNutt Law Group, represent the Committee. When the Debtors filed for protection from their creditors, they listed assets and debts between $100 million and $500 million each. DBSI INC: DBSI Landsowne's Voluntary Chapter 11 Case Summary ------------------------------------------------------------ Debtor: DBSI Inc. 1550 S. Tech Lane Meridian, ID 83642 Bankruptcy Case No.: 08-12687 Debtor-affiliates filing separate Chapter 11 petitions on Jan. 28, 2008: Entity Case No. ------ -------- DBSI Lansdowne LLP 09-10276 Debtor-affiliates filing separate Chapter 11 petitions on Jan. 26, 2008: Entity Case No. ------ -------- FOR 1031 Brookhollow One LLC 09-10262 DBSI Brookhollow One LLC 09-10263 DBSI Lone Peak Parkway LLC 09-10264 Debtor-affiliates filing separate Chapter 11 petitions on Jan. 9, 2008: Entity Case No. ------ -------- FOR 1031 Broadway Plaza LLC 09-10080 Florissant Market Place Acquisition LLC 09-10081 Debtor-affiliates filing separate Chapter 11 petitions on Jan. 7, 2008: Entity Case No. ------ -------- Belton Town Center Acquisition LLC 09-10034 DBSI Broadway Plaza LeaseCo LLC 09-10035 DBSI Collins Offices LLC 09-10036 DBSI Development Services LLC 09-10037 DBSI-Renaissance Flowood LLC 09-10038 DBSI Land Development LLC 09-10039 DBSI Lexington LLC 09-10040 DBSI Meridian 184 LLC 09-10041 DBSI One Hernando Center North LLC 09-10042 DBSI Republic LeaseCo LLC 09-10043 South Cavanaugh LLC 09-10044 DBSI 121/Alma Land L.P. 09-10045 DBSI 121/Alma LLC 09-10046 Debtor-affiliates filing separate Chapter 11 petitions on Nov. 10, 2008: Entity Case No. ------ -------- DBSI South 75 Center LeaseCo LLC 08-12688 DBSI 14001 Weston Parkway LeaseCo LLC 08-12689 DBSI CP Ironwood LeaseCo LLC 08-12690 DBSI Lake Ellenor LeaseCo LLC 08-12691 DBSI 12 South Place LeaseCo LLC 08-12692 DBSI 13000 Weston Parkway LeaseCo LLC 08-12693 DBSI 2001A Funding Corporation 08-12694 DBSI 2001B Funding Corporation 08-12695 DBSI 2001C Funding Corporation 08-12696 DBSI 2005 Secured Notes Corporation 08-12697 DBSI 2006 Secured Notes Corporation 08-12698 DBSI 2008 Notes Corporation 08-12699 DBSI 2nd Street Quad LeaseCo LLC 08-12700 DBSI 700 Locust LeaseCo LLC 08-12701 DBSI Abbotts Bridge LeaseCo LLC 08-12702 DBSI Allison Pointe LeaseCo LLC 08-12703 DBSI Amarillo Apartments LeaseCo LLC 08-12704 DBSI Anna Plaza LeaseCo LLC 08-12705 DBSI Arlington Town Square LeaseCo LLC 08-12706 DBSI Arrowhead LeaseCo LLC 08-12707 DBSI Avenues North Center LeaseCo LLC 08-12708 DBSI Bandera Trails LeaseCo LLC 08-12709 DBSI Battlefield Station LeaseCo LLC 08-12710 DBSI Belton Town Center LeaseCo LLC 08-12711 DBSI Breckinridge LeaseCo LLC 08-12712 DBSI Brendan Way LeaseCo LLC 08-12713 DBSI Brookfield Pelham LeaseCo LLC 08-12714 DBSI Cambridge Place LeaseCo LLC 08-12715 DBSI Carolina Commons LeaseCo LLC 08-12716 DBSI Cedar East and Cypress LeaseCo LLC 08-12717 DBSI Clear Creek Square LeaseCo LLC 08-12718 DBSI Corporate Woods LeaseCo LLC 08-12719 DBSI CP Clearwater LeaseCo LLC 08-12720 DBSI Cranberry LeaseCo LLC 08-12721 DBSI Cross Pointe LeaseCo LLC 08-12722 DBSI Crosstown Woods LeaseCo LLC 08-12723 DBSI Daniel Burnham LeaseCo LLC 08-12724 DBSI Decatur LeaseCo LLC 08-12725 DBSI Eagle Landing LeaseCo LLC 08-12726 DBSI Embassy Tower LeaseCo LLC 08-12727 DBSI Executive Dr LeaseCo LLC 08-12728 DBSI Executive Park LeaseCo LLC 08-12729 DBSI Fairlane Green LeaseCo LLC 08-12730 DBSI Fairway LeaseCo LLC 08-12731 DBSI Florissant Market Place LeaseCo LLC 08-12732 DBSI Gadd Crossing LeaseCo LLC 08-12733 DBSI Ghent Road LeaseCo LLC 08-12734 DBSI Grant Street Portfolio LeaseCo LLC 08-12735 DBSI Green Street Commons Leaseco LLC 08-12736 DBSI Guaranteed Capital Corporation 08-12737 DBSI Hampton LeaseCo LLC 08-12738 DBSI Hickory Plaza LeaseCo LLC 08-12739 DBSI Highlands & Southcreek LeaseCo LLC 08-12740 DBSI Houston Levee Galleria Leaseco LLC 08-12741 DBSI Kemper Pointe LeaseCo LLC 08-12742 DBSI Kenwood Center LeaseCo LLC 08-12743 DBSI Keystone Commerce LeaseCo LLC 08-12744 DBSI Lake Natoma LeaseCo LLC 08-12745 DBSI Lamar LeaseCo LLC 08-12746 DBSI Landmark Towers Leaseco LLC 08-12747 DBSI Lifestyle Center LeaseCo LLC 08-12748 DBSI Lincoln Park 10 LeaseCo LLC 08-12749 DBSI Mansell Forest LeaseCo LLC 08-12750 DBSI Mansell Place LeaseCo LLC 08-12751 DBSI Master Leaseco, Inc. 08-12752 DBSI Meadow Chase Apartments LeaseCo LLC 08-12753 DBSI Megan Crossing LeaseCo LLC 08-12754 DBSI Metropolitan Square LeaseCo LLC 08-12755 DBSI Missouri LeaseCo LLC 08-12756 DBSI Network LeaseCo LLC 08-12757 DBSI North Logan Retail Center LeaeCo LLC 08-12758 DBSI North Park LeaseCo LLC 08-12759 DBSI North Stafford LeaseCo LLC 08-12760 DBSI Northlite Commons II LeaseCo LLC 08-12761 DBSI Northpark Ridgeland LeaseCo LLC 08-12762 DBSI Northridge LeaseCo LLC 08-12763 DBSI Oakwood Plaza LeaseCo LLC 08-12764 DBSI Old National Town Center LeaseCo LLC 08-12765 DBSI One Executive Center LeaseCo LLC 08-12766 DBSI One Hanover LeaseCo LLC 08-12767 DBSI Park Creek-Gainesville LeaseCo LLC 08-12768 DBSI Parkway III LeaseCo LLC 08-12769 DBSI Peachtree Corners Pavilion LeaseCo LLC 08-12770 DBSI Phoenix Peak LeaseCo LLC 08-12771 DBSI Pinehurst Square East LeaseCo LLC 08-12772 DBSI Pinehurst Square West LeaseCo LLC 08-12773 DBSI Plano Tech Center LeaseCo LLC 08-12774 DBSI Portofino Tech Center LeaseCo LLC 08-12775 DBSI Properties Inc. 08-12776 DBSI Real Estate Funding Corporation 08-12777 DBSI Realty Inc. 08-12778 DBSI Road 68 Retail Center LeaseCo LLC 08-12779 DBSI Sam Houston Tech Center LeaseCo LLC 08-12780 DBSI Sapphire Pointe LeaseCo LLC 08-12781 DBSI Securities Corporation 08-12782 DBSI Sherwood Plaza LeaseCo LLC 08-12783 DBSI Shoppes at Misty Meadows LeaseCo LLC 08-12784 DBSI Shoppes at Trammel LeaseCo LLC 08-12785 DBSI Signature Place LeaseCo LLC 08-12786 DBSI Silver Lakes Leaseco LLC 08-12787 DBSI Southport Pavilion LeaseCo LLC 08-12788 DBSI Spalding Triangle LeaseCo LLC 08-12789 DBSI Spring Valley Road LeaseCo LLC 08-12790 DBSI Springville Corner Leasco LLC 08-12791 DBSI ST Tower LeaseCo LLC 08-12792 DBSI St. Andrews Place LeaseCo LLC 08-12793 DBSI Stone Glen Village LeaseCo LLC 08-12794 DBSI Stony Brook South LeaseCo LLC 08-12795 DBSI Streetside at Towne Lake LeaseCo LLC 08-12796 DBSI Topsham Fair Mall LeaseCo LLC 08-12797 DBSI Torrey Chase LeaseCo LLC 08-12798 DBSI Treasure Valley Business Center LeaseCo LLC 08-12799 DBSI Trinity Ridge Business Center LeaseCo LLC 08-12800 DBSI University Park LeaseCo LLC 08-12801 DBSI Vantage Drive LeaseCo LLC 08-12802 DBSI Watkins LeaseCo LLC 08-12803 DBSI West Oaks Square LeaseCo LLC 08-12804 DBSI Wilson Estates LeaseCo LLC 08-12805 DBSI Winchester Office LeaseCo LLC 08-12806 DBSI Windcom Court LeaseCo LLC 08-12807 DBSI Wisdom Pointe LeaseCo LLC 08-12808 DBSI Woodlands Medical Office LeaseCo LLC 08-12809 DBSI Woodside Center LeaseCo LLC 08-12810 DCJ Inc. 08-12811 DBSI Draper LeaseCo LLC 08-12812 FOR 1031 LLC 08-12813 Spectrus Real Estate Inc. 08-12814 DBSI Academy Park Loop LeaseCo LLC 08-12815 DBSI Copperfield Timbercreek LeaseCo LLC 08-12816 DBSI Corporate Center II LeaseCo LLC 08-12817 DBSI Executive Plaza LeaseCo LLC 08-12818 DBSI Northgate LeaseCo LLC 08-12819 DBSI Two Notch Rd. LeaseCo LLC 08-12820 DBSI Asset Management LLC 08-12821 DBSI 2006 Land Opportunity Fund LLC 08-12822 DBSI Shoppes at Trammel LLC 08-12823 DBSI 2007 Land Improvement & Development Fund LLC 08-12824 DBSI 2008 Land Option Fund LLC 08-12825 DBSI Alma/121 Office Commons LLC 08-12826 DBSI Cottonwood Plaza Development LLC 08-12827 DBSI Draper Technology 21 LLC 08-12828 DBSI Escala LLC 08-12829 DBSI Short-Term Development Fund LLC 08-12830 DBSI Telecom Office LLC 08-12831 DBSI Discovery Real Estate Services LLC 08-12834 Related Information: The Debtors operate a real estate company. See: http://www.dbsi.com Court: District of Delaware (Delaware) Judge: Peter J. Walsh Debtor's Counsel: James L. Patton, Esq. bankfilings@ycst.com Joseph M. Barry, Esq. bankfilings@ycst.com Michael R. Nestor, Esq. bankfilings@ycst.com Young, Conaway, Stargatt & Taylor LLP The Brandywine Bldg. 1000 West Street, 17th Floor PO Box 391 Wilmington, DE 19899-0391 Tel: (302) 571-6684 (302) 571-6600 (302) 571-1253 http://www.ycst.com Notice Claims and Balloting Agent Claims: Kurztman Carson Consultants LLC Estimated Assets: $100 million to $500 million Estimated Debts: $100 million to $500 million The Debtor's Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Ellen Kwiatkowski- investment $26,743,328 Schwinge 402 Kilarney Pass Mundeleim, IL 60060 Michael Kanoff investment $18,696,689 3500 Flamingo Drive Miami Beach, Fl 33140 Harold Rubin investment $17,854,893 100 North Street Teterboro, NJ 07608 Bill Ramsey investment $15,500,000 PO Box 690 Salinas, CA 93902 Frederick Nicholas investment $14,250,863 3844 Culver Center Street Suite B Culver City, CA 90232 Peter Evans investment $7,317,633 17046 Marina Bay Drive Huntington Beach, CA 92649 Jeffrey Johnston investment $7,200,000 1751 Wst. Citracado Pkwy. Clubhouse Escondido, CA 92029 Yim Chow investment $7,200,000 702 Los Pinos Avenue Milpitas, CA 95035 Phyllis Chu investment $6,191,068 3020 Gough Street San Francisco, CA 94123 Elizabeth Noonan investment $5,395,000 316 Chapin Lane Burlingame, CA 94010 John Roeder investment $5,375,848 PO Box 23490 San Jose, CA 95153 Jim Nicholas investment $5,325,000 385 Hilcrest Road Englewood, NJ 07632 Robert Markstein investment $5,220,000 696 San Ramon Valley Boulevard, #347 Danville, CA 94526 Robert Angelo investment $4,542,500 33316 S.E. 34th Street Washougal, WA 98671 Henry Vara investment $4,509,982 16960 Bohlman Road Saratoga, CA 95070 Alan Destefani investment $4,500,000 PO Box 20968 Bakersfield, CA 93390 Kevin Pascoe investment $4,476,000 9400 Etchart Road Bakersfield, CA 93314 Martha Walker investment $4,324,349 863 S. Bates Street Birmingham, AL 48009 Tina Bernard investment $4,277,596 19336 Collier Street Tarzana, CA 91356 Paul Wendland investment $4,208,999 1034 N. Datepalm Drive Gilbert, AZ 85234 William Marvel investment $3,579,289 492 Escondido Circle Grand Junction, CO 81503 James Fritts investment $3,424,900 309 W. Washington Street Charlestown, WV 25414 Joan Kresse investment $3,410,909 5100 Figueroa Mountain Road Los Olivios, CA 93441 John Baklayan investment $3,400,000 16105 Whitecap Land Huntington Beach, CA 92649 Robert Rifkin investment $3,360,000 697 Red Arrow Trail Palm Desert, CA 92211 Gerard Keller investment $3,200,783 12-161 Saint Andrews Drive Ranco Mirage, CA 92270 Kristi Wells investment $3,120,000 2860 Old Quarry Road West Point, IA 92656 Michael Cooper investment $3,000,000 6465 S. 3000 E, Suite Salt Lake City, UT 84121 Gladys Esponda investment $3,000,000 PO Box 609 Buffalo, NY 82834 Arthur Hossenlopp investment $3,000,000 228 18th Street Ft. Madison, IA 52627 Richard Newman investment $3,000,000 13679 Orchard Gate Road Poway, CA 92064 Bernard Posner investment $3,000,000 6222 Primrose Avenue Los Angeles, CA 90068 Kent Schroeder investment $3,000,000 5697 McIntyre Street Golden, CO 80403 Bernard Ineichen investment $2,900,000 650 South Avenue, B122 Yuma, Arizona 85346 Alan Sacks investment $2,900,000 5 Horizon Road, #1407 Fort Lee, NJ 07024 Joseph Stokley investment $2,843,461 PO Box 1231 Bethel Island, CA 94511 JoAnn Picket investment $2,800,000 3769 E. 125th Drive Thornton, CO 80241 Bill Hall investment $2,740,593 PO Box 16172 Lubbock, TX 79490 Max Buchmann investment $2,716,186 14464 Rand Rail Drive El Cajon, CA 92021 Brian Schuck investment $2,701,027 700 Maldonado Pensacola Beach, Fl 32561 James Jensen investment $2,616,648 2125 Cypress Point Discovery Bay, CA 94505 Robert Etzel investment $2,600,000 2623 Avenue H. Ft. Madison, IA 52627 Theodore Mintz investment $2,554,458 751 Georgia Trail Lincolnton, NC 28092 Joyce Jongsma investment $2,540,000 2012 E. Burrville Crete, IL 60417 Kent Wright investment $2,488,694 2115 Marwood Circle Salt Lake City, UT 84124 James Veugler investment $2,442,397 c/o Georgia Veugler Material Recovery Corp. 820 E. Terra Cotta Ave. Unit 116 Crystal Lake, IL 60014 Virgil Gentzler investment $2,427,301 2707 Bressi Ranch Way Carlsbad, CA 92009 Karen Hughes investment $2,417,886 1050 The Old Drive Pebble Drive, CA 93953 Robert Goldberg investment $2,407,915 PO Box 8807 Boise, ID 83707 DELTA AIR: Posts $8.9 Billion Full Year 2008 Loss ------------------------------------------------- Eight of the nine major U.S. airlines that have disclosed fourth quarter and full year 2008 results have posted losses aggregating $19.6 billion. Only Southwest Airlines posted a net profit. Net Profit Net Profit Full Year 2008 Full Year 2007 -------------- -------------- Delta Air Lines, Inc. ($8,900,000,000) $1,600,000,000 AMR Corp. (2,100,000,000) 504,000,000 Southwest Air Lines 178,000,000 645,000,000 UAL Corp. (5,348,000,000) 403,000,000 US Airways Group Inc. (2,210,000,000) 427,000,000 Continental Airlines Inc. (585,000,000) 459,000,000 Alaska Air Group Inc. (135,900,000) 124,300,000 Skywest Inc. -- -- JetBlue Airways Corp. (76,000,000) 41,000,000 AirTran Holdings, Inc. (273,829,000) 52,683,000 Skywest is expected to release its fourth quarter 2008 results on February 11. The figures provided by JetBlue were pre-tax profit (or losses). Net Profit Net Profit 4th Quarter '08 4th Quarter '07 --------------- --------------- Delta Air Lines, Inc. ($1,400,000,000) ($70,000,000) AMR Corp. (340,000,000) (69,000,000) UAL Corp. (1,303,000,000) (53,000,000) Southwest Airlines (56,000,000) 111,000,000 US Airways (541,000,000) (79,000,000) Continental Airlines (266,000,000) (32,000,000) Alaska Air Group Inc. (75,200,000) (7,400,000) Skywest Inc. -- -- Jetblue Airways Corp. (49,000,000) (3,000,000) AirTran Holdings, Inc. (118,391,000) (2,171,000) High Fuel Jet Prices The airlines said high fuel prices for most of 2008 have contributed to their losses. AMR, the parent of American Airlines, said that historically high and volatile jet fuel prices continued to challenge it in the fourth quarter of 2008. AMR paid $133 million and $2.7 billion more for fuel in the fourth quarter and for all of 2008, respectively, than it would have paid at prevailing prices from the corresponding prior-year periods. Delta faced over $2 billion in increased fuel costs in 2008. While fuel prices dropped in the fourth quarter 2008, Delta paid for high fuel prices due to its fuel hedging contracts. Delta would have reported a $167 million net profit excluding special items in the December 2008 quarter, if fuel had been purchased at market prices. UAL said the historic peak in prices and the impact on hedges driven by the rapid decline resulted in a $2.9 billion increase in cost compared to 2007 fuel prices. UAL recorded $370 million in cash losses on fuel hedges that settled in the quarter, as the recent fall in fuel prices drove losses on hedges put in place earlier in the year to mitigate the steep increase in prices that had occurred in the second and third quarters of 2008. In addition, the company also recorded non-cash, net mark-to-market losses on its fuel hedges of $566 million. US Airways Group Chairman and CEO Doug Parker stated, "Like other airlines that have reported before us, our financial results reflect the staggering increase in fuel prices that we faced throughout most of 2008. In fact, had our 2008 fuel price including realized gains and losses on fuel hedging instruments remained at 2007 levels, the company's fuel expense would have been approximately $1.4 billion lower. Lower Revenues Due to Recession Delta Air Lines, which completed its merger with Northwest Airlines in 2008, said that during the fourth quarter, on a combined basis, passenger revenue fell 1%, or $54 million, compared to the prior year period due to a 4% decline in capacity, partially offset by a 3% increase in unit revenue. These results reflect the weakening of the revenue environment during the quarter caused by the global economic recession. According to UAL, total passenger revenue for the quarter decreased 8.7% year-over- year as consolidated capacity declined 10.6% , consolidated yield increased 2.4% and load factor decreased 0.3 points. Continental Airlines, which have been mentioned in possible merger talks with other U.S. airlines in 2008, said weakening economic conditions and highly volatile fuel prices presented financial challenges for the airline in the fourth quarter 2008. Continental recorded a fourth quarter net loss of $266 million. Dave Barger, JetBlue's CEO, said that while he was appointed to report a loss, he has been satisfied with JetBlue's performance in 2008. "Against the backdrop of record fuel prices and unprecedented economic challenges, we effectively managed our capacity and strengthened our network. We also made significant progress in our efforts to further enhance the JetBlue experience for our customers. JetBlue's industry-leading unit revenue growth throughout the year reflects the outstanding work of our crewmembers. "2008 was an especially tough and challenging year," said Bob Fornaro, AirTran Airways' chairman, president and chief executive officer. "We thank our dedicated, hard-working Crew Members and our loyal customers for helping us overcome the many obstacles we faced in 2008. Our Crew Members continue to strive to provide exceptional customer service, and a high-quality product while offering value to the traveling public. Despite the industry challenge shifting from high oil costs to concerns regarding consumer demand, our 2008 initiatives have us well positioned to return to profitability in 2009." Liquidity, Bankruptcy Concerns Delta, UAL and AirTran said that they have strengthened their liquidity that would allow them to face the challenges of 2009. Michael Lowry, project manager for AVIATION WEEK's Top- Performing Companies report, said in September 2008 that USAirways, AMR, Northwest Airlines, AirTran and Continental would have high bankruptcy risk in 2009. The September report also said that USAir was a high risk to file for bankruptcy again in 2008 -- it had entered and exited bankruptcy protection twice -- but USAir has been able, so far, to survive the crisis. Only smaller airlines filed for bankruptcy in 2008. These included Frontier Airlines, Skybus Airlines Inc., Aloha Airgroup Inc. and ATA Airlines Inc., who made its second Chapter 11 filing. Northwest Airlines has completed its merger with Delta Air to form one of the world's largest airlines. Delta noted that as of Dec. 31, 2008, it had $6.1 billion in total liquidity and cash collateral posted with hedge counterparties. As of Dec. 31, 2007, Delta had $3.3 billion in cash, cash equivalents and short-term investments. UAL said it completed several transactions during the fourth quarter that helped strengthen its liquidity. It raised $215 million from aircraft financing transactions that closed during the quarter along with $66 million in proceeds from asset sales. The company also received net proceeds of $107 million through equity issuances during the quarter. AirTran noted that it ended the fourth quarter with $340.5 million in unrestricted cash and investments, its highest year-end balance since 2005. 2009 Outlook Most of the airlines expect weak revenues in 2008, but expect those revenues to be offset by lower fuel prices and savings from cost cutting measures. Some of the airlines have also disclosed capacity cuts for 2009. AMR has decided not to use MD-80s to backfill flying associated with the seven 737s that no longer will be delivered in 2009. Largely as a result of this decision, the company's 2009 mainline capacity will decline by more than one percentage point compared to previous guidance provided in October. "Our fourth quarter and full-year 2008 results reflect the difficulties all airlines faced last year, but we believe our steps to reduce capacity, bolster liquidity, and improve revenue helped us better manage the challenges of record fuel prices and a weak economy," said AMR Chairman and CEO Gerard Arpey. "While significant hurdles remain, I am guardedly optimistic we can regain momentum in 2009," Mr. Arpey said. "Despite the difficult economic environment, we expect to be solidly profitable in 2009 driven by lower fuel costs, capacity discipline, and merger synergies," said Richard Anderson, Delta's chief executive officer. "Delta people have a great track record for achieving their goals, and I am confident that 2009 will be another successful year." "Delta's proactive decision to reduce domestic capacity during 2008 mitigated the impact of the decline in demand we saw over the course of the fourth quarter. We expect the worldwide economy to be difficult throughout 2009; however, if fuel prices remain at current levels, we believe the benefit of lower fuel prices will more than offset the revenue decline." said Edward Bastian, Delta's president. "Delta has the tools required to manage through these tough economic times -- with the broadest, most diverse network in the industry; an estimated $2 billion in annual merger synergies to be obtained; best-in-class costs; a solid liquidity balance; unmatched fleet flexibility; and the discipline and drive of the new Delta team." Delta projects that consolidated passenger revenue in 2009 will be down 4% to $4.8 billion. Fuel price will be $2.15 per gallon. During the December 2008 quarter, Delta hedged 58% of its fuel consumption, resulting in an average fuel price of $2.90 per gallon -- included in the fuel price is $507 million in fuel hedge losses in the fourth quarter. In 2007, when Delta paid $2.21 a gallon, it noted that its operating results were significantly impacted by changes in the price and availability of aircraft fuel. In 2007, its average fuel price per gallon rose 5% to $2.21, as compared to an average price of $2.10 in 2006, which was 15% higher than our average price of $1.79 in 2005. UAL believes that for full year 2009 revenues will be down 8% to 7%. United said it is on track to complete the previously announced removal of 100 aircraft from its fleet by the end of 2009. United added it is taking additional steps in 2009 to reduce overhead costs. The company will further reduce the number of salaried and management employees by approximately 1,000 positions by the end of 2009. This is in addition to the 1,500 positions the company announced in the second quarter, and when completed, will bring the total reduction in its salaried and management staff to approximately 2,500, or nearly 30% , since the beginning of 2008. "Last year was by any measure a challenging year -- defined by unprecedented volatility and unpredictability, but for United it was also characterized by steady and durable improvements," said Glenn Tilton, United's chairman, president and CEO. "Our management team made timely decisions that resulted in fundamental improvements across our business, which will hold us in good stead in 2009." Alaska Air Group, which operates Alaska Air and Horizon Air, noted that excluding special items, it had net income of $16.4 million in the 4th quarter of 2008 compared to a $17.9 million net loss in the same period in 2007. "In a year of unprecedented volatility that included soaring fuel prices and an economic meltdown, we were pleased to eke out a small profit for 2008, excluding special items, and be one of only a few major airlines to do so," said Bill Ayer, Alaska Air Group's chairman and chief executive officer. "Our concerted efforts to control costs, improve our operation and tailor our schedule to better match customer demand have prepared us to face whatever hurdles the current year brings." According to Mr. Parker, USAir CEO, measures executed by the airlines before aimed at offsetting high fuel prices in 2008 have significantly softened the blow from the economic downturn that the airline industry now faces. "As we begin the new year, US Airways is well prepared for a difficult global macroeconomic environment. We are running a great operation, have restructured our business model through the introduction of new fees, reduced capacity and increased our liquidity. With the help of falling fuel prices, we believe we are well positioned for the challenges ahead," concluded Parker. Larry Kellner, Continental's chairman and chief executive officer, said, "While there are continuing hard times ahead, thanks to our team, we are well-positioned to maintain our place as an industry leader." Continental said it will inaugurate daily nonstop service between New York and Shanghai in March 2009. For the full year 2009, JetBlue expects to report an operating margin between 12 and 14% . Capacity, according to JetBlue, for the full year 2009 is expected to decrease between zero and 2% over 2008 and stage length is expected to decrease about 6% over full year 2008. Full Year 2008 Net Profit for Southwest The usually profitable Southwest Airlines also posted a fourth quarter loss -- $56,000,000 net loss. However, Southwest noted that excluding special charges and other items, its fourth quarter 2008 net income was $61 million, bringing it to its 71st consecutive quarter of profitability. Gary C. Kelly, CEO of Southwest, stated: "We are very proud to report another profitable year in one of the most difficult years in aviation's 100-year-plus history. We certainly had our challenges in 2008, but thanks to the extraordinary efforts and Warrior Spirit of our People, we persevered to report our 36th consecutive year of profitability." "We celebrated many operational successes throughout 2008 and enhanced our already exceptional Brand and Customer Experience. With one full year of our new boarding system and Business Select product offering, the Customer response has been overwhelmingly favorable. We've made significant advancements in our revenue management and network optimization capabilities. And, we've made great progress on the technology side to lay the foundation for improved Customer Service, a new southwest.com, a new Rapid Rewards program, and international codeshare agreements with WestJet to Canada and Volaris to Mexico. "Despite the difficult credit markets, we were able to boost our liquidity by $1.1 billion during fourth quarter 2008 through several financing transactions to end the year with $1.8 billion in unrestricted cash and short-term investments. After yearend, we raised an additional $173 million in cash upon the closing of the second tranche of our sale and leaseback transaction for an additional five of our 737-700 aircraft. "Due to the rapid collapse in energy prices during fourth quarter 2008, we substantially reduced our net fuel hedge position to approximately ten percent of our estimated fuel gallons in each year from 2009 through 2013. Based on this current 2009 portfolio and future market prices for energy (as of January 20, 2009), we estimate our economic fuel costs per gallon, including fuel taxes, to be approximately $1.80 and under $1.90, for first quarter and full year 2009, respectively. This current full year 2009 projection is more than $1 billion lower than we were projecting last summer for 2009. About AirTran Airways AirTran Airways, a subsidiary of AirTran Holdings, Inc. (NYSE: AAI), a Fortune 1000 company, is ranked number one in the 2008 Airline Quality Rating study. The airline offers coast-to-coast flights, North America's newest all-Boeing fleet, friendly service and Business Class and complimentary XM Satellite Radio on every flight. To book a flight, visit http://www.airtran.com. * * * The Troubled Company Reporter said on Aug. 29, 2008, that Standard & Poor's Ratings Services has lowered its ratings on AirTran Holdings Inc., including the corporate credit rating, which it lowered to 'CCC+' from 'B-'. At the same time, S&P removed the ratings from CreditWatch, where they had been placed with negative implications on May 22, 2008. The outlook is stable. About Delta Air Lines With its acquisition of Northwest Airlines, Atlanta, Georgia-based Delta Air Lines (NYSE: DAL) -- http://www.delta.com/or http://www.nwa.com/-- is now the world's largest airline. From its hubs in Atlanta, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-JFK, Salt Lake City and Tokyo-Narita, Delta, its Northwest subsidiary and Delta Connection carriers offer service to more than 376 destinations worldwide in 66 countries and serves more than 170 million passengers each year. Delta's marketing alliances allow customers to earn and redeem either SkyMiles or WorldPerks on more than 16,000 daily flights offered by SkyTeam and other partners. The merger closed on October 29, 2008. Prior to the merger, Delta was the world's second-largest airline in terms of passengers carried and Northwest was the world's fourth largest airline. Northwest and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington, represented the Northwest Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors retained Scott L. Hazan, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C. as its bankruptcy counsel. When the Northwest Debtors filed for bankruptcy, they listed $14.4 billion in total assets and $17.9 billion in total debts. On May 21, 2007, the Court confirmed the Northwest Debtors' amended plan. That amended plan took effect May 31, 2007. (Northwest Airlines Bankruptcy News Issue No. 114; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). Delta 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, represented the Delta Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provided the Delta Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provided 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, served as the Committee's financial advisors. On April 25, 2007, the Court confirmed the Delta 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; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). About United Airlines United Airlines (NASDAQ: UAUA) operates more than 3,000* flights a day on United and United Express to more than 200 U.S. domestic and international destinations from its hubs in Los Angeles, San Francisco, Denver, Chicago and Washington, D.C. With key global air rights in the Asia-Pacific region, Europe and Latin America, United is one of the largest international carriers based in the United States. United also is a founding member of Star Alliance, which provides connections for our customers to 912 destinations in 159 countries worldwide. United's 49,500 employees reside in every U.S. state and in many countries around the world. News releases and other information about United can be found at the company's Web site at united.com. * * * As reported in the Troubled Company Reporter on July 29, 2008, Standard & Poor's Ratings Services lowered its ratings on UAL Corp. and subsidiary United Air Lines Inc. (both rated B- /Negative/--), including lowering the long-term corporate credit ratings on both entities to 'B-' from 'B', and removed the ratings from CreditWatch, where they had been placed with negative implications May 22, 2008, as part of an industrywide review. The outlook is negative. About US Airways US Airways, along with US Airways Shuttle and US Airways Express, operates more than 3,100 flights per day and serves 200 communities in the U.S., Canada, Europe, the Caribbean and Latin America. The airline employs nearly 34,000 aviation professionals worldwide and is a member of the Star Alliance network, which offers our customers more than 16,500 daily flights to 912 destinations in 159 countries worldwide. Travel + Leisure Magazine named US Airways as one of the top-three airlines for 2008 in on- time performance for the year (based on Department of Transportation data for Sept. 1, 2007 through Aug. 31, 2008). And for the tenth consecutive year, the airline received a Diamond Award for maintenance training excellence from the Federal Aviation Administration (FAA) for its Charlotte, North Carolina hub line maintenance facility. For more company information, visit usairways.com. (LCCF) About JetBlue New York-based JetBlue Airways has created a new airline category based on value, service and style. Known for its award-winning service and free TV as much as its low fares, JetBlue is now pleased to offer customers Lots of Legroom and super-spacious Even More Legroom seats. JetBlue introduced complimentary in-flight e- mail and instant messaging services on aircraft "BetaBlue," a first among U.S. domestic airlines. JetBlue is also America's first and only airline to offer its own Customer Bill of Rights, with meaningful and specific compensation for customers inconvenienced by service disruptions within JetBlue's control. Visit www.jetblue.com/promise for details. JetBlue serves 52 cities with 600 daily flights. New service to San Jose, Costa Rica, begins in 2009. With JetBlue, all seats are assigned, all travel is ticketless, all fares are one-way, and an overnight stay is never required. For information or reservations call 1-800- JETBLUE (1-800-538-2583) or visit www.jetblue.com. About Continental Airlines Based in Houston, Texas, Continental Airlines Inc. (NYSE: CAL) -- http://continental.com/-- is the world's fifth largest airline. Continental, together with Continental Express and Continental Connection, has more than 3,000 daily departures throughout the Americas, Europe and Asia, serving 140 domestic and 139 international destinations. More than 550 additional points are served via SkyTeam alliance airlines. With more than 46,000 employees, Continental has hubs serving New York, Houston, Cleveland and Guam, and together with Continental Express, carries approximately 69 million passengers per year. * * * The Troubled Company Reporter said on Aug. 13, 2008, that Standard & Poor's Ratings Services took various actions on its ratings on Continental Airlines Inc. (B/Negative/B-3). S&P affirmed its 'B' long-term corporate credit rating, 'B-3' short-term corporate credit rating, all ratings on unsecured debt and on selected enhanced equipment trust certificates. S&P lowered S&P's ratings on other enhanced equipment trust certificates, particularly those secured by regional jets, and raised other ratings. All ratings were removed from CreditWatch, where they were placed with negative implications May 22, 2008, as part of an industrywide review. The rating outlook is negative. Continental Airlines, Inc. reported a working capital deficit of US$202 million, with current assets of US$4.713 billion and current liabilities of US$4.915 billion. At Dec. 31, 2007, the Company had a positive working capital of US$112 million, with US$4.561 billion in current assets and US$4.449 billion in current liabilities. As of Sept. 30, 2008, the Company had US$2.9 billion in unrestricted cash, cash equivalents and short-term investments, which is US$83 million higher than at Dec. 31, 2007. At Sept. 30, 2008, the Company also had US$164 million of restricted cash, cash equivalents and short-term investments, which is primarily collateral for estimated future workers' compensation claims, credit card processing contracts, letters of credit and performance bonds. Restricted cash, cash equivalents and short- term investments at Dec. 31, 2007, totaled US$179 million. Additionally, the Company held student loan-related auction rate securities reported as long-term investments at Sept. 30, 2008 with a par value of US$147 million and a fair value of US$130 million. DOT VN INC: Names Kenneth Le as Strategic Advisory Board Member --------------------------------------------------------------- Kenneth Le has joined Dot VN, Inc.'s Strategic Advisory Board. Mr. Le will assist the company with strategic planning for future growth and development of key projects. Mr. Le is president and CEO of Le Investment Group, LLC, and has been an entrepreneur for over 20 years with experience in a variety of sectors including real estate development, import- export, food services, and Internet ventures. Mr. Le is a co- founder and vice-president of the Vietnamese American Entrepreneurs Association. The VAEA is a non-profit organization dedicated to promoting business in the Vietnamese community, developing and promoting trade between the United States and Southeast Asia and supporting charitable organizations. Mr. Le also serves on the board of directors of 3 companies, Texatronics Corp, My Viet Phu and Saigon Mall Corp. "Given [Mr. Le's] deep expertise as an entrepreneur and his understanding of the challenges associated with managing complex business developments in Vietnam and Southeast Asia, we are thrilled that he will be an active member of Dot VN's Advisory board," said Thomas M. Johnson, Dot VN's chairman and chief executive officer. "As we work to continually lead the charge in bringing advanced Internet services and wireless telecommunication solutions, such as, secure online .VN Domain registrations, Internet Data Centers, and wireless Virtual Fiber to Vietnam, Kenneth's extensive background in pragmatic product innovation and development, well as product commercialization will further assist Dot VN in meeting these objectives. We look forward to working closely with [Mr. Le] and utilizing his 20 plus years of industry experience to make Dot VN the leader in Internet and Telecommunications throughout Vietnam and Southeast Asia." "I am extremely pleased and deeply honored to join Dot VN's Strategic Advisory Board," stated Mr. Le. "I look forward to working closely with Dot VN's management team and will endeavor to bring my skills, relationships and experience to assist the company in executing its business strategy to become an industry leader in Internet and Telecommunications in Vietnam." About Dot VN, Inc. Dot VN, Inc. (OTC: DTVI.PK) -- http://www.dotvn.com-- offers Internet services and related online business e-commerce services in Vietnam and internationally. At Oct. 31, 2008, the company's balance sheet showed total assets of $2,268,318 and total liabilities of $10,681,016, resulting in a shareholders' deficit of $8,412,698. For three months ended Oct. 31, 2008, the company posted net loss of $1,589,472 compared with net loss of $4,728,219 for the same period in the previous year. For six months ended Oct. 31, 2008, the company posted net loss of $1,395,573 compared with net loss of $1,657,986. Overall, the company's liquidity and access to capital is very limited; it has not received any commitment for additional financing and given the size of the company, it may be limited to (i) continued deferral of salaries by its officers, (ii) the sale of the company's common stock or the issuance of convertible notes, or (iii) other debt instruments. The company does not have a written agreement with Hi-Tek Private and no funds were advanced during the six months ended Oct. 31 2008. Going Concern Doubt As reported in the Troubled Company Reporter on Sept. 23, 2008, Chang G. Park, CPA, from San Diego, California, expressed on Sept. 10, 2008, substantial doubt about Dot VN Inc.'s ability to continue as a going concern after auditing the company's condensed consolidated balance sheet as of July 31, 2008. The auditing firm reported that the company experienced losses from operations. The auditor said the company has had limited revenues due to the early stage of its efforts to transition into the marketing of its Internet resources. Consequently, the company has incurred recurring losses from operations. These factors, as well as the risks associated with raising capital through the issuance of equity and debt securities creates uncertainty as to the company's ability to continue as a going concern, the auditor continued. EAD SANTA NELLA: Voluntary Chapter 11 Case Summary -------------------------------------------------- Debtor: EAD Santa Nella, LLC 1109 South Santa Fe Avenue, Los Angeles, CA 90021 Bankruptcy Case No.: 09-11076 Type of Business: The company is a single asset real estate debtor. Chapter 11 Petition Date: January 20, 2009 Court: United States Bankruptcy Court Central District Of California (Los Angeles) Judge: Ellen Carroll Debtor's Counsel: Alan I. Nahmias, Esq. Mirman & Bubman LLP 21860 Burbank Blvd. Ste. 360 Woodland Hills, CA 91367 Tel: (818) 995-2555 Fax: (818) 451-4620 Email: anahmias@mirmanbubman.com Total Assets: $4,273,031 Total Debts: $2,955,941 A full-text copy of the Debtor's petition, including its largest unsecured creditors, is available for free at: http://bankrupt.com/misc/nysb08-15173.pdf The petition was signed by Abner Pajounia, Manager of the company. EASTMAN KODAK: To Cut Up to 18% of Workforce; Posts $137MM Loss --------------------------------------------------------------- Eastman Kodak Company expects to reduce its worldwide employment by between 3,500 and 4,500 positions during 2009, approximately 14% to 18% of its total workforce. This includes the reduction of 2,000 to 3,000 positions related to the company's 2009 restructuring program that is being reported today in a Form 8-K filing with the U.S. Securities and Exchange Commission, as well as actions that the company took in late 2008 that will be implemented in 2009. The 2008 actions were included in the rationalization charges that the company recorded in the fourth quarter. The layoffs are part of Kodak's efforts to strengthen its operations and become more competitive in the face of the continuing global economic downturn. These actions, which the company has already begun, include more tightly focusing its portfolio of investments, intensifying its emphasis on cash generation, and further streamlining its cost structure. The workforce reductions, which include executive positions, have commenced and the company expects to implement the majority of the actions associated with this program in the first half of 2009. In connection with these restructuring actions, the company expects to incur charges against earnings in 2009 in the range of $250 million to $300 million, and make payments from corporate cash in the range of $225 million to $275 million, including the impact of carryover actions from 2008. When combined with rationalization actions the company took in late 2008 these new 2009 restructuring actions are expected to generate annual savings in the range of $300 million to $350 million and better align the company's cost structure with the new economic environment. Additionally, the company announced that on a global basis there will be no salary increases for 2009 except where required by law or local agreements. "These are extraordinary times," said Eastman Kodak Antonio M. Perez, Chairperson and CEO. "In the face of this economic environment we are focusing on those things within our control, and we are taking aggressive yet prudent action to ensure that Kodak remains a strong and enduring competitor. Some of the actions we are taking are especially difficult because they impact our people, whose hard work and continued commitment I appreciate during these difficult times. Despite the challenges facing the economy, we remain optimistic that we will rebuild the momentum we had following our successful strategic transformation. Our future will be driven by our dedicated employees, our powerful brand, and our unmatched expertise at the intersection of imaging science and materials science." The company recognizes the need to continually rationalize its workforce and streamline its operations to remain competitive in the face of an ever-changing business and economic climate. In the fourth quarter of 2008, the Company recorded rationalization charges, net of reversals, of $103 million. $137MM 4th-Quarter Preliminary Net Loss Eastman Kodak reported preliminary fourth-quarter 2008 results, which reflect the impact of the global recession, the slowdown in consumer spending and reduced business investment, as well as changes in the value of the U.S. dollar. For the fourth quarter, Kodak reported a preliminary loss from continuing operations of $133 million, or $0.50 per share and preliminary Net Loss of $137 million, or $.51 per share. Fourth- quarter sales were $2.433 billion, a 24% decline from the year-ago quarter. Digital sales for the fourth quarter were $1.779 billion, a 23% decline from the year-ago quarter, and traditional revenues were $652 million, a 27% decline from the year-ago quarter. For full-year 2008, the company reported preliminary earnings from continuing operations of $54 million, or $0.19 per share. Full- year revenue totaled $9.416 billion, a 9% decline from 2007. Full-year digital revenue totaled $6.422 billion, a 4% decline from 2007, and traditional revenue totaled $2.987 billion, an 18% decline. The company is currently performing assessments of goodwill and long-lived assets, consequently 2008 results are preliminary pending the outcome of those assessments. "The second half of 2008 will go down in history as one of the most challenging periods we have seen in decades," said Mr. Perez. "We built significant momentum following the completion of our corporate transformation and our business results were on track through most of 2008, with digital revenue up 10% in the first half of the year, following double-digit growth in the second-half of 2007. However, during the last three months of the year, we experienced dramatic declines in several of our key businesses due to the slowdown in consumer spending and significantly reduced demand for capital equipment. Despite these challenging conditions, we held or improved our market position in key businesses, maintained a solid balance sheet, and continued to invest in innovative, differentiated products. We are taking the necessary steps to address this environment and to position Kodak to recapture the momentum when the recovery occurs." For the fourth quarter of 2008: -- Sales worldwide totaled $2.433 billion, a decrease of 24% from $3.220 billion in the fourth quarter of 2007. Revenue from digital businesses totaled $1.779 billion, a 23% decline from $2.325 billion in the prior-year quarter. Revenue from the company's traditional business decreased 27% to $652 million as a result of accelerated industry-related declines in Film Capture and Traditional Photofinishing. -- The company's preliminary fourth-quarter loss from continuing operations before interest expense, other income (charges), net, and income taxes was $120 million, compared with earnings on the same basis of $130 million in the year-ago quarter. On the basis of U.S. generally accepted accounting principles (GAAP), the company reported a preliminary fourth-quarter loss from continuing operations of $133 million, or $0.50 per share, compared with earnings on the same basis of $92 million, or $0.31 per share, in the year-ago period. Items of net expense that impacted comparability in the fourth quarter of 2008 totaled $112 million after tax, or $0.42 per share, including restructuring and rationalization charges of $96 million after tax, or $0.36 per share, and a legal contingency of $21 million after tax, or $0.08 per share, partially offset by tax and other items totaling $5 million, or $0.02 per share. Items of net expense that impacted comparability in the prior-year quarter totaled $15 million after tax, or $0.05 per share, primarily reflecting restructuring and impairment costs of $93 million after tax, or $0.30 per share, net gains on sale of property of $89 million after tax, or $0.29 per share, and various tax and other items totaling $11 million, or $0.04 per share. Other fourth-quarter 2008 details: -- Gross Profit margin was 20.5% for the quarter, a decline from 24.7% in the year-ago period. This margin decline reflects the impact of negative price/mix, including lower intellectual property royalties, along with unfavorable foreign exchange, partially offset by continued cost reductions. -- Selling, General and Administrative (SG&A) expenses were $403 million in the fourth quarter, down 23%, or $122 million, from $525 million in the year-ago quarter. -- Cash generation before dividends for the fourth-quarter was $472 million compared with $1.204 billion in the year-ago quarter. This corresponds to net cash provided by continuing operations from operating activities on a GAAP basis of $516 million in the fourth quarter, compared with net cash provided of $1.045 billion in the fourth quarter of 2007. Cash performance during the fourth quarter of 2008 reflects the change in earnings, partially offset by continued improvements in working capital. -- Kodak held $2.145 billion in cash and cash equivalents as of December 31, 2008. -- The company's debt level stood at $1.303 billion as of December 31, 2008, a reduction of $294 million as compared to the year-end 2007 debt level of $1.597 billion. -- In the quarter, the company repurchased approximately 6 million shares of its common stock at a cost of $82 million. While the previously disclosed share repurchase authorization remains in effect through the end of 2009, Kodak is not currently repurchasing any of its shares. The company will continue to provide updates on the program at the end of each quarter. Segment sales and earnings from continuing operations before interest, taxes, and other income and charges (segment earnings from operations), are as follows: -- Consumer Digital Imaging Group full-year sales were $3.088 billion, a 5% decline from 2007. Sales for the fourth quarter were $958 million, a 30% decrease from $1.372 billion in the prior-year quarter. Fourth-quarter loss from operations for the segment was $40 million, compared with earnings of $91 million in the year-ago quarter. The fourth-quarter loss was driven primarily by lower volume and price/mix impacts, particularly in Digital Capture and Devices, including lower intellectual property licensing royalties, and unfavorable foreign exchange, partially offset by cost improvements. -- Graphic Communications Group full-year sales were $3.334 billion, a 2% decline from 2007. Sales for the fourth quarter were $821 million, a 14% decrease from $953 million in the year-ago quarter. Fourth-quarter loss from operations for the segment totaled $4 million, compared with earnings of $30 million in the year-ago quarter. This earnings decline was primarily driven by lower volume and price/mix across several product lines, along with a negative impact from foreign exchange, partially offset by reductions in selling, general and administrative cost. -- Film, Photofinishing and Entertainment Group full-year sales were $2.987 billion, an 18% decline from 2007. Fourth-quarter revenue was $652 million, down from $894 million in the year-ago quarter, representing a decrease of 27%, attributable to reduced sales volume of Film Capture and Traditional Photofinishing products and services. Fourth-quarter earnings from operations for the segment increased to $39 million from $17 million in the year-ago quarter. These earnings results were driven by significant cost reductions, and reflect the impact of previously announced changes in post-employment benefits, and lower depreciation expense related to the company's previously announced change in useful life assumptions. These were partially offset by the effects of lower consumer film sales volumes, price/mix across several product lines, increased commodity costs, and foreign exchange impacts. Balance Sheet Considerations The reported company's earnings are preliminary, subject to the completion of long-lived asset and goodwill impairment testing. Given uncertainty surrounding the external economic conditions and volatility of the company's market capitalization, the company is performing impairment testing as of the end of 2008. It is likely that non-cash impairment charges, which could be material, will be recorded in 2008 based on these analyses, which will be completed prior to the filing of the company's Form 10-K in late February 2009. At the end of 2008, the company maintained a substantial cash balance and was in full compliance with all of the financial covenants associated with its revolving credit agreement. The company maintains this credit arrangement in order to provide additional financial flexibility and currently has no funds drawn in connection with this arrangement, other than a modest amount of outstanding letters of credit issued under the agreement. In the current environment, the company continues to experience an earnings impact as a result of the economic downturn and also expects its earnings to be seasonal in nature, as is typical. The company also expects to incur significant restructuring charges in the first half of 2009. The combination of these factors has an impact on the metrics used to determine financial covenant compliance. For this reason, management is engaged in dialogue with its agent and other key banks to ensure that the company continues to have access to a revolving credit agreement. As previously announced, the company will update the investment community on its overall strategy and outlook for 2009 during a meeting to be held on February 4, 2009, in New York City. The company will provide a detailed outlook for 2009 at its annual strategy meeting with the investment community on February 4. No Payout for 2008 Executive Performance-Based Compensation The company has in place compensation programs designed to drive achievement of key financial goals and to align the interests of Kodak executives with that of its shareholders. Executive performance-based compensation programs for 2008, including the executive long-term equity program (Leadership Stock) and the annual cash variable pay program (EXCEL), were based on achievement of goals related to digital revenue growth, net cash generation, and total earnings from operations. As a result of the company's 2008 performance, Kodak executives worldwide will receive no payout in 2009 for either the EXCEL variable pay program or the executive Leadership Stock program. In addition, the company previously announced that, where permissible by law, its executives will receive no salary increases in 2009. The company also announced that for non-exempt U.S. employees, there will be no U.S. Wage Dividend payout in 2009 based on 2008 performance. EASTMAN KODAK COMPANY CONSOLIDATED STATEMENT OF FINANCIAL POSITION - UNAUDITED (in millions, except share and per share data) As of December 31, 2008 2007 ---- ---- ASSETS CURRENT ASSETS Cash and cash equivalents $ 2,145 $ 2,947 Receivables, net 1,716 1,939 Inventories, net 948 943 Other current assets 174 224 ---- ---- Total current assets 4,983 6,053 Property, plant and equipment, net 1,551 1,811 Goodwill 1,681 1,657 Other long-term assets 1,745 4,138 ----- ----- TOTAL ASSETS $ 9,960 $ 13,659 ===== ====== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and other current liabilities $ 3,267 $ 3,794 Short-term borrowings and current portion of long-term debt 51 308 Accrued income and other taxes 144 344 ------ ------ Total current liabilities 3,462 4,446 Long-term debt, net of current portion 1,252 1,289 Pension and other postretirement liabilities 2,382 3,444 Other long-term liabilities 1,122 1,451 ------ ------ Total liabilities 8,218 10,630 Commitments and Contingencies SHAREHOLDERS' EQUITY Common stock, $2.50 par value, 950,000,000 shares authorized; 391,292,760 shares issued as of December 31, 2008 and 2007; 268,169,055 and 287,999,830 shares outstanding as of December 31, 2008 and 2007 978 978 Additional paid in capital 901 889 Retained earnings 6,660 6,474 Accumulated other comprehensive (loss) income (749) 452 ------ ------ 7,790 8,793 Treasury stock, at cost 123,123,705 shares as of December 31, 2008 and 103,292,930 shares as of December 31, 2007 6,048 5,764 ------ ------ Total shareholders' equity 1,742 3,029 ------ ------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 9,960 $ 13,659 ====== ====== EASTMAN KODAK COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS - UNAUDITED Twelve Months Ended December 31 2008 2007 ------------ ----------- Cash flows from operating activities: Net earnings $ 339 $ 676 Adjustments to reconcile to net cash provided by operating activities: Earnings from discontinued operations, net of income taxes (285) (881) Depreciation and amortization 500 785 Gain on sales of businesses/assets (14) (157) Non-cash restructuring and rationalization costs, asset impairments and other charges 16 336 Provision for deferred income taxes 20 54 Decrease in receivables 148 161 (Increase) decrease in inventories (20) 108 Decrease in liabilities excluding borrowings (720) (624) Other items, net (127) (107) ------- ------- Total adjustments (482) (325) ------- ------- Net cash (used in) provided by Continuing operations (143) 351 ------- ------- Net cash provided by (used in) discontinued operations 296 (37) ------- ------- Net cash provided by operating activities 153 314 ------- ------- Cash flows from investing activities: Additions to properties (254) (259) Net proceeds from sales of businesses/assets 92 227 Acquisitions, net of cash acquired (38) (2) Marketable securities - sales 162 166 Marketable securities - purchases (150) (173) ------- ------- Net cash used in continuing operations (188) (41) ------- ------- Net cash provided by discontinued operations - 2,449 ------- ------- Net cash (used in) provided by investing activities (188) 2,408 ------- ------- Cash flows from financing activities: Stock repurchases (301) - Proceeds from borrowings 155 177 Repayment of borrowings (446) (1,363) Dividends to shareholders (139) (144) Exercise of employee stock options - 6 ------- ------- Net cash used in continuing operations (731) (1,324) ------- ------- Net cash provided by discontinued operations - 44 ------- ------- Net cash used in financing activities (731) (1,280) ------- ------- Effect of exchange rate changes on cash (36) 36 ------- ------- Net (decrease) increase in cash and cash equivalents (802) 1,478 Cash and cash equivalents, beginning of year 2,947 1,469 ------- ------- Cash and cash equivalents, end of year $ 2,145 $ 2,947 ======= ======= About Eastman Kodak Eastman Kodak Company, headquartered in Rochester, New York, provides imaging technology products and services to the photographic, graphic arts commercial printing, consumer digital, and entertainment imaging market. Kodak reported $10.2 billion in revenue for the twelve months ended September 30, 2008. As reported by the Troubled Company Reporter on Dec. 16, 2008, Moody's Investors Service placed the B1 corporate family and probability of default ratings on Eastman Kodak Company under review for possible downgrade. According to the TCR on Dec. 15, 2008, Standard & Poor's Ratings Services lowered its corporate credit and issue-level ratings on Eastman Kodak Co. by one notch. The corporate credit rating was lowered to 'B' from 'B+'. These ratings remain on CreditWatch with negative implications, where they were initially placed Nov. 3, 2008, because of the company's significant downward revision in earnings guidance in October. EDGEWATER FOODS: Posts $346,946 Net Loss in Quarter ended Nov. 30 ----------------------------------------------------------------- Edgewater Foods International Inc. disclosed in a filing with the Securities and Exchange Commission that for three months ended Nov. 30, 2008, it posted a net loss of $346,946 compared with a net loss of $913,315 for the same period in the previous year. At Nov. 30, 2008, the company's balance sheet showed total assets of $6,110,762, total liabilities of $1,923,875 and stockholders' equity of $4,186,887. Liquidity and Cash Resources At Nov. 30, 2008, the company had a cash balance of approximately $292,000. Prior to the completion of its initial Preferred Stock Financing, its initial expansion had been largely funded by a short term note with a maximum limit of approximately $1,451,000. A full-text copy of the 10-Q filing is available for free at: http://ResearchArchives.com/t/s?38be Based in Gaithersburg, Maryland, Edgewater Foods International Inc. (OTC BB: EDWT) -- http://www.edgewaterfoods.com/-- is the parent company of Island Scallops Ltd., a Vancouver Island aquaculture company. Established in 1989, ISL operates a scallop farming and marine hatchery business. Going Concern Doubt LBB & Associates Ltd. LLP, in Houston, expressed substantial doubt about Edgewater Foods International Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the year ended Aug. 31, 2007. The auditing firm pointed to the company's absence of significant revenues, recurring losses from operations, and its need for additional financing in order to fund its projected loss in 2008. ENTERPRISE RENT-A-CAR: Rental Car Firms Also Want to Access TARP ---------------------------------------------------------------- Paulo Prada at The Wall Street Journal reports that Avis Budget Group Inc., Hertz Global Holdings Inc., Enterprise Rent-A-Car Co., and other rental car companies are asking the Congress to let them use Troubled Asset Relief Program funds to finance new auto purchases. WSJ relates that stagnant credit markets, declining demand for travel, and the automobile industry's hardships have made it hard for rental car companies to find buyers for their used automobiles and secure financing to purchase new ones to replace them. According to WSJ, the House of Representatives included a clause in a TARP reform bill that it passed to the Senate last week to give the government the authority to back loans to rental car companies and other fleet purchasers. WSJ states that the rental car industry is the U.S. auto industry's biggest customer, buying as many as 1.8 million new vehicles per year. The report quoted Steven Adamske -- a spokesperson for House Financial Services Committee chairperson Barney Frank -- as saying, "If our desire is to get car buying and credit flowing again, enabling people who buy hundreds of cars at a time is a good way to do it." Enterprise Rent-A-Car Company -- http://www.enterprise.com/car_rental/home.do-- is a privately held St. Louis, Missouri-based rental car company serving customers in the U.S., Canada, Germany, Ireland, Puerto Rico, and the U.K. They are also the owners of the Vanguard Automotive Group, operator of National Car Rental and Alamo Rent A Car in North America. Enterprise Rent-A-Car is the largest rental car company in North America, and has more than 6,900 offices. FAIRFAX FINANCIAL: S&P Raises Sr. Unsec. Debt Rating From 'BB+' --------------------------------------------------------------- Standard & Poor's Ratings Services said it raised its counterparty credit and senior unsecured debt ratings on Toronto-based Fairfax Financial Holdings Ltd. to 'BBB-' from 'BB+'. The outlook is stable. "The upgrade reflects S&P's enhanced view of the company's credit profile, which benefits from its increasing ownership of Toronto- based Northbridge Financial as well as from its improved financial flexibility resulting from significant investment gains during a period of challenging economic conditions," said Standard & Poor's credit analyst Michael Gross. Fairfax's competitive position is specifically enhanced by its increasing ownership of Toronto-based Northbridge Financial and its intent to secure 100% ownership in early 2009, subject to shareholder approval. Through its investment expertise, Fairfax reported substantial realized investment gains of $1.9 billion through Sept. 30, 2008. Although S&P does not view this level of investment performance as sustainable, Fairfax has produced a record of above-average investment performance for more than two decades. FANNIE MAE: Eight Officers Dispose of Shares to Pay Taxes --------------------------------------------------------- Eight officers of Federal National Mortgage Association or Fannie Mae disclosed in separate regulatory filings that on January 26, 2009, they may be deemed to have disposed of a number of shares of Fannie Mae's common stock at $0.65 per share. The shares were withheld by Fannie Mae to pay withholding taxes due upon the vesting of restricted shares. Following that transaction, the remaining shares directly owned by Mr. Bacon total 110,831. Mr. Bacon may also be deemed to indirectly own 1,100,509 shares of Fannie Mae's common stock through ESOP. Shares Name Position Disposed ---- -------- -------- Kenneth J. Bacon EVP for Housing & Community Dev. 6,452 David C. Benson EVP - Capital Mkts & Treasury 1,810 David C. Hisey EVP & Deputy CFO 2,280 Linda K. Knight EVP - Enterp. Ops & Securities 5,769 Thomas A. Lund EVP - Single Family Mortgage 8,851 William B. Senhauser SVP, Chief Compliance Officer 1,764 Michael A. Shaw EVP & Enterprise Risk Officer 910 Michael J. Williams EVP & COO 16,234 Remaining shares beneficially owned after the transactions: Officer Directly Owned Indirectly Owned ------- -------------- ---------------- Mr. Bacon 110,831 1,100,509.0 Mr. Benson 35,033 480,908.0 Mr. Hisey 73,881 917.7 Ms. Knight 125,886.8 1,336.5 Mr. Lund 134,261 707.9 Mr. Senhauser 35,291 574,526.7 Mr. Shaw 29,228 216.8 Mr. Williams 351,536.8 1,621.1 About Fannie Mae Fannie Mae exists to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America's secondary mortgage market to enhance the liquidity of the mortgage market by providing funds to mortgage bankers and other lenders so that they may lend to home buyers. Our job is to help those who house America. As reported by the Troubled Company Reporter, the U.S. government took direct responsibility for Fannie Mae and Freddie Mac, placing the government sponsored enterprises under conservatorship on September 7, 2008. James B. Lockhart, director of Federal Housing Finance Agency, said that Fannie Mae and Freddie Mac share the critical mission of providing stability and liquidity to the housing market. Between them, the Enterprises have $5.4 trillion of guaranteed mortgage-backed securities (MBS) and debt outstanding, which is equal to the publicly held debt of the United States. Among the key components of the conservatorship, the FHFA, as conservator, assumed the power of the Board and management. FLYING J: Big West to Wind Down Rosedale Highway Operations ----------------------------------------------------------- KGET TV 17 reports that Big West Oil LLC said on Wednesday that it will suspend operations at its Rosedale Highway refinery. According to KGET TV, Big West's parent company, Flying J Inc., filed for Chapter 11 bankruptcy protection in December 2008. Big West said in a statement that it has been trying to purchase crude oil to refine into gasoline, but has failed to find a steady source. According to KGET TV, Big West has been seeking alternative crude oil supply on normal terms and financing or other business solutions that would help keep its Bakersfield Refinery in operation. KGET TV relates that Big West said it still hopes to find a source of crude, but has to close the refinery in the meantime. "We hope this suspension will be short lived . . . And we're working very hard to find a solution that will allow resumption of operations," according to Big West's statement. KGET TV quoted Big West Executive Vice President Fred Greener as saying, "Following the Chapter 11 filing on December 22, 2008, we have not had the cash liquidity needed to purchase crude in the necessary types and quantities under the terms being offered by suppliers. We are continuing to evaluate the full range of options, but we have been unsuccessful in our efforts thus far to find a workable solution. For now, we will be winding down refining operations at the facility as we continue to explore opportunities. We hope that this suspension will be shortlived, and are working very hard to find a solution that will allow resumption of operations. However, at this time, we cannot predict when that might occur. We have reached out to the United Steelworkers, Local 219, to begin discussions regarding the future of the plant and its employees. We remain committed to doing everything within our power to achieve positive outcomes for our company, our workforce, and for the Bakersfield community. We certainly wish the circumstances were different." KGET TV states that Big West is asking the unions for a meeting regarding the closure. According to the report, Big West has contacted the United Steelworkers Local 219 to start discussions regarding the future of its contract with union workers at its Bakersfield Refinery. About Big West Big West Oil is a small, refining and marketing company with 101,000 barrels per day rated throughput capacity at two refineries in Bakersfield, California and Salt Lake City, Utah. Big West markets its product through wholesale markets as well as through sales to Flying J's retail network. About Flying J Headquartered in Ogden, Utah, Flying J Inc. -- http://www.flyingj.com-- operate an oil company with operations in the filed of exploration and refining of petroleum products. The Debtors engage in online banking, card processing truck and trailer leasing, and payroll services. The Debtors also operate about 200 travel plazas in 41 states and six Canadian provinces. The company and six of its affiliates filed for Chapter 11 protection on Dec. 22, 2008 (Bankr. D. Del. Lead Case No. 08-13384). Kirkland & Ellis LLP represents the Debtors' in their restructuring efforts and Young, Conaway, Stargatt & Taylor LLP as their Delaware Counsel. The Debtors proposed The Blackstone Group LP as financial advisor and Epiq Bankruptcy Solutions LLC as claims agent. When the Debtors filed for protection from its creditors, they listed assets more than $1 billion and debts between $100 million to $500 million. FORD MOTOR: Posts $5.9BB Net Loss in Quarter ended December 31 -------------------------------------------------------------- Ford Motor Company reported net loss of $5.9 billion for fourth quarter ended Dec. 31, 2008, compared with a net loss of $2.8 billion in the fourth quarter of 2007. Ford's fourth quarter pre-tax operating loss from continuing operations, excluding special items, was $3.7 billion, a decline from a loss of $620 million a year ago. On an after-tax basis, Ford lost $3.3 billion in the fourth quarter compared with a loss of $487 million a year ago. "Ford and the entire auto industry faced an extraordinary slowdown in all major global markets in the fourth quarter that clearly had an impact on our results," said Ford president and CEO Alan Mulally. "We continued to take the decisive actions necessary to lower production to match the lower worldwide demand and reduce costs, which we expect will allow us to significantly reduce negative operating cash flow in 2009 and position Ford for growth when the economy rebounds. "The progress we continued to make in the fourth quarter gives us great confidence that we have the right plan, the right people and the right products to create a viable, profitably growing Ford for all of our stakeholders," Mr. Mulally added. "Our market share growth in the fourth quarter in the U.S. and Europe is a positive sign that customers recognize the value of our new products and understand that a new and different Ford is emerging." Based on current planning assumptions, Ford reiterated it has sufficient liquidity to fund its business plan and product investments. Ford said it finished 2008 with $24 billion in available Automotive liquidity, including $13.4 billion in Automotive gross cash. In January 2009, as permitted by its underlying agreement with the UAW, Ford converted the Temporary Asset Account funds into a new Ford note, payable at year-end. This will provide the flexibility to utilize more than $2 billion of funds to support operations, if needed. As a result, this amount will improve liquidity and be included as part of Ford's Automotive gross cash beginning with the first quarter of 2009. Ford also reconfirmed that, based on current planning assumptions, it does not need a bridge loan from the U.S. government, barring a significantly deeper economic downturn or a significant industry event, such as the bankruptcy of a major competitor that causes disruption to the company's supply base, dealers or creditors. Ford also said it remains on track for both its overall and North American Automotive pre-tax results to be breakeven or profitable in 2011 -- excluding special items -- based on current planning assumptions. Due to concerns about the instability of the capital markets with the uncertain state of the global economy, Ford disclosed it is drawing its available credit lines. The company said it expects to receive the funds on Feb. 3 and will add the $10.1 billion to its cash and reflect it on its first quarter 2009 balance sheet. "Ford went to the credit markets two years ago when they were functioning normally and obtained the funding necessary -- including our credit lines -- to support our product transformation and restructuring," Mr. Mulally said. "Given the instability of the capital markets with the uncertain state of the global economy, we believe it is prudent to draw these credit facilities at this time." Ford also said the United Auto Workers union has agreed to end the "jobs bank" at Ford, known as the Job Security program. The company and the union presently are working out the details of implementation. On an after-tax basis, Ford's fourth quarter operating loss from continuing operations, excluding special items, was $3.3 billion compared with a loss of $487 million a year ago. Ford's fourth quarter revenue was $29.2 billion, down from $45.5 billion a year ago. The decline is explained by lower volume, the sale of Jaguar Land Rover and exchange translation. Special items reduced pre-tax profits by $1.4 billion in the fourth quarter which largely reflected costs associated with worldwide personnel reductions and retiree health care charges related to our VEBA agreement with the UAW, primarily reflecting losses on the Temporary Asset Account. Overall, the company's Automotive gross cash was reduced by $5.5 billion in the fourth quarter, while its operating-related cash flow was $7.2 billion negative. The change in gross cash reflects: -- An Automotive pre-tax loss of $3.3 billion, excluding special items. -- Capital spending during the quarter about $600 million higher than depreciation and amortization, because of spending associated with the launch of the all-new Ford F- 150 and the favorable impact of the second quarter asset impairments on depreciation and amortization. -- Changes in working capital and other timing differences that were $2.7 billion negative. This is explained by a reduction in trade payables of about $4 billion and other timing differences as a result of low production at the end of the quarter. Significant reductions in inventory and receivables were offsets to the lower payables. -- Payments of $600 million to Ford Credit reflecting its change to up-front payment of subvention. -- Approximately $1.3 billion in tax-related payments primarily from Ford Credit. Ford's negative Automotive operating-related cash flow during the fourth quarter was significantly affected by declining worldwide demand. Ford said it expects operating-related cash outflows in 2009 to be significantly less than those incurred in 2008. The expected improvement assumes, among other things, stabilization of trade payables as industry volumes begin to grow later in the year, lower capital spending, structural cost reductions, lower inventories and other factors. "Ford continues to take the decisive actions necessary to match our production in line with demand. This allowed us to reduce dealer stock by about 50,000 units and benefit from one the lowest days supply in the U.S. industry," said Lewis Booth, Ford executive vice president and chief financial officer. "As production volumes stabilize, payables will stop declining and generally will grow as volumes recover. In addition, with the major F-150 launch behind us, we expect spending to decline in 2009," Mr. Booth said. "We expect this will allow us to significantly reduce our negative operating cash flow in 2009 and maintain the liquidity we need to fund our product-led transformation." Ford disclosed it was evaluating its strategic options for Volvo Cars, including the possible sale of the automaker. Volvo continued to implement restructuring actions and substantially implemented its worldwide personnel reduction of 25% by the end of the quarter. Outlook Despite the severe worldwide downturn, Ford said it continues to make progress on all four pillars of its plan: -- Restructuring to operate profitably at the demand and changing model mix; -- Accelerating the development of new products that customers want and value; -- Financing the plan and improving the balance sheet; -- Working together effectively as one team, leveraging Ford's worldwide assets Ford anticipates weak volumes this year across all markets, with worldwide sales down more than 10%. Significant government policy stimulus is being implemented in most markets and is expected to improve the environment for sales later this year. However, financial markets remain under significant stress, and further government and central bank actions to provide liquidity and stabilize banks are needed, the company said. For Ford, the year ahead will be marked by an unprecedented number of new product introductions. In North America, 2009 sees the introduction and sale of upgraded gas and hybrid versions of the Ford Fusion mid-size sedan, new Ford Mustang - including a new convertible model and new Shelby GT500, new Ford Taurus and Taurus with fuel-saving EcoBoost engine, Ford Flex with EcoBoost, an entirely new type of small commercial van for the North American market called the Transit Connect, upgraded Mercury Milan and new Milan Hybrid, upgraded Lincoln MKZ, Lincoln MKS with EcoBoost, all-new Lincoln MKT three-row premium crossover and the first full sales year for the new Ford F-150 pickup. In Europe, Ford will launch its fastest volume production model ever - the new 300 horsepower Focus RS. 2009 also marks the first full sales year for the Fiesta, while the new Ford Ka is introduced progressively across the region. The Ford Kuga crossover will be available for the first time with a 2.5-litre 5- cylinder Duratec Turbo engine and Durashift 5-tronic automatic transmission, while "Ford Individual" vehicle personalization interior and exterior styling packs will be extended across the model range. Volvo this year is launching the XC60 crossover in Europe now and in the U.S. market this spring. Volvo also will introduce low- emission versions of seven cars, including the C30, S40, V50, V70, XC70, XC 60 and S80. A freshened S80 comes later this year for Volvo's flagship sedan. In Asia, 2009 sees the introduction in China of the all-new Ford Fiesta five-door and four-door sedan built in Nanjing. The Fiesta also currently is being introduced in Australia and New Zealand. Other product introductions in 2009 include the new Ranger compact pickup and the Everest SUV, both with advanced and efficient TDCi turbo-diesel engines. In South America, 2009 provides still more evidence of the growing strength of the company's "ONE Ford" plan. Ford is bringing to market the new European-based Ford Focus in Brazil, Argentina and Venezuela. Plus, in Brazil, the North American-based Ford Edge arrives in dealerships, along with the European-based Transit. Six additional product actions also are planned for introduction in the region this year. Ford also is on track with its plan to invest in new, smaller, fuel-efficient vehicles and achieve a more balanced global product portfolio. With the company's "ONE Ford" product development vision, all Ford vehicles competing in global segments will be common in North America, Europe and Asia within the next five years. They include Fiesta- and Focus-sized small cars, Fusion- and Mondeo-sized mid-size cars and utilities, and commercial vans. Importantly, every new product will be the best or among the best in its segment for fuel economy, while providing top quality, safety, smart technologies and value. Ford's leadership in connectivity and infotainment includes the addition of two newly added features to its award-winning SYNC technology -- 911 Assist and Vehicle Health Reports. This summer, Ford SYNC(TM) will be further expanded with Traffic, Directions and Information technology. The new services will be provided in with no monthly subscription fees for the first three years. Ford also this month confirmed that its SYNC technology will be available globally beginning in 2010, starting in Europe and then migrating to Asia Pacific. The company also said it is on track to deliver the plan disclosed in November to deliver $14 billion to $17 billion of cash improvements by 2010. The actions include: -- Reducing spending and inventories and achieving other working capital improvements; -- Reducing salaried personnel-related costs and achieving additional efficiencies in engineering, manufacturing, advertising, and information technology; -- Releasing capital consistent with Ford Credit's smaller balance sheet and focus on Ford brands; -- Developing incremental sources of funding, including sale of non-core assets. In addition, Ford is pursuing other restructuring opportunities in conjunction with its various stakeholders and will have more to discuss at a later date. Based on current planning assumptions -- many of which are outlined below -- Ford reiterated that it remains on track for both its overall and North American Automotive pre-tax results to be at or above breakeven in 2011, excluding special items. "Despite the tough fourth quarter, we saw many positive developments that make us more confident than ever that we have the right plan and are taking the right actions to survive this downturn and emerge as a lean, globally integrated company poised for long-term profitable growth," Mr. Mulally said. 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. * * * Moody's Investors Service in December 2008 lowered the Corporate Family Rating and Probability of Default Rating of Ford Motor Company to Caa3 from Caa1 and lowered the company's Speculative Grade Liquidity rating to SGL-4 from SGL-3. The outlook is negative. The downgrade reflects the increased risk that Ford will have to undertake some form of balance sheet restructuring in order to achieve the same UAW concessions that General Motors and Chrysler are likely to achieve as a result of the recently- approved government bailout loans. Such a balance sheet restructuring would likely entail a loss for bond holders and would be viewed by Moody's as a distressed exchange and consequently treated as a default for analytic purposes. GENCORP INC: Board Approves Kathleen Redd's Appointment as CFO -------------------------------------------------------------- On January 21, 2009, the Board of Directors of GenCorp Inc. unanimously approved the appointment of Acting Chief Financial Officer Kathleen E. Redd to Chief Financial Officer of the company. Ms. Redd, age 47, will also maintain her position as Vice President at the company. Since September 26, 2008, Ms. Redd has served as the company's Vice President, Controller and Acting Chief Financial Officer. Before that, Ms. Redd served as the company's Vice President, Finance from August 2006 to September 2008 and as the company's Assistant Corporate Controller from August 2002 to August 2006. Before joining the company, Ms. Redd was Vice President of Finance for Grass Valley Group in Nevada City, California from April 2001 to July 2002 and Vice President of Finance and Controller for Jomed Inc. in Rancho Cordova, California from April 1996 to April 2001. Ms. Redd will be paid an annual base salary of $300,000 and will be eligible for the same benefits currently received. There are no other understandings or arrangements between Ms. Redd and any other person pursuant to which Ms. Redd was selected or appointed as the Chief Financial Officer of the company. Ms. Redd does not have any family relationship with any director, executive officer or person nominated or chosen by the Board of Directors to become an executive officer. Other than her employment with the company, Ms. Redd did not have any material interest, direct or indirect, in any material transaction to which the company was a party since the beginning of the company's last fiscal year, or which is presently proposed. 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. GenCorp Inc.'s balance sheet as of Aug. 31, 2008, showed $1.01 billion in total assets, $1.04 billion in total liabilities, resulting to $30.9 million in shareholders' deficit. GenCorp posted $2.7 million in net losses on $172.5 million in net revenues for the third quarter ended Aug.31, 2008, compared with $15.6 million in net profit on $198.5 million in net revenues for the third quarter ended 2007. As reported in the Troubled Company Reporter on Jan. 20, 2009, Moody's Investors Service downgraded the Corporate Family Rating of GenCorp, Inc. to B3 from B2 and the Probability of Default Rating to Caa1 from B2. In a related action, the company's senior secured bank credit facilities were downgraded to Ba3, convertible subordinated notes downgraded to Caa2, and senior subordinated notes affirmed at B1. The rating outlook remains negative. GIANT CARPET: Declares Bankruptcy, Lists $5.2MM in Liabilities -------------------------------------------------------------- Torstar News Service reports that Giant Carpet and Flooring Ltd. has declared bankruptcy. Torstar News relates that Giant Carpet, hurt by the deteriorating housing market, listed $5.2 million in assets. According to the report, Toronto-based liquidation firm Danbury Sales is handling the sale of Giant Carpet's inventory. Torstar News states that Giant Carpet's bankruptcy left an unknown number of clients with unfilled orders. Giant Carpet and Flooring Ltd. is a 40-year-old chain of warehouse-style stores. GOLD & HONEY: Voluntary Chapter 15 Case Summary ----------------------------------------------- Chapter 15 Debtor: Gold & Honey, Ltd. c/o Amir Bartov, Receiver Lipa Meir & Co. 4 Itamar Ben Avi St. Tel Aviv, Israel Chapter 15 Case No.: 09-70463 Debtor-affiliate filing separate Chapter 15 petition: Entity Case No. ------ -------- Gold & Honey (1995) LP 09-70464 Debtor-affiliates filing separate Chapter 11 petitions on Sept. 23, 2008: Entity Case No. ------ -------- Almond Jewelers, Inc. 08-75238 Gold & Honey (1995) LP 08-75237 Chapter 15 Petition Date: January 28, 2009 Court: Eastern District of New York (Central Islip) Judge: Alan S. Trust Chapter 15 Debtors' Counsel: Paul H. Deutch, Esq. paul.deutch@troutmansanders.com Troutman Sanders LLP The Chrysler Building 405 Lexington Avenue New York, NY 10174 Tel: (212) 704-6000 Fax: (212) 704-6288 Estimated Assets: $1 million to $10 million Estimated Debts: $10 million to $50 million GOODY'S LLC: Former Worker Sues Co. for Unpaid Wages, Benefits -------------------------------------------------------------- Court documents say that Richard McGrath, a former Goody's LLC employee, has filed a lawsuit against the company on behalf of himself and about 480 former workers for nonpayment of wages and other benefits for 60 days. Reuters reports that Mr. McGrath alleged that Goody's failed to give workers at least 60 days advance notice of termination as required by the Worker Adjustment and Retraining Notification Act. The lawsuit, says the report, is seeking class action status. About Goody's LLC Headquartered in Wilmington, Delaware, Goody's LLC -- http://www.shopgoodys.com-- Goody's Family Clothing Inc. -- http://www.shopgoodys.com/-- operates chains of clothing stores. The company and 13 of its affiliates filed for Chapter 11 protection on January 13, 2009 (Bankr. D. Del. Lead Case No. 09-10124). M. Blake Cleary, Esq., at Young, Conaway, Stargatt & Taylor LLP, represents the Debtors in their restructuring efforts. The Debtor proposed Bass Berry & Sims PLC and Skadden Arps Slate Meagher & Flom LLP as their special counsel; FTI Consulting Inc. as financial advisor; and Hilco Merchant Resources LLC and Gordon Brothers Retail Partners LLC as liquidation agent. The company is owned by Goody's Holdings Inc., a non-debtor entity. As of May 31, 2008, the company operated 355 stores in several states with approximately 9,868 personnel of which 170 employees are covered under a collective bargaining agreement. The company and 19 of its affiliates filed for Chapter 11 protection on June 9, 2008 (Bankr. D. Del. Lead Case No. 08-11133). Gregg M. Galardi, Esq., and Marion M. Quirk, Esq., at Skadden Arps Slate Meagher & Flom LLP, and Paul G. Jennings, Esq., at Bass, Berry & Sims PLC, represented the Debtors. The Debtors selected Logan and Company Inc. as their claims agent. The company emerged from bankruptcy Oct. 20, 2008, after closing more than 70 stores. When the Debtors filed for protection from their creditors for the second time, they listed assets and debts between $100 million to $500 million each. GOTTSCHALK INC: Taps DJM Asset as Real Estate Consultant -------------------------------------------------------- Gottschalk Inc. asks the United States Bankruptcy Court for the District of Delaware for permission to employ DJM Asset Management LLC as its real estate consultant. The firm is expected to: a) meet with the Debtor to ascertain the its goals, objectives and financial parameters; b) negotiate the modification of certain leases, as directed by the Debtor to obtain rent reductions or other advantageous modifications; c) negotiate the potential termination, assignment of other disposition of certain of the leases as directed by the Debtor and the owned properties including assisting the Debtor at auction, if needed; d) negotiate waivers or reductions of prepetition cure amounts and claims asserted under Section 502(b)(6) of the Bankruptcy Code with respect to leases; e) assist the Debtor in the documentation of proposed transactions; and f) report periodically to the Debtor regarding the status of negotiations and disposition efforts. The firm will be paid in accordance to the real estate consulting and advisory services agreement. A full-text copy of the agreement is available for free at: http://ResearchArchives.com/t/s?38c5 To the best of the Debtor's knowledge, the firm does not hold any interest adverse to the Debtor's estate and its creditors, and is a "disinterested person" as defined in Section 101(14) of the Bankruptcy Code. About Gottschalks Headquartered in Fresno, California, Gottschalks Inc. -- http://www.gottschalks.com-- is a regional department store chain, currently operating 58 department stores and three specialty apparel stores in six western states, including California (38), Washington (7), Alaska (5), Oregon (5), Nevada (1) and Idaho (2). Gottschalks offers better to moderate brand- name fashion apparel, cosmetics, shoes, accessories and home merchandise. The company filed for Chapter 11 protection on January 14, 2009 (Bankr. D. Del. Case No. 09-10157). O'Melveny & Myers LLP represents the Debtor in its restructuring efforts. Lee E. Kaufman, Esq., and Mark D. Collins, Esq., at Richards, Layton & Finger, P.A., will serve as the Debtors' co-counsel. The Debtors selected Kurtzman Carson Consultants LLC as claims agent. The U.S. Trustee for Region 3 appointed seven creditors serve on an Official Committee of Unsecured Creditors. In its bankruptcy petition, Gottschalk listed $288,438,000 in total assets and $197,072,000 in total debts as of Jan. 3, 2009. GOTTSCHALK INC: Taps FD U.S. as Communications Advisor ------------------------------------------------------ Gottschalk Inc. asks the United States Bankruptcy Court for the District of Delaware for permission to employ FD U.S. Communications Inc. as its communications advisors. The firm is expected to: a) develop and implement communications programs and related strategies and initiatives for communications with the Debtor's key constituencies regarding the Debtor's operations and financial performance and the Debtor's progress through the Chapter 11 process; b) develop public relations initiatives for the Debtor during this Chapter 11 case; c) prepare press release and other public statements for the Debtor including statements relating to major events in this Chapter 11 case; d) prepare other forms of communication to the Debtor's key constituencies and the media, potentially including materials to be posted on the Debtor's web site; and e) perform other communications consulting services as may be requested by the Debtor. The Debtor paid $20,000 retainer fee to the firm. The firm's professionals and their compensation rates are: Designation Hourly Rate ----------- ----------- vice chairman $520 senior managing director $480 senior vice president $420 vice president $340 assistant vice president $300 associate $240 junior associate $200 administration $100 To the best of the Debtor's knowledge, the firm is a "disinterested person" as defined in Section 101(14) of the Bankruptcy Code. A full-text copy of the engagement letter between the Debtor and the firm is available for free at: http://ResearchArchives.com/t/s?38c5 About Gottschalks Headquartred in Fresno, California, Gottschalks Inc. -- http://www.gottschalks.com-- is a regional department store chain, currently operating 58 department stores and three specialty apparel stores in six western states, including California (38), Washington (7), Alaska (5), Oregon (5), Nevada (1) and Idaho (2). Gottschalks offers better to moderate brand- name fashion apparel, cosmetics, shoes, accessories and home merchandise. The company filed for Chapter 11 protection on January 14, 2009 (Bankr. D. Del. Case No. 09-10157). O'Melveny & Myers LLP represents the Debtor in its restructuring efforts. Lee E. Kaufman, Esq., and Mark D. Collins, Esq., at Richards, Layton & Finger, P.A., will serve as the Debtors' co-counsel. The Debtors selected Kurtzman Carson Consultants LLC as claims agent. The U.S. Trustee for Region 3 appointed seven creditors serve on an Official Committee of Unsecured Creditors. In its bankruptcy petition, Gottschalk listed $288,438,000 in total assets and $197,072,000 in total debts as of Jan. 3, 2009. GOTTSCHALK INC: Taps Financo Co. as Investment Banker ----------------------------------------------------- Gottschalks Inc. asks the United States Bankruptcy Court for the District of Delaware for permission to employ Financo Inc. as its investment banker. The firm is expected to: a) work with the Debtor to determine the appropriate process for marketing the Debtor to potential purchasers; b) assist in the preparation of descriptive material concerning the Debtor; c) develop, update and review with the Debtor on an ongoing basis a list of parties which might be interested in acquiring the Debtor; d) conduct the overall sale process including investment banking sale, advisory and valuation services. e) consult with and advise the Debtor concerning the sale process, and participate in sale negotiations on the Debtor's behalf; and f) provide opinion to the board of directors of the Debtor as to whether, depending on the nature of the sale, the consideration to be received by the Debtor in connection with the proposed sale is fair from a financial point of view. The firm will be paid for its rendered services in accordance to the engagement letter dated Jan. 8, 2009. A full-text copy of the engagement letter is available for free at: http://ResearchArchives.com/t/s?38c6 To the best of the Debtor's knowledge, the firm is a "disinterested person" as defined in Section 101(14) of the Bankruptcy Code. About Gottschalks Headquartered in Fresno, California, Gottschalks Inc. -- http://www.gottschalks.com-- is a regional department store chain, currently operating 58 department stores and three specialty apparel stores in six western states, including California (38), Washington (7), Alaska (5), Oregon (5), Nevada (1) and Idaho (2). Gottschalks offers better to moderate brand- name fashion apparel, cosmetics, shoes, accessories and home merchandise. The company filed for Chapter 11 protection on January 14, 2009 (Bankr. D. Del. Case No. 09-10157). O'Melveny & Myers LLP represents the Debtor in its restructuring efforts. Lee E. Kaufman, Esq., and Mark D. Collins, Esq., at Richards, Layton & Finger, P.A., will serve as the Debtors' co-counsel. The Debtors selected Kurtzman Carson Consultants LLC as claims agent. The U.S. Trustee for Region 3 appointed seven creditors serve on an Official Committee of Unsecured Creditors. In its bankruptcy petition, Gottschalk listed $288,438,000 in total assets and $197,072,000 in total debts as of Jan. 3, 2009. GEORGIA-PACIFIC LLC: Fitch Affirms Issuer Default Rating to 'B+' ---------------------------------------------------------------- Fitch Ratings has affirmed Georgia-Pacific LLC's ratings: -- Issuer Default Rating at 'B+'; -- Senior unsecured at 'B+/RR4'; -- Senior secured revolver at 'BB/RR2'; -- First lien term loans at 'BB/RR2'. The Rating Outlook is Negative. The affirmation of GP's ratings recognizes the company's strong position in North American tissue products (paper towels, cups, plates and bathroom tissue) and the continued strong earnings expectations for this business in a weak economy. North American tissue generates about two-thirds of GP's consolidated EBITDA, and is presently characterized by firm pricing and a deflating cost structure. GP's other businesses (building products, packaging and tissue products sold into Europe, the Middle East and Africa) are not as strong; earnings expectations for the first two are weak this year. How weak is difficult to forecast; Fitch is presuming EBITDA declines in these businesses on the order of 20%- 25% in 2009. This is expected to hinder GP's debt repayment, to around 40% of the $1.5 billion or so repayment expected to be reported once 2008's results are released. Risks to Fitch's prediction weigh in favor of a weaker rather than stronger year for earnings, particularly in building products (wood panels, gypsum board and lumber), packaging (containerboard, bleached board and pulp) and possibly GP's offshore tissue products, and are the reasons for the Negative Rating Outlook. GP is looking to trim its capital and operating budgets from last year to improve free cash flow; Fitch expects this will not materially move the company's leverage to earnings far from a 5 times multiple of net debt to EBITDA from the end of 2008. GP was taken private in 2005 by Koch Industries, Inc. in a transaction valued at just over $21 billion. GP produces a wide variety of products: consumer tissue, disposable tableware, lumber, plywood, oriented strand board, gypsum wallboard, corrugated packaging, and uncoated freesheet. The company is either No. 1, 2, or 3 in most of these markets. GIBRALTAR INDUSTRIES: S&P Downgrades Corp. Credit Rating to 'BB-' ----------------------------------------------------------------- Standard & Poor's Ratings Services said that it lowered its ratings on Gibraltar Industries Inc., including its corporate credit rating, to 'BB-' from 'BB'. The outlook is negative. "The lower rating reflects our expectation that as a result of likely further deterioration in Gibraltar's operating environment- specifically its residential and automotive end-markets, which account for about 60% of the company's revenues-credit measures could deteriorate to a level that S&P would consider to be more in-line with a lower rating," said Standard & Poor's credit analyst Thomas Nadramia. "Specifically, S&P expects the company's debt to EBITDA could exceed 4x and EBITDA interest coverage could fall below 3.5x over the next several quarters. In addition, given the challenging operating environment and the potential for weaker credit measures, the cushion relative to the company's total leverage covenant governing its bank facility, which is set at 4.25x could decrease. The ratings on Buffalo, New York-based building products manufacturer and metal processor Gibraltar Industries Inc. reflect the company's mature and cyclical markets, volatile raw material costs, and aggressive growth strategy. Still, the company maintains a leading position in niche markets, relatively consistent profitability, and a highly variable cost structure. The negative outlook reflects S&P's expectation that the company's performance will continue to be hurt by the challenging operating environment as lower residential and commercial construction end- market demand and weaker automotive results continue through 2009. As a result, Gibraltar's credit metrics could deteriorate to a level that S&P would consider to be weak for the rating, with adjusted debt to EBITDA of more than 4x and EBITDA interest coverage of less than 3.5x. S&P could lower the rating if demand in the company's end-markets declines more than S&P currently expects, meaningfully affecting revenues and operating margins and further reducing the cushion relative to its financial covenants. Specifically, if there were no meaningful reductions in debt levels and EBITDA were to decline to less than $85 million, the company's liquidity position could become constrained. A positive rating action seems less likely in the near term given S&P's expectations for weak residential and nonresidential construction activity and depressed automotive sales. However, if Gibraltar's sales and operating margins improve allowing the company to substantially reduce debt to a level that results in a leverage ratio of about 3x, a positive action would be considered. GMAC LLC: Moody's Downgrades Ratings on 14 Classes of Securities ---------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 14 classes of securities from 9 auto lease securitizations sponsored by GMAC LLC. The rating actions were motivated by the continued uncertainty on future residual values, the creditworthiness of the manufacturer, the credit enhancement available to the rated notes relative to the remaining securitized residual value, and the timing of lease terminations. The rating actions conclude the review period of the 9 transactions that were downgraded on November 25, 2008 and placed on review for possible further downgrade. During the review period, Moody's reviewed, among other things, additional information relating to the performance of vehicle residual values in these transactions. Vehicle residual value losses have increased significantly over the past several months, particularly during the last quarter of 2008. Moody's expects the residual values to remain under stress in the current year due to the challenging macroeconomic environment as well as the uncertainty surrounding the US automotive sector. Additionally, Moody's has observed a significant industry-wide build up in the inventory of turned-in vehicles that could further depress residual values in the near term. Moody's has recently downgraded the corporate family ratings of General Motors to Ca (negative outlook). This action reflects the expectation that the pace and severity of erosion in the US automotive sector will severely outpace the company's ability to respond effectively. Moody's believes that future residual values could be adversely affected in the event of a manufacturer bankruptcy. Moreover, residual value exposure grows as a percentage of the outstanding securitized pool balance over time. In addition, Moody's analyzed recent residual value loss experience to derive a probability-based loss expectation under circumstances where the manufacturer is either in a non-bankrupt status, a Chapter 11 bankruptcy or a Chapter 7 bankruptcy. The rating actions are based on the credit enhancement available relative to the probability-based loss expectation. The complete rating actions are: Issuer: Capital Auto Receivables Asset Trust 2007-SN2 -- Cl. A-2, Downgraded to Baa1 from Aa3; previously on 11/25/2008 Downgraded to Aa3 from Aaa and Placed Under Review for further Possible Downgrade -- Cl. A-3, Downgraded to Baa1 from Aa3; previously on 11/25/2008 Downgraded to Aa3 from Aaa and Placed Under Review for further Possible Downgrade -- Cl. A-4, Downgraded to Baa1 from Aa3; previously on 11/25/2008 Downgraded to Aa3 from Aaa and Placed Under Review for further Possible Downgrade -- Cl. B, Downgraded to Baa3 from A1; previously on 11/25/2008 Downgraded to A1 from Aa2 and Placed Under Review for further Possible Downgrade -- Cl. C, Downgraded to Ba3 from A3; previously on 11/25/2008 Downgraded to A3 from A1 and Placed Under Review for further Possible Downgrade -- Cl. D, Downgraded to B3 from Ba1; previously on 11/25/2008 Downgraded to Ba1 from Baa1 and Placed Under Review for further Possible Downgrade Issuer: Capital Auto Receivables Asset Trust 2007-SNE -- Cl. A, Downgraded to Baa1 from Aa3; previously on 11/25/2008 Downgraded to Aa3 from Aaa and Placed Under Review for further Possible Downgrade Issuer: Capital Auto Receivables Asset Trust 2007-SNG -- Cl. A, Downgraded to Baa1 from Aa3; previously on 11/25/2008 Downgraded to Aa3 from Aaa and Placed Under Review for further Possible Downgrade Issuer: Capital Auto Receivables Asset Trust 2008-SNA -- Cl. A, Downgraded to Baa1 from Aa3; previously on 11/25/2008 Downgraded to Aa3 from Aaa and Placed Under Review for further Possible Downgrade Issuer: Capital Auto Receivables Asset Trust 2008-SNB -- Cl. A, Downgraded to Baa1 from Aa3; previously on 11/25/2008 Downgraded to Aa3 from Aaa and Placed Under Review for further Possible Downgrade Issuer: Capital Auto Receivables Asset Trust 2008-SND -- Cl. A, Downgraded to Baa1 from Aa3; previously on 11/25/2008 Downgraded to Aa3 from Aaa and Placed Under Review for further Possible Downgrade Issuer: Capital Auto Receivables Asset Trust 2008-SNE -- Cl. A, Downgraded to Baa1 from Aa3; previously on 11/25/2008 Downgraded to Aa3 from Aaa and Placed Under Review for further Possible Downgrade Issuer: Capital Auto Receivables Asset Trust 2008-SNF -- Cl. A, Downgraded to Baa1 from Aa3; previously on 11/25/2008 Downgraded to Aa3 from Aaa and Placed Under Review for further Possible Downgrade Issuer: Capital Auto Receivables Asset Trust 2008-SNH -- Cl. A, Downgraded to A2 from Aa2; previously on 11/25/2008 Downgraded to Aa2 from Aaa and Placed Under Review for further Possible Downgrade Servicer GMAC LLC provides wholesale, retail, and lease financing, primarily to GM dealers and is one of the world's largest auto finance companies. General Motor Corporation, headquartered in Detroit, Michigan, is one the world's largest auto manufacturers. GM's long-term unsecured bonds are rated Ca with a negative outlook, while GMAC's long-term unsecured bonds are rated C. GMAC LLC: Moody's Takes Rating Actions on Floorplan Notes --------------------------------------------------------- Moody's Investors Service has taken these ratings actions on dealer floorplan asset-backed notes issued by GMAC LLC. The ratings actions are due to the high degree of uncertainty around several key variables associated with floorplan financings. These include the financial strength of the dealerships, the market value of the vehicles that secure the loans, and the macroeconomic and business challenges facing General Motor Corporation. The transactions feature revolving pools of receivables payable by auto dealers and secured by the dealers' related inventory of vehicles. The dealers' accounts were originated and are serviced by GMAC. Superior Wholesale Inventory Financing Trust X -- Class A Notes, including RN1 and RN2, Downgraded to A3 from Aa3 and remain Under Review for further Possible Downgrade; previous on 11/25/2008 Downgraded to Aa3 from Aaa and Placed Under Review for further Possible Downgrade -- Class B Notes, remain Under Review for further Possible Downgrade; previous on 11/25/2008 Downgraded to B2 from A2 and Placed Under Review for further Possible Downgrade -- Class C Notes, remain Under Review for further Possible Downgrade; previous on 11/25/2008 Downgraded to B3 from Baa2 and Placed Under Review for further Possible Downgrade Superior Wholesale Inventory Financing Trust XI -- Class A Notes, including RN1 and RN2, Downgraded to A3 from Aa2 and remain Under Review for further Possible Downgrade; previous on 11/25/2008 Downgraded to Aa2 from Aaa and Placed Under Review for further Possible Downgrade -- Class B Notes, Downgraded to B2 from B1 and remain Under Review for further Possible Downgrade; previous on 11/25/2008 Downgraded to B1 from A2 and Placed Under Review for further Possible Downgrade -- Class C Notes, remain Under Review for further Possible Downgrade; previous on 11/25/2008 Downgraded to B3 from Baa2 and Placed Under Review for further Possible Downgrade Superior Wholesale Inventory Financing Trust 2007-AE-1 -- Class A Notes, Downgraded to Aa2 from Aaa and remain Under Review for further possible downgrade -- Class B Notes, Downgraded to Aa3 from Aaa and remain Under Review for further Possible Downgrade; previous on 11/25/2008 Placed Under Review for Possible Downgrade -- Class C Notes, Downgraded to Baa1 from Aa1 and remain Under Review for further Possible Downgrade; previous on 11/25/2008 Downgraded to Aa1 from Aaa and Placed Under Review for further Possible Downgrade -- Class D Notes, Downgraded to Baa3 from Aa2 and remain Under Review for further Possible Downgrade; previous on 11/25/2008 Downgraded to Aa2 from Aaa and Placed Under Review for further Possible Downgrade SWIFT Master Auto Receivables Trust Series 2007-1 -- Class A Notes, Downgraded to Aa2 from Aaa and remain Under Review for further possible downgrade -- Class B Notes, Downgraded to Aa3 from Aaa and remain Under Review for further Possible Downgrade; previous on 11/25/2008 Placed Under Review for Possible Downgrade -- Class C Notes, Downgraded to Baa1 from Aa1 and remain Under Review for further Possible Downgrade; previous on 11/25/2008 Downgraded to Aa1 from Aaa and Placed Under Review for further Possible Downgrade -- Class D Notes, Downgraded to Baa3 from A1 and remain Under Review for further Possible Downgrade; previous on 11/25/2008 Downgraded to A1 from Aaa and Placed Under Review for further Possible Downgrade SWIFT Master Auto Receivables Trust Series 2007-2 -- Class A Notes, Downgraded to Aa2 from Aaa and remain Under Review for further possible downgrade -- Class B Notes, Downgraded to Aa3 from Aaa and remain Under Review for further Possible Downgrade; previous on 11/25/2008 Placed Under Review for Possible Downgrade -- Class C Notes, Downgraded to Baa1 from Aa1 and remain Under Review for further Possible Downgrade; previous on 11/25/2008 Downgraded to Aa1 from Aaa and Placed Under Review for further Possible Downgrade -- Class D Notes, Downgraded to Baa3 from A1 and remain Under Review for further Possible Downgrade; previous on 11/25/2008 Downgraded to A1 from Aaa and Placed Under Review for further Possible Downgrade Rationale Since the rating actions on the GMAC auto floorplan deals on November 25, 2008, Moody's further assessed, among other things, the potential for bankruptcy at GM (reorganization and liquidation), potential dealer default rates, collateral recovery values, and servicer readiness to monitor dealers and secure collateral should numerous dealers default simultaneously. The rating actions reflect Moody's updated view of key driving factors in the floorplan transactions following the review process. Moody's rating action reflects the high degree of uncertainty around a number of assumptions, particularly those applicable to Chapter 11 or Chapter 7 bankruptcy scenarios. The ratings of the subordinated notes also reflect high loss severities upon default for the smaller sized bonds. The notes remain on review for further possible downgrade due to significant uncertainty surrounding GM in 2009. On December 4, 2008, the Bush Administration approved $17.4 billion in short-term emergency loans for General Motors and Chrysler. The loans provided near-term liquidity to both companies, but also identified key targets against which the companies must show substantial progress if the existing loans are to be extended beyond March 31, 2009 and if additional requested funding is to be provided. Whether the funding will still be available and whether a more complete agreement can be reached with the government in early 2009 should have implications on GM's floorplan transactions because of their direct exposure to GM. Rating Methodology Moody's floorplan analysis is based on a joint-default probability analysis of both the manufacturer and dealers. Loss given default is determined by analyzing the collateral at risk net of recoveries. The total collateral at risk upon a joint-default of manufacturer and dealer is the remaining unpaid floorplan loan balance. The balance is calculated based on total payments as determined by monthly payment rate prior to dealer default. The analysis is implemented through a simulation model, which simulates losses during a two year amortization period following an event of default based on a set of key modeled assumptions: -- Manufacturer bankruptcy scenarios -- Dealer default rates -- Recovery rates -- Payment rates In addition, Moody's includes other assumptions in the simulation model such as the impact of macroeconomic activity on manufacturer and dealer default probability, the correlation of default between manufacturer and dealer. In addition, the model includes assumptions about the frequency of diversion of vehicle sale proceeds by the dealership. The above modeled assumptions form the basis of the quantitative analysis executed through a simulation model. Manufacturer default is simulated, which is further specified into Chapter 11 and Chapter 7 bankruptcies. Manufacturer default probability is modeled based on committee assessment, often with reference to the manufacturer rating. Next, the simulation model simulates dealer default, which takes place randomly throughout the two-year amortization period. The final step in simulation is to calculate total principal collections. For defaulted dealers, the model calculates total collateral at risk determined by payment rate prior to dealer default and then applies a recovery rate under different circumstances where the manufacturer is either in a non- bankrupt status, a Chapter 11 bankruptcy or a Chapter 7 bankruptcy. Each simulation run simulates a total loss and corresponding internal rate of return reduction for each bond. This IRR reduction helps form the quantitative basis of Moody's rating assessment. Moody's also evaluates qualitative factors such as the quality of provided information, servicer strength, and dealership profile. Combining the qualitative and quantitative analysis, a final rating level is determined. Servicer GMAC provides wholesale, retail, and lease financing, primarily to GM dealers and is one of the world's largest auto finance companies. General Motor Corporation, headquartered in Detroit, Michigan, is one the world's largest auto manufacturers. GM's long-term unsecured bonds are rated Ca with a negative outlook, while GMAC's long-term unsecured bonds are rated C. GUAM POWER: Fitch Affirms 'BB+' Rating on $375 Mil. Notes --------------------------------------------------------- Fitch Ratings affirms the rating on Guam Power Authority's $375 million of outstanding electric system revenue bonds at 'BB+'. The Rating Outlook remains Positive. The rating is supported by a continuation of the solid track record of GPA's governance structure, a more stable financial profile, and improving system reliability and operating performance. The Positive Outlook reflects the improved relationship with the public utilities commission's approval of a base rate increase and other charges, and the PUC's willingness to respond to the fuel cost volatility in 2008 and provide GPA with a third fuel cost recovery via the Levelized Energy Adjustment Clause. Fitch believes that a rating upgrade is dependent on continued improvements in debt service coverage for full obligations (including the capitalized lease), and increases in liquidity to a level sufficient to protect against volatile fuel prices and adverse economic impacts, and natural disasters (typhoons and earthquakes). Additionally, the rating and Outlook reflect the continued progress on the pay down of government past account receivables. Other Rating considerations include: -- Absence of competition; -- Key load center transmission lines being placed underground, providing protection from outages due to typhoons; -- Ongoing exposure to natural disasters; -- Tourism-based economy (mitigated by current military presence and future expansion); -- Dependence on oil for generation and the need for the PUC to approve timely recovery of fuel costs thought the LEAC. In order to mitigate the volatility of fuel oil prices in the past, GPA has developed a fuel risk management program which includes the use of a collar-hedging strategy to protect and stabilize the price of fuel paid by the Authority's ratepayers. In light of the sharp decline in fuel oil prices, the hedges are currently out of the money on a marked-to-market basis. GPA will combine unspent construction fund monies that will not be utilized in the next 12 months and grant monies into an investment agreement that will be used as collateral for its fuel hedge agreements. The collateral only has to be posted for the remaining term of the fuel hedge contracts, which is less than one year. Guam Power Authority, the only retail provider of energy on the Island of Guam, serves 45,751 customer accounts and a population of approximately 175,000. Guam is the westernmost territory of the U.S. HERTZ GLOBAL: Rental Car Industry Also Wants Access to TARP ----------------------------------------------------------- Paulo Prada at The Wall Street Journal reports that Avis Budget Group Inc., Hertz Global Holdings Inc., Enterprise Rent-A-Car Co., and other rental car companies are asking the Congress to let them use Troubled Asset Relief Program funds to finance new auto purchases. WSJ relates that stagnant credit markets, declining demand for travel, and the automobile industry's hardships have made it hard for rental car companies to find buyers for their used automobiles and secure financing to purchase new ones to replace them. According to WSJ, the House of Representatives included a clause in a TARP reform bill that it passed to the Senate last week to give the government the authority to back loans to rental car companies and other fleet purchasers. WSJ states that the rental car industry is the U.S. auto industry's biggest customer, buying as many as 1.8 million new vehicles per year. The report quoted Steven Adamske -- a spokesperson for House Financial Services Committee chairperson Barney Frank -- as saying, "If our desire is to get car buying and credit flowing again, enabling people who buy hundreds of cars at a time is a good way to do it." About Hertz Global Hertz Global Holdings Inc. in Park Ridge, New Jersey, (NYSE: HTZ) -- https://www.hertz.com/ -- through its subsidiaries, rents and leases cars and trucks primarily in the U.S. and Europe. It operates in two segments, Car Rental and Equipment Rental. The Car Rental segment engages in the ownership and lease of cars. The Equipment Rental segment rents earthmoving equipment, material handling equipment, aerial and electrical equipment, air compressors, generators, pumps, small tools, compaction equipment, and construction-related trucks in North America and Europe. The company's products and services include Hertz #1 Club Gold; NeverLost customized, onboard navigation systems; SIRIUS Satellite Radio; and unique cars and SUVs offered through Hertz's Prestige, Fun and Green collections. Hertz also operates an equipment rental companies with corporate locations in France and Spain. It is the corporate parent of Hertz Corporation. HEXION SPECIALTY: Finalizes Severance Agreement With Sarah Coffin ----------------------------------------------------------------- On January 7, 2009, Hexion Specialty Chemicals Inc. reported that Sarah R. Coffin, Executive Vice President and President of the Coatings and Inks Division, would be leaving the company effective February 15, 2009. Ms. Coffin's severance agreement was finalized on January 21, 2009. The agreement provides for the continuation of her current base salary of $400,000 for fifty-two weeks to be paid in bi- weekly installments, and an additional transition bonus of $126,000 to be paid by February 20, 2009. The agreement also provides for payment of a lump sum intended to cover the approximate cost of the company's portion of medical care coverage premiums under COBRA for twenty-six weeks following February 16, 2009, which amount will be grossed-up for federal income tax withholding. Ms. Coffin will receive payment for accrued but unused vacation through her termination date and 12 months of executive outplacement support. Based in Columbus, Ohio, Hexion Specialty Chemicals Inc. -- http://www.hexionchem.com/-- is a producer of thermosetting resins, or thermosets. Thermosets are a critical ingredient in virtually all paints, coatings, glues and other adhesives produced for consumer or industrial uses. Hexion Specialty Chemicals is controlled by an affiliate of Apollo Management L.P. Hexion's balance sheet at Sept. 30, 2008, showed total assets of $3.8 billion and total liabilities of $5.4 billion, resulting in a shareholders' deficit of $1.6 billion. The Troubled Company Reporter reported on Nov. 6, 2008, that Standard & Poor's Ratings Services lowered its ratings on Hexion Specialty Chemicals Inc., including the corporate credit rating to 'B-' from 'B'. All of the ratings on Hexion remain on CreditWatch, where they were placed with negative implications on July 5, 2007. HEXION SPECIALTY: Earnings Uncertainty Cues S&P's Junk Rating ------------------------------------------------------------- Standard & Poor's Ratings Services said that it lowered its ratings on Columbus, Ohio-based Hexion Specialty Chemicals Inc., including the corporate credit rating to 'CCC+' from 'B-'. The ratings remain on CreditWatch, where they were placed with negative implications on July 5, 2007. "The ongoing CreditWatch listing reflects earnings uncertainty in the current difficult business environment and the risk of a financial covenant violation in the company's credit facilities during the next few quarters," noted Standard & Poor's credit analyst Paul Kurias. The initial CreditWatch placement followed the announcement of Hexion's proposed debt-financed acquisition of Huntsman Corp. in a transaction valued at more than $10 billion, including assumed debt. "The downgrade reflects increasing concerns about Hexion's weak financial performance relative to expectations for the rating," added Mr. Kurias. "We believe that weak demand for chemicals in the fourth quarter of 2008 and early 2009 will hurt earnings and weaken Hexion's already stretched financial profile." Hexion's financial profile is already highly leveraged with the ratio of total debt to EBITDA of more than 9x as of Sept. 30, 2008 (pro forma for the $325 million financing of a breakup fee at the parent holding company, Hexion LLC for the failed Huntsman transaction). S&P's adjustments to debt include tax-adjusted unfunded employee benefit obligations and the capitalized present value of operating leases. The prospects for earnings in 2009 remain weak relative to 2008, which will likely forestall any meaningful improvement in the financial profile. S&P is concerned that weak earnings in 2009 could lead to a further deterioration in the financial profile. S&P's concerns include weakening cushions under a financial covenant in 2009, which could constrain liquidity. A meaningful portion of Hexion's sales are to cyclical end markets such as construction and industrial, which are vulnerable to demand contractions during economic downturns. The ongoing global economic slowdown is also expected to offset benefits to Hexion's earnings from its global diversification, which has been a strength, and from an ongoing cost reduction program initiated by management to shore up earnings. The risks to Hexion's financial profile are only partly offset by a debt maturity profile which is not onerous during 2009 or 2010 despite the high leverage. There is no meaningful debt maturity until the fourth-quarter of 2011, when the $225 million revolving credit facility matures. In addition, the company has a provision for equity cures under its financial covenants, which mitigates some of the risk related to covenant compliance. S&P also note Huntsman's recent announcement that it has undertaken steps to dismiss lawsuits and legal claims against Hexion, which S&P believes considerably diminishes legal risks related to the terminated Huntsman acquisition. Still, overall financial risk is expected to increase with the increase in leverage in 2009 and with the potential for constraints on access to the revolving credit facility as covenant cushions weaken. The CreditWatch listing indicates that the ratings remain at risk of a downgrade if earnings deteriorate meaningfully during the next quarter, or if covenant cushions decline to negligible levels or liquidity declines meaningfully below Sept. 30, 2008, levels. S&P will resolve S&P's CreditWatch when operational results in the fourth quarter of 2008 become available, and after S&P complete S&P's review of operating prospects for 2009. The CreditWatch resolution will also address the pending changes to the company's capital structure, which could affect S&P's recovery analysis and notching of existing debt issues. HINES HORTICULTURE: Court Confirms Black Diamond-Backed Plan ------------------------------------------------------------ Hines Horticulture Inc. has won from the U.S. Bankruptcy Court for the District of Delaware approval of its reorganization plan. According to Bloomberg's Bill Rochelle, the Court confirmed the reorganization plan, which provides for: -- Full payment to secured creditors on their $35.9 million in claims; -- Payment to unsecured creditors, including holders of $175 million in 10.25% senior notes due 2011, from 7.2% of future profits of NewCo, the entity created by Black Diamond to conduct Hines' former businesses; and -- Zero recovery to holders of equity interests in the company. As reported by the Troubled Company Reporter in December, the Hon. Kevin J. Carey authorized the sale of substantially all assets of Hines Horticulture Inc. and Hines Nurseries Inc. to an affiliate of Black Diamond Capital LLC. According to Bloomberg News, the Black Diamond unit was declared the winning bidder when no other competing offers were made. The Black Diamond unit offered to pay $58 million in cash and assume more than $45.9 million in debts. The Plan requires the consummation of the sale before the Plan could be declared effective. A copy of the Plan is available at: A full-text copy of the Debtors' First Amended Joint Plan is available for free at: http://bankrupt.com/misc/Hines_1stAmendedJointPlan.pdf About Hines Horticulture Headquartered in Irvine, California, Hines Horticulture, Inc. -- http://www.hineshorticulture.com/-- operates nursery facilities located in Arizona, California, Oregon and Texas. Through its affiliate, the company produces and distributes horticultural products. The company and its affiliate, Hines Nurseries, Inc., filed for Chapter 11 protection on Aug. 20, 2008 (Bankr. D. Del. Lead Case No.08-11922). Anup Sathy, Esq., Ray C.Schrock, Esq., and Ross M. Kwasteniet, Esq., at Kirkland & Ellis, LLP, represent the Debtors in their restructure efforts. Robert S. Brady, Esq., and Edmon L. Morton, Esq., at Young, Conaway, Stargatt & Taylor, serve as the Debtors' co-counsel. The Debtors selected Epiq Bankruptcy Solutions LLC as their voting and claims agent, and Financial Balloting Group LLC as their securities voting agent. The U.S. Trustee for Region 3 appointed creditors to serve on an Official Committee of Unsecured Creditors in the Debtors' case. In its schedules, Hines Horticulture, Inc. listed total assets of $30,068 and total debts of $218,052,380. In its schedules, Hines Nurseries, Inc. listed total assets of $229,231,003 and total debts of $228,698,592. HPG INTERNATIONAL: Can Use $1.2 Million BofA Facility on Interim ---------------------------------------------------------------- The United States Bankruptcy Court for the District of Delaware authorized HPG International Inc. and VIG Holdings Ltd. to obtain, on an interim basis, $1.2 million in postpetition financing from Bank of America NA, successor by merger to LaSalle Business Credit LLC. A hearing is set for Feb. 18, 2009, at 12:00 p.m., to consider final approval of the request. Objections, if any are due Feb. 11, 2009. Troubled Company Reporter said on Jan 28, 2009, the proceeds of the facility will enable the Debtors to execute an orderly liquidation of their assets. The facility will incur interest at Prime Rate plus 2.50% for all loans with the exception of the $.7 million seller collateral term loan which interest rate will remain at the Prime Rate provided no event of default will occur under the DIP order. The facility is expected to terminate by March 6, 2009. The lender will be paid $100,000 postpetition financing fee under the transaction. The DIP facility is subject to carve-outs to pay any fees payable to the clerk of the Court, and professionals retained by the Debtors or any committee. To secure their DIP obligations, the lender will receive a superprioty administrative expense claim status over any and all administrative expenses The facility contains customary and appropriate events of default including, among other things: i) order dismissing the Debtors' Chapter 11 cases or converting any of their cases; ii) appointment of a Chapter 11 trustee; and iii) failure to obtain final DIP order within 30 days after the Debtors' bankruptcy filing. The lender and the Debtors are parties to a $26.84 million loan and security agreement dated Jan. 11, 2006. The lender accelerated the Debtors' obligations and refused any further funding when certain events of default under the agreement occurred. A full-text copy of the Loan and Security Agreement dated Jan. 11, 2006, is available for free at: http://ResearchArchives.com/t/s?38a9 About HPG International Headquartered in Mountaintop, Pennsylvania, HPG International Inc. -- http://www.hpg-intl.com-- designs and make plastics PV sold primarily to the fabricating industries throughout the United States, Canada and Mexico for commercial use in roofs, pool, liners, wallcoverings, label applications and shower panels. The company and its affiliate, VIG Holdings Ltd., filed for Chapter 11 protection on January 23, 2009 (Bankr. D. Del. Lead Case No. 09- 10231). Jeffrey M. Carbino, Esq., Buchanan Ingersoll & Rooney PC, represents the Debtors in their restructuring efforts. The Debtors proposed Kurtzman Carson Consultants LLC as their claims agent. When the Debtors filed for protection from their creditors, they listed assets and debts between $10 million and $50 million. INERGY LP: Moody's Assigns 'B1' Rating on $200 Mil. Senior Notes ---------------------------------------------------------------- Moody's Investors Service assigned a B1 (LGD 4, 64%) rating to Inergy, L.P.'s $200 million proposed senior unsecured notes offering that will be used to pay down borrowings under the company's senior secured revolving credit facility. Simultaneously, Moody's affirmed NRGY's existing Ba3 Corporate Family Rating, the Ba3 Probability of Default Rating, and the B1 (LGD 4) rating on the existing senior notes (though the point estimate is changing from 67% to 64%), and the SGL-3 Speculative Grade Liquidity rating. The outlook remains stable. The affirmation of the Ba3 CFR reflects the company's position as the 5th largest distributor of propane in the U.S. and the relative durability of the company's cash flows from that business. The Ba3 also reflects the increased business and seasonal diversification from the company's growing natural gas storage operations in the Northeastern U.S. and the stability of the cash flow generated from that business. Moody's expects that after completing projects related to its US Salt acquisition and the Thomas corners expansion, Inergy is poised to become one of the largest natural gas storage providers in the Northeastern U.S. When combined with the completion of the West Coast project, about 30% to 40% of NRGY's consolidated EBITDA is expected to be generated from the more stable, largely fee-based midstream segment. The stable outlook assumes the company will continue to maintain, if not improve its financial profile. Leverage (adjusted debt/EBITDA) had increased to approximately 4.1x after the US Salt acquisition in August 2008, which is on the high end for the Ba3 CFR, but still within the range acceptable at the current ratings level. Given the amount of spending planned for its expansion projects in FY 2009 and that NRGY intends to remain a consolidator in the propane sector, Moody's expects leverage to remain at the higher end for the Ba3 rating through 2009 barring any equity issuances that could reduce debt sooner. However, once completed, these organic projects are expected to generate additional fee- based EBITDA, which along with recent acquisitions could bring run-rate leverage back to within the 3.5x range over the next 12 to 18 months assuming no new acquisitions. The SGL-3 rating is supported by Moody's expectation that internal cash flows will cover maintenance capital expenditures, interest payments, working capital requirements, and cash distributions to unit holders; the company will maintain sufficient cushion under the facilities' covenants; and ample availability under the revolving credit facilities. The SGL-3 rating remains tempered by the company's need to distribute all of its free cash flow to the Master Limited Partnership unit holders which results in the need for external funding to support its significant organic projects; and the seasonality of the propane business which requires use of the credit facilities during inventory build up and subsequent receivable collections. The credit facilities are secured by all Inergy's assets leaving no alternate sources of readily available liquidity. Moody's last rating action for Inergy, L.P. dates from August 13, 2008, at which time Moody's affirmed the existing ratings and changed the outlook to stable from positive. NRGY, headquartered in Kansas City, Missouri, is a publicly traded master limited partnership that owns and operates one of the largest geographically diverse retail and wholesale propane supply, marketing, and distribution businesses in the United States. Additionally, NRGY owns and operates a natural gas storage facility located approximately 150 miles northwest of New York City and a natural gas liquids business located near Bakersfield, California. INERGY LP: S&P Assigns Issue-Level Rating at 'B+' ------------------------------------------------- Standard & Poor's Ratings Services said it assigned its 'B+' issue-level rating to Inergy L.P.'s $200 million senior unsecured notes due 2015, and at the same time, assigned its '5' recovery rating to this debt. The '5' recovery rating indicates that lenders can expect modest (10%-30%) recovery in the event of a payment default. Standard & Poor's also affirmed Inergy's corporate credit rating of 'BB-' and left unchanged its '5' recovery rating on the company's unsecured debt. The offering proceeds will refinance debt on Inergy's revolving acquisition credit facility. The outlook remains stable. As of Sept. 30, 2008, Inergy, a retail and wholesale propane distributor and midstream energy company, had $1.1 billion of debt. The rating on Kansas City, Missouri-based Inergy reflects the partnership's weak business risk profile and aggressive financial profile. Rating concerns include the propane business's exposure to weather, seasonal demand patterns, customer conservation, exposure to volatile commodity prices, the partnership's aggressive growth strategy, and the master limited partnership structure. "These concerns are partially offset by the propane segment's high percentage of residential customers in attractive markets, improving per-gallon margins, and Inergy's growing midstream business that provides more stable cash flows," said Standard & Poor's credit analyst Michael Grande. The stable outlook is based on S&P's expectation that Inergy can maintain its operating performance over the next 12 to 18 months as the midstream expansion provides incremental cash flow to support its current financial metrics. S&P could revise the outlook to positive or raise the rating if sustained higher propane margins, a disciplined acquisition strategy, and a growing midstream business result in an FFO to debt ratio of 25% to 30% and a total debt to EBITDA ratio of about 3.5x for several quarters. Standard & Poor's could lower the rating or revise the outlook to negative if Inergy's capital spending program experiences cost overruns that require additional debt, if there is less than $100 million in available liquidity over the next 12 to 18 months, or if the propane and midstream businesses underperform, resulting in FFO to debt in the mid-teens and debt to EBITDA of above 4x for several quarters. INTERSTATE BAKERIES: GE Capital Facility Reduced by $20 Million --------------------------------------------------------------- Interstate Bakeries Corporation has reached an agreement in principle with GE Capital Corp. on key terms for a revised asset- based revolving credit financing facility. The revisions include reduction of the commitment amount by $20 million to $105 million. Interstate Bakeries and its debtor-affiliates obtained October 3, 2008, the U.S. Bankruptcy Court for the Western District of Missouri's approval of funding agreements which outlines the capital structure for Reorganized IBC upon its emergence from Chapter 11. The funding agreements consist of: * the ABL Facility -- a $125,000,000 asset-based senior secured revolving credit facility to be structured, arranged and syndicated by General Electric Capital Corporation and GE Capital Markets; * the Term Loan Facility -- a term loan credit facility, by Silver Point Finance, LLC and Monarch Master Funding, Ltd., which was increased to $344,000,000 from $339,000,000, pursuant to an agreement among the Debtors and the Commitment Parties on December 1, 2008; and * the New Third Lien Term Loan Facility --a third priority secured term loan financing facility, under which Prepetition Lender Claimholders will receive Pro Rata share of the New Third Lien Term Loan in exchange for the Claims, which was decreased to $142,300,000 million from $147,300,000 under the December 2008 Agreement. The Commitments contemplated Agreements that expire by their terms on February 9, 2009. In an official statement posted on IBC's Web site dated January 26, 2009, Chief Executive Officer Craig D. Jung says that the Debtors have reached an agreement in principle with the ABL Commitment Parties to amend the key terms for a revised ABL Facility. "We are now working diligently with GE Capital and our other financing providers to finalize all documentation for our exit financing. We are optimistic that we will emerge from Chapter 11 in the near future," Mr. Jung stated. "Given today's challenging credit markets, our road to emergence from Chapter 11 has been longer and more challenging than anticipated, but we have now reached the final stretch," Mr. Jung added. Subsequently, the Debtors ask the Court to approve the Amended ABL Facility. The Debtors aver that the Amendments are "necessary and appropriate," as part of their efforts to consummate the transactions contemplated by their Amended New Plan of Reorganization, which was confirmed on December 1, 2008. Prior to the parties' agreement in principle, IBC confirmed on January 13, 2009, that it was "engaged in productive discussions" with the ABL Commitment Parties to further its attempts to emerge from Chapter 11, maximize value for the Debtors' constituents, and save more than 22,000 employees from losing their jobs. Summary of Amended ABL Terms The Debtors and the ABL Facility Commitment Parties have agreed to amend certain terms of the ABL Facility to, among other things, increase certain fees, increase the interest rate, and decrease the aggregate amount of commitments under the Commitment Letters. The pertinent amendments to the terms of the ABL Facility, as compared to the Court-approved terms are: As Approved Term by the Court As Amended ---- ------------ ---------- Commitment $125,000,000 $105,000,000 Amount Expense All reasonable Fees and expenses of Reimbursement out-of-pocket fees certain other fees and expenses, commitment parties including single may be payable external legal counsel for GE Capital and GECM Closing Conditioned upon a Based upon a Availability Borrowing Base collateral audit (Borrowing Base) availability amount conducted as of of $90 million 9/20/08 which shows availability of $92.4 million; a subsequent "bring down" collateral audit will occur in the 30 days following closing which will provide the basis for the Borrowing Base on a go-forward basis; limited to $25 million pending the earlier of (i) completion of the collateral audit or (ii) the 30th day following the closing date Applicable 2.50% per annum, in Increased by 50 bps Margin the case of Base Rate Loans 3.50% per annum, in the case of Eurodollar Rate Loans Unused 0.50% per annum 0.75% per annum Commitment Fee Pricing Flex GE has the ability to The Pricing Flex increase the amount of Language is to be the commitment fee and eliminated certain other economic terms in connection with its syndication efforts in order that GE's total commitment amount is equal to $75 million or less Fixed Charge Tested when Borrowing Tested when Coverage Test Availability is less Borrowing than 12.5% of the Availability is Borrowing Base less than $25 million and tested as to certain permitted investments, restricted payments and payments of other indebtedness if Borrowing Availability is less than $25 million and loans from the ABL Facility are going to be used Collateral The ABL Facility Instead of a second Lenders are to receive priority lien and a first priority lien security interest and security interest on certain real in accounts receivable property located in and their inventory New York, the ABL proceeds, subject to Facility lenders certain limited will receive a first exceptions, a second priority lien and priority lien and security interest on security interest in certain real the collateral that property collateral secures the obligations that was previously owed to the Term Loan unencumbered; the Facility Commitment ABL Facility lenders Parties will not receive a junior lien and security interest in certain cash deposited by the Debtors in order to cash collateralize outstanding letters of credit According to J. Eric Ivester, Esq., at Skadden Arps Slate Meagher & Flom LLP, in Chicago, Illinois, the Debtors have agreed to increase the underwriting fee payable to the ABL Commitment Parties. At the Commitment Parties' request, the Underwriting Fee will remain confidential, but will be disclosed to the Court and, subject to applicable confidentiality agreements, the Official Committee of Unsecured Creditors and the U.S. Trustee upon their request. In addition, certain other technical terms of the ABL Facility will be amended including, among others, calculations of availability, leverage ratios, mandatory prepayment provisions, collateral and financial covenants, which will be discussed with the Court or with the Creditors' Committee, the U.S. Trustee and other parties-in-interest upon their request, and subject to confidentiality agreements. Mr. Ivester notes that the Debtors and the Original ABL Facility Commitment Parties are currently discussing whether to execute amendments to the ABL Facility Commitment Papers, as opposed to merely executing definitive documents reflecting the foregoing modifications. In the event that amended ABL Facility Commitment Papers are negotiated for execution, the Debtors will introduce them into evidence or otherwise submit them at the hearing to consider the Debtors' request. Mr. Ivester adds that amendments to the Exit Financing Documents -- including the ABL Facility -- do not constitute Plan amendments. Rather, he says, they are amendments to documents implementing the Plan. However, to the extent that the Court finds that the modifications constitute an amendment to the Plan, the Debtors seek relief to modify the Plan accordingly, pursuant to Section 1127 of the Bankruptcy Code. The Debtors also ask court to convene a hearing on January 29, 2009, to consider approval of their request. The January 29 Hearing is imperative in order to afford the Debtors sufficient time to close on the Plan Transactions in advance of (i) the maturity date of the Debtors' current DIP Facility, and (ii) the expiration of the commitments contemplated by the Commitment Letters on February 9, 2009, Mr. Ivester tells the Court. "While much work remains to be done to close our financing transactions, we believe that our accord with GE Capital has cleared the last significant obstacle to our emergence. Negotiations with GE Capital over the past several days have been constructive, and so I am optimistic we will have a timely completion of this transaction," Mr. Jung added. IBC, however, has cautioned that there can be no assurance that its Exit Financing will close as expected. Eric Palmer of The Kansas City Star notes that GE Capital has faced some challenges of its own. As credit markets have shrunk, it has reduced its lending and even tapped some government programs to refinance some of its own debt, Mr. Palmer says. About Interstate Bakeries Headquartered in Kansas City, Missouri, Interstate Bakeries Corporation is a wholesale baker and distributor of fresh-baked bread and sweet goods, under various national brand names, including Wonder(R), Baker's Inn(R), Merita(R), Hostess(R) and Drake's(R). Currently, IBC employs more than 25,000 people and operates 45 bakeries, as well as approximately 800 distribution centers and approximately 800 bakery outlets throughout the country. The company and eight of its subsidiaries and affiliates filed for chapter 11 protection on Sept. 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,626,425,000 in total assets and $1,321,713,000 (excluding the $100,000,000 issue of 6% senior subordinated convertible notes due Aug. 15, 2014) in total debts. The Debtors first filed their Chapter 11 Plan and Disclosure Statement on Nov. 5, 2007. On Jan. 30, 2008, the Debtors received court approval of the disclosure statement explaining their first amended plan. IBC did not receive any qualifying alternative proposals for funding its plan in accordance with the court- approved alternative proposal procedures. The Debtors, on Oct. 4, 2008, filed another Plan, which contemplates IBC's emergence from Chapter 11 as a stand-alone company. The filing of the Plan was made in connection with the plan funding commitments, on Sept. 12, 2008, from an affiliate of Ripplewood Holdings L.L.C. and from Silver Point Finance, LLC, and Monarch Master Funding Ltd. On December 5, 2008, the Bankruptcy Court confirmed IBC's Amended New Joint Plan of Reorganization. The plan was filed October 31, 2008. The exit financings that form the basis for the Plan are reflected in corresponding debt and equity commitments. IRVINE SENSORS: Files Amendment to Annual Report ------------------------------------------------ Irvine Sensors Corporation filed with the Securities and Exchange Commission on January 26, 2009, Amendment No. 1 to its Annual Report for the fiscal year ended September 28, 2008. The company incorporated by reference Part III of its Initial Form 10-K from the definitive Proxy Statement to be filed in connection with its 2009 Annual Stockholders' Meeting. Part III includes information about directors, executive officers and corporate governance; executive compensation; security ownership of certain beneficial owners and management and related stockholder matters; certain relationships and related transactions, and director independence; and principal accountant fees and services. A full-text copy of Amendment No. 1 is available for free at: http://researcharchives.com/t/s?38d0 Irvine Sensors Corporation -- http:www.irvine-sensors.com -- headquartered in Costa Mesa, California, is a vision systems company engaged in the development and sale of miniaturized infrared and electro-optical cameras, image processors and stacked chip assemblies and research and development related to high density electronics, miniaturized sensors, optical interconnection technology, high speed network security, image processing and low- power analog and mixed-signal integrated circuits for diverse systems applications. As of September 28, 2008, the company's balance sheet showed total assets of $22,884,000 and total liabilities of $31,343,200, resulting in total stockholders' deficit of $8,459,200. Grant Thornton LLP in Irvine, California, in a letter dated January 9, 2009, pointed out that the company incurred net losses of $21.6 million, $22.1 million, and $8.4 million for the years ended September 28, 2008, September 30, 2007 and October 1, 2006, respectively, and the company has a working capital deficit of $16.1 million at September 28, 2008. "These factors, among others, raise substantial doubt about the company's ability to continue as a going concern." The Troubled Company Reporter reported on Jan. 21, 2009, that Irvine Sensors Corporation received a written notice from The Nasdaq Stock Market on January 14, 2009, indicating that the company failed to comply with the minimum stockholders' equity, market value and net income from continuing operations requirements for continued listing set forth in Nasdaq Marketplace Rule 4310(c)(3) because the company's stockholders' equity is below the Nasdaq minimum stockholders' equity listing requirement of $2,500,000, the market value of the company's listed securities is below the Nasdaq minimum market value listing requirement of $35,000,000 and the Company's net income from continuing operations is below the Nasdaq minimum listing requirement of $500,000 for the most recently completed fiscal year or two of the three most recently completed fiscal years. LANDMARK HOMES: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Landmark Homes and Development Inc. 985 Damonte Parkway, Suite 300 Reno, NV 89521 Bankruptcy Case No.: 09-50197 Type of Business: The Debtor is a homebuilder and developer. Chapter 11 Petition Date: January 28, 2009 Court: District of Nevada (Reno) Debtor's Counsel: John J. Dawson, Esq. Quarles & Brady LLP 2 No. Central Avenue Phoenix, AZ 85004 Tel: (602) 229-5200 Fax: (602) 229-5690 jdawson@quarles.com Estimated Assets: $10 million to $50 million Estimated Debts: $10 million to $50 million The Debtor's Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Signature First LLC trade debt $491,315 PO Box 21441 Carson City, NV 89721 Tel: (775) 882-5500 Sommercal Construction trade debt $390,744 3690 33rd Avenue Sacramento, CA 95824 Tel: (800) 520-0776 Peninsula Floors Inc. trade debt $370,928 PO Box 71 Livermore, CA 84551 Tel: (800) 326-1297 Sierra General Contractors trade debt $213,142 Engeo Incorporated trade debt $179,687 McDonald Carano Wilson trade debt $156,867 Artistic Fence trade debt $154,726 Fleet Heating trade debt $132,299 Leonard, Pete trade debt $110,500 Express Plumbing trade debt $103,992 General Electric Company trade debt $83,777 Innerwest Advertising trade debt $67,007 Creative Touch Interiors trade debt $66,554 Reliable Framing trade debt $65,400 Padilla Construction trade debt $58,674 Environmental Protection trade debt $58,394 Door & Window Company trade debt $57,312 Paragon Civil Constructors trade debt $52,047 Inc. Bawden, Catherine trade debt $51,800 Sierra Wes Drywall Inc. trade debt $51,598 The petition was signed by James F. Bawden, president. LEAR CORP: Violates Loan Covenant; In Talks with Primary Lenders ---------------------------------------------------------------- Lear Corporation reports that during the fourth quarter of 2008, it chose to borrow $1.2 billion under its primary credit facility to protect against disruptions in the capital markets and to further bolster its liquidity position. The Company elected not to repay the amounts borrowed at year end in light of continued market and industry uncertainty. As a result of this decision, the Company is no longer in compliance with the leverage ratio contained in its primary credit facility. Lear has initiated discussions with the co-agents under its primary credit facility to seek a long-term amendment. The discussions have been constructive and are continuing, according to Lear. Because the amendment will require support from lenders holding a majority of outstanding commitments and borrowings under the primary credit facility, the Company intends to pursue discussions with a broader lender group before finalizing the amendment proposal and launching the formal amendment process. If the Company is unable to obtain an amendment, upon a majority vote of the lenders under the primary credit facility, the lenders would have the right to exercise all remedies thereunder, which would have a material adverse effect on the Company's financial position. Based in Southfield, Michigan, Lear Corp. is a global automotive supplier, conducting business in two product operating segments: seating and electrical and electronic. The seating segment includes seat systems and the components. The electrical and electronic segment includes electrical distribution systems and electronic products, primarily wire harnesses, junction boxes, terminals and connectors, various electronic control modules, as well as audio sound systems and in-vehicle television and video entertainment systems. The assembly process with respect to the electrical and electronic segment is performed in low-cost labor sites in Mexico, Honduras, the Philippines, Eastern Europe and Northern Africa. Lear has divested substantially all of the assets of its interior segment, which included instrument panels and cockpit systems, headliners and overhead systems, door panels, flooring and acoustic systems and other interior products. As reported by the Troubled Company Reporter on Jan. 9, 2009, Moody's Investors Service lowered the Corporate Family and Probability of Default ratings of Lear Corporation, to Caa2 from B3. In a related action, the rating of the senior secured term loan was lowered to Caa1 from B2, and the rating on the senior unsecured notes was lowered to Caa2 from B3. The ratings remain on review for further possible downgrade. According to the TCR on Jan. 15, 2009, Standard & Poor's Ratings Services said it lowered its corporate credit rating on Southfield, Michigan-based Lear Corp. to 'B-' from 'B'. At the same time, S&P also lowered its issue-level ratings on the company's debt. The ratings remain on CreditWatch, where they had been placed with negative implications on Nov. 13, 2008. LEAR CORP: Posts $689.9 Million Net Loss for Full-Year 2008 ----------------------------------------------------------- Lear Corporation reported preliminary financial results for the fourth quarter and full year of 2008. Lear reported a net loss of $689.9 million, including the non-cash goodwill impairment charge and restructuring costs, for the full-year 2008. This compares with net income of $241.5 million for the full-year 2007. Free cash flow in 2008 was negative $70.7 million as compared with free cash flow of $433.6 million in 2007. The decline primarily reflects lower earnings and higher cash costs for restructuring. For the full year 2008, Lear reported net sales of $13.6 billion and a pretax loss of $604.1 million, driven largely by a non-cash goodwill impairment charge of $530.0 million and restructuring costs of $193.9 million. Core operating earnings were $418.4 million for the full year 2008. This compares with net sales of $16.0 billion, pretax income of $331.4 million and core operating earnings of $748.5 million in 2007. For the fourth quarter of 2008, Lear reported net sales of $2.6 billion and a pretax loss of $692.1 million, driven largely by a non-cash goodwill impairment charge of $530.0 million and restructuring costs of $66.2 million. Income before interest, other (income) expense, income taxes, restructuring costs and other special items (core operating earnings) was $22.0 million in the fourth quarter of 2008. This compares with net sales of $3.9 billion, pretax income of $45.1 million and core operating earnings of $178.6 million in the fourth quarter of 2007. Lear says net loss was $688.2 million, including the non-cash goodwill impairment charge and restructuring costs, for the fourth quarter of 2008. This compares with net income of $27.0 million in the year earlier quarter. In the fourth quarter of 2008, free cash flow was negative $38.3 million, as compared with free cash flow of $170.9 million in the fourth quarter of 2007. The decline in free cash flow compared with a year ago primarily reflects lower earnings. Lear says the production environment in the fourth quarter was extremely challenging due to significantly lower production volumes globally. In North America, industry production compared with a year ago was down 26%, the Domestic Three were down 30%, and Lear's top 15 platforms were down 26%. In Europe, industry production was down 29%, and its top five customers were down 31%. Globally, automotive production was down 21%. "These sharp declines in automotive production in North America and globally dramatically impacted our financial results in the fourth quarter," said Bob Rossiter, Lear's chairman, chief executive officer and president. "We have been aggressively restructuring our global operations in response to changing business conditions. Lear's strategy to manage through the downturn is to accelerate and expand global restructuring and cost reduction efforts, to narrow our investment focus to minimize cash burn and to continue to provide our customers with superior value." For the year, Lear continued to make progress on its strategic priorities, including further diversification of its global sales, business development in emerging markets and the implementation of an operating improvement plan for the electrical and electronic segment. Approximately two-thirds of Lear's 2008 net sales were generated outside of North America. In addition, Lear continues to improve quality and win new business globally. Lear's business backlog for the 2009 to 2011 period currently stands at $1.1 billion, with 60% in the seating segment and 40% in the electrical and electronic segment, including recent awards on the Chevy Volt and several other new hybrid models. In terms of liquidity, the Company had approximately $1.6 billion in cash and cash equivalents as of December 31, 2008, providing more than adequate resources to satisfy ordinary course business obligations. Lear had $6.8 billion in total assets, and $3.5 billion in reported debt as of December 31, 2008. Based in Southfield, Michigan, Lear Corp. is a global automotive supplier, conducting business in two product operating segments: seating and electrical and electronic. The seating segment includes seat systems and the components. The electrical and electronic segment includes electrical distribution systems and electronic products, primarily wire harnesses, junction boxes, terminals and connectors, various electronic control modules, as well as audio sound systems and in-vehicle television and video entertainment systems. The assembly process with respect to the electrical and electronic segment is performed in low-cost labor sites in Mexico, Honduras, the Philippines, Eastern Europe and Northern Africa. Lear has divested substantially all of the assets of its interior segment, which included instrument panels and cockpit systems, headliners and overhead systems, door panels, flooring and acoustic systems and other interior products. As reported by the Troubled Company Reporter on Jan. 9, 2009, Moody's Investors Service lowered the Corporate Family and Probability of Default ratings of Lear Corporation, to Caa2 from B3. In a related action, the rating of the senior secured term loan was lowered to Caa1 from B2, and the rating on the senior unsecured notes was lowered to Caa2 from B3. The ratings remain on review for further possible downgrade. According to the TCR on Jan. 15, 2009, Standard & Poor's Ratings Services said it lowered its corporate credit rating on Southfield, Michigan-based Lear Corp. to 'B-' from 'B'. At the same time, S&P also lowered its issue-level ratings on the company's debt. The ratings remain on CreditWatch, where they had been placed with negative implications on Nov. 13, 2008. LEHMAN BROTHERS: Examiner Anton Valukas Begins Investigation ------------------------------------------------------------ Anton Valukas, the examiner appointed by the U.S. Bankruptcy Court for the Southern District of New York in Lehman Brothers Holdings Inc.'s case, has started its probe on Lehman. Mr. Valukas said he sought advice from the examiners in other large bankruptcies including WorldCom Inc. and Refco Inc. about conducting the investigation. According to Bloomberg News, Mr. Valukas told Judge James Peck he contacted Barclays Plc, which bought Lehman's North American brokerage business, Lehman Brothers Inc., in September. Mr. Valukas said he worked out an agreement to share information with the U.S. Attorney's Office in Manhattan and the Securities Investor Protection Corp. trustee James Giddens. Judge Peck has said all the various entities probing Lehman need to coordinate and share information to avoid duplicate efforts and higher fees that would hurt creditors' returns. As reported by the Troubled Company Reporter on Jan. 21, 2009, former federal prosecutor Anton Valukas of the firm Jenner & Block LLP has been selected by Diana J. Adams, the United States Trustee for Region 2, to lead an independent investigation of the events leading to Lehman Brothers Holdings Inc.'s collapse and the claims creditors owed more than $613 billion may pursue. The U.S. Trustee named an examiner at the direction of the U.S. Bankruptcy Court for the Southern District of New York. The Court has approved the U.S. Trustee's selection. The Walt Disney Company in October 2008 filed a request for an appointment of an examiner who will, among other things, investigate pre-bankruptcy transactions between Lehman Brothers Holdings Inc., and its affiliates. After negotiations, Lehman Brothers reached an agreement with Walt Disney regarding an examiner's appointment and the scope of the trustee's investigation. Alvarez & Marsal, which oversees Lehman's wind-down proceedings, slammed New York State Comptroller Thomas DiNapoli's call for the replacement of Lehman Brothers Holdings' board of directors and Richard Fuld Jr., chairman and former chief executive officer, by a trustee. Alvarez & Marsal said that, contrary to the Comptroller's accusations, Lehman was a victim of a financial tsunami that was beyond its control and that Lehman executives took appropriate action to strengthen Lehman's financial conditions before its bankruptcy filing in Sept. 2008. "The Lehman case needs sunshine from an independent and learned voice," said Martin Bienenstock, counsel to Walt Disney, Bloomberg News reported. "We are thrilled the U.S. Trustee moved so quickly and proposed a great lawyer from a great firm to serve as examiner." Mr. Valukas is the chairman of the Illinois-based Jenner & Block LLP and a partner in Jenner & Block's litigation department. "Throughout my legal career of over 40 years, I have led numerous investigations of Fortune 500 companies and large international corporations involving potential financial misconduct, accounting irregularities, ethical issues, and alleged corporate fraud." He also held several positions with the United States Department of Justice, including United States Attorney for the Northern District of Illinois (1985-1989), First Assistant United States Attorney (1975-1976), Chief of Special Prosecutions Division (1974), and Assistant United States Attorney (1970-1974). Judge James Peck said that an examiner will instill "confidence and trust" among those involved in Lehman's bankruptcy case. He rules that the Examiner's duties will include an investigation as to: (1) Whether Lehman Brothers Commercial Corporation or any other entity that currently is an LBHI Chapter 11 debtor subsidiary or affiliate has any administrative claims against LBHI resulting from LBHI's cash sweeps of cash balances, if any, from September 15, 2008, through the date that that LBHI affiliate commenced its Chapter 11 case. (2) All voluntary and involuntary transfers to, and transactions with, affiliates, insiders and creditors of LBCC or its affiliates, in respect of foreign exchange transactions and other assets that were in the possession or control of LBHI Affiliates at any time commencing on September 15, 2008, through the day that each LBHI Affiliate commenced its Chapter 11 case. (3) Whether any LBHI Affiliate has colorable claims against LBHI for potentially insider preferences arising under the Bankruptcy Code or state law. (4) Whether any LBHI Affiliate has colorable claims against LBHI or any other entities for potentially voidable transfers or incurrences of debt, under the Bankruptcy Code or otherwise applicable law. (5) Whether there are more colorable claims for breach of fiduciary duties and aiding or abetting any breaches against the officers and directors of LBCC and other Debtors arising in connection with the financial condition of the Lehman enterprise prior to LBHI's Petition Date. (6) Whether assets of any LBHI Affiliates, other than Lehman Brothers, Inc., were transferred to Barclays Capital Inc. as a result of the sale to Barclays Capital Inc. that was approved by a Court order, and whether consequences to any LBHI Affiliate as a result of the consummation of the transaction created colorable causes of action that inure to the benefit of the creditors of that LBHI subsidiary or affiliate. (7) The inter-company accounts and transfers among LBHI and its direct and indirect subsidiaries, including but not limited to LBI, LBIE, Lehman Brothers Special Finance and LBCC, during the 30-day period preceding the commencement of the Chapter 11 cases by each debtor on September 15, 2008, or thereafter as the Examiner deems relevant to the Investigation. (8) The transactions and transfers, including but not limited to the pledging or granting of collateral security interest among the debtors and the prepetition lenders and financial participants including but not limited to, JPMorgan Chase, Citigroup, Inc., Bank of America, the Federal Reserve Bank of New York and others. (9) The transfer of the capital stock of certain subsidiaries of LBI on or about September 19, 2008, to Lehman ALI Inc. (10) The events that occurred from September 4, 2008, through September 15, 2008 or prior thereto that may have resulted in commencement of the LBHI chapter 11 case. About Lehman Brothers Lehman Brothers Holdings Inc. -- http://www.lehman.com-- was the fourth largest investment bank in the United States. For more than 150 years, Lehman Brothers led in the global financial markets by serving the financial needs of corporations, governmental units, institutional clients and individuals worldwide. Through its team of more than 25,000 employees, Lehman Brothers offered a full array of financial services in equity and fixed income sales, trading and research, investment banking, asset management, private investment management and private equity. Its worldwide headquarters in New York and regional headquarters in London and Tokyo are complemented by a network of offices in North America, Europe, the Middle East, Latin America and the Asia Pacific region. The firm, through predecessor entities, was founded in 1850. Lehman filed for chapter 11 bankruptcy Sept. 15, 2008 (Bankr. S.D.N.Y. Case No. 08-13555). Lehman's bankruptcy petition listed $639 billion in assets and $613 billion in debts, effectively making the firm's bankruptcy filing the largest in U.S. history. Subsidiary LB 745 LLC, submitted a Chapter 11 petition on Sept. 16 (Case No. 08-13600). Several other affiliates followed thereafter. The Debtors' bankruptcy cases are handled by Judge James M. Peck. Harvey R. Miller, Esq., Richard P. Krasnow, Esq., Lori R. Fife, Esq., Shai Y. Waisman, Esq., and Jacqueline Marcus, Esq., at Weil, Gotshal & Manges, LLP, in New York, represent Lehman. Epiq Bankruptcy Solutions serves as claims and noticing agent. On Sept. 19, 2008, the Honorable Gerard E. Lynch, Judge of the United States District Court for the Southern District of New York, entered an order commencing liquidation of Lehman Brothers, Inc., pursuant to the provisions of the Securities Investor Protection Act in the case captioned Securities Investor Protection Corporation v. Lehman Brothers Inc., Case No. 08-CIV- 8119 (GEL). James W. Giddens has been appointed as trustee for the SIPA liquidation of the business of LBI Barclays Bank Plc has agreed, subject to U.S. Court and relevant regulatory approvals, to acquire Lehman Brothers' North American investment banking and capital markets operations and supporting infrastructure for US$1.75 billion. Nomura Holdings Inc., the largest brokerage house in Japan, on Sept. 22 reached an agreement to purchased Lehman Brothers Holdings, Inc.'s operations in Europe and the Middle East less than 24 hours after it reached a deal to buy Lehman's operations in the Asia Pacific for US$225 million. Nomura paid only $2 dollars for Lehman's investment banking and equities businesses in Europe, but agreed to retain most of Lehman's employees. International Operations Collapse Lehman Brothers International (Europe), the principal UK trading company in the Lehman group, was placed into administration, together with Lehman Brothers Ltd, LB Holdings PLC and LB UK RE Holdings Ltd. These are currently the only UK incorporated companies in administration. Tony Lomas, Steven Pearson, Dan Schwarzmann and Mike Jervis, partners at PricewaterhouseCoopers LLP, have been appointed as joint administrators to Lehman Brothers International (Europe) on Sept. 15, 2008. The joint administrators have been appointed to wind down the business. Lehman Brothers Japan Inc. and Lehman Brothers Holdings Japan Inc. filed for bankruptcy in the Tokyo District Court on Sept. 16. The two units of Lehman Brothers Holdings, Inc., which has filed for bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York, have combined liabilities of JPY4 trillion -- US$38 billion). Lehman Brothers Japan Inc. reported about JPY3.4 trillion ($33 billion) in liabilities in its petition. Akio Katsuragi, a former Morgan Stanley executive, runs Lehman's Japan units. Lehman Brothers Asia Limited, Lehman Brothers Securities Asia Limited and Lehman Brothers Futures Asia Limited have suspended its operations with immediate effect, including ceasing to trade on the Hong Kong Securities Exchange and Hong Kong Futures Exchange, until further notice. The Asian units' asset management company, Lehman Brothers Asset Management Limited, will continue to operate on a business as usual basis. A further notice concerning the retail structured products issued by or arranged by any Lehman Brothers group company will be issued as soon as possible, a press statement said. Bankruptcy Creditors' Service, Inc., publishes Lehman Brothers Bankruptcy News. The newsletter tracks the chapter 11 proceeding undertaken by Lehman Brothers Holdings, Inc. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) LEHMAN BROTHERS: Replaced As Admin. Agent Under Jarden Facility --------------------------------------------------------------- Jarden Corporation has reached an agreement to settle all of its outstanding claims against Lehman Brothers related to the bankruptcy of Lehman and related entities and the subsequent defaults of Lehman Commercial Paper Inc., an affiliate of Lehman Brothers, as agent and revolving lender under Jarden's Senior Credit Facility. As part of the settlement, Jarden completed an amendment to the credit facility to replace Lehman Commercial Paper Inc. with Deutsche Bank AG New York Branch as Administrative Agent. Additionally, Deutsche Bank will replace Lehman in all of its other administrative capacities under the credit facility. The settlement and amendment include repayment of Lehman's outstanding revolving credit loans to Jarden in an amount mutually agreed upon by Lehman and Jarden, termination of Lehman's commitment to make additional loans, and a mutual release of all claims related to the credit agreement and certain defaults by an affiliate of Lehman. The settlement has been approved by the Bankruptcy Court overseeing Lehman's bankruptcy filing. Lehman accounted for less than 10% of the Company's total availability under its revolving credit facility. Martin E. Franklin, Chairman and Chief Executive Officer of Jarden Corporation said, "We are happy to put the distraction of Lehman's bankruptcy behind us and we look forward to our new expanded relationship with Deutsche Bank. In this tough economic environment it is a satisfying reflection on Jarden's strength and steadiness that we received unanimous approval for the bank amendment from participants in our revolving credit facility. Jarden's liquidity position continues to be strong, and we remain focused on maintaining a conservative fiscal position while executing our long-term growth strategy." As previously announced, Jarden expects to report its fourth quarter and year-end results as scheduled for February 12, 2009, and plans to discuss its longer-term growth strategy at its analyst and investor day at the NYSE on March 3, 2009. Jarden Corp. -- http://www.jarden.com-- operates in three primary business segments through a number of well recognized brands, including: Outdoor Solutions: Abu Garcia(R), Berkley(R), Campingaz(R) and Coleman(R), Fenwick(R), Gulp!(R), JT(R), K2(R), Marker(R), Marmot(R), Mitchell(R), Penn(R), Rawlings(R), Shakespeare(R), Stearns(R), Stren(R), Trilene(R) and Volkl(R); Consumer Solutions: Bionaire(R), Crock-Pot(R), FoodSaver(R), Health o meter(R), Holmes(R), Mr. Coffee(R), Oster(R), Patton(R), Rival(R), Seal-a-Meal(R), Sunbeam(R), VillaWare(R) and White Mountain(R); and Branded Consumables: Ball(R), Bee(R), Bicycle(R), Crawford(R), Diamond(R), Dicon(R), First Alert(R), Forster(R), Hoyle(R), Kerr(R), Lehigh(R), Leslie-Locke(R), Loew Cornell(R) and Pine Mountain(R). Headquartered in Rye, N.Y., Jarden has over 25,000 employees worldwide. Harmonic & XCel Disclose Exposure SunnyVale, California-based Harmonic Inc. disclosed that it has incurred a charge as a result of the fair value of the Company's investment in the unsecured debt of Lehman Brothers Holdings, Inc., being substantially reduced because of the bankruptcy of the issuer. As a result, the Company recorded an $845,000 "other- than-temporary" impairment charge to reduce the carrying value of this investment. This impairment charge has been excluded from Harmonic's non-GAAP net income because Harmonic expects the impairment charge to be a non-recurring item. Harmonic believes that its inclusion in the calculation of non-GAAP net income would not provide a meaningful comparison of current versus prior net income. Harmonic provides broadcast and on-demand video delivery solutions. Minneapolis, Minnesota-based Xcel Energy Inc. said commitments under its credit facilities have been reduced by $73 million as a result of the Lehman Brothers bankruptcy. Xcel Energy has $2.1 billion in total commitments. About Lehman Brothers Lehman Brothers Holdings Inc. -- http://www.lehman.com-- was the fourth largest investment bank in the United States. For more than 150 years, Lehman Brothers led in the global financial markets by serving the financial needs of corporations, governmental units, institutional clients and individuals worldwide. Through its team of more than 25,000 employees, Lehman Brothers offered a full array of financial services in equity and fixed income sales, trading and research, investment banking, asset management, private investment management and private equity. Its worldwide headquarters in New York and regional headquarters in London and Tokyo are complemented by a network of offices in North America, Europe, the Middle East, Latin America and the Asia Pacific region. The firm, through predecessor entities, was founded in 1850. Lehman filed for chapter 11 bankruptcy Sept. 15, 2008 (Bankr. S.D.N.Y. Case No. 08-13555). Lehman's bankruptcy petition listed $639 billion in assets and $613 billion in debts, effectively making the firm's bankruptcy filing the largest in U.S. history. Subsidiary LB 745 LLC, submitted a Chapter 11 petition on Sept. 16 (Case No. 08-13600). Several other affiliates followed thereafter. The Debtors' bankruptcy cases are handled by Judge James M. Peck. Harvey R. Miller, Esq., Richard P. Krasnow, Esq., Lori R. Fife, Esq., Shai Y. Waisman, Esq., and Jacqueline Marcus, Esq., at Weil, Gotshal & Manges, LLP, in New York, represent Lehman. Epiq Bankruptcy Solutions serves as claims and noticing agent. On Sept. 19, 2008, the Honorable Gerard E. Lynch, Judge of the United States District Court for the Southern District of New York, entered an order commencing liquidation of Lehman Brothers, Inc., pursuant to the provisions of the Securities Investor Protection Act in the case captioned Securities Investor Protection Corporation v. Lehman Brothers Inc., Case No. 08-CIV- 8119 (GEL). James W. Giddens has been appointed as trustee for the SIPA liquidation of the business of LBI Barclays Bank Plc has agreed, subject to U.S. Court and relevant regulatory approvals, to acquire Lehman Brothers' North American investment banking and capital markets operations and supporting infrastructure for US$1.75 billion. Nomura Holdings Inc., the largest brokerage house in Japan, on Sept. 22 reached an agreement to purchased Lehman Brothers Holdings, Inc.'s operations in Europe and the Middle East less than 24 hours after it reached a deal to buy Lehman's operations in the Asia Pacific for US$225 million. Nomura paid only $2 dollars for Lehman's investment banking and equities businesses in Europe, but agreed to retain most of Lehman's employees. International Operations Collapse Lehman Brothers International (Europe), the principal UK trading company in the Lehman group, was placed into administration, together with Lehman Brothers Ltd, LB Holdings PLC and LB UK RE Holdings Ltd. These are currently the only UK incorporated companies in administration. Tony Lomas, Steven Pearson, Dan Schwarzmann and Mike Jervis, partners at PricewaterhouseCoopers LLP, have been appointed as joint administrators to Lehman Brothers International (Europe) on Sept. 15, 2008. The joint administrators have been appointed to wind down the business. Lehman Brothers Japan Inc. and Lehman Brothers Holdings Japan Inc. filed for bankruptcy in the Tokyo District Court on Sept. 16. The two units of Lehman Brothers Holdings, Inc., which has filed for bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York, have combined liabilities of JPY4 trillion -- US$38 billion). Lehman Brothers Japan Inc. reported about JPY3.4 trillion ($33 billion) in liabilities in its petition. Akio Katsuragi, a former Morgan Stanley executive, runs Lehman's Japan units. Lehman Brothers Asia Limited, Lehman Brothers Securities Asia Limited and Lehman Brothers Futures Asia Limited have suspended its operations with immediate effect, including ceasing to trade on the Hong Kong Securities Exchange and Hong Kong Futures Exchange, until further notice. The Asian units' asset management company, Lehman Brothers Asset Management Limited, will continue to operate on a business as usual basis. A further notice concerning the retail structured products issued by or arranged by any Lehman Brothers group company will be issued as soon as possible, a press statement said. Bankruptcy Creditors' Service, Inc., publishes Lehman Brothers Bankruptcy News. The newsletter tracks the chapter 11 proceeding undertaken by Lehman Brothers Holdings, Inc., and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) MATHIS PARTNERS: Bankruptcy Case Dismissed; FDIC Assumes Loan ------------------------------------------------------------- Comstock Homebuilding Companies, Inc., says the bankruptcy filing of its Mathis Partners, LLC subsidiary in Atlanta, Georgia, has been dismissed. At this time, Mathis Partners has retained ownership of its sole asset, the Gates at Luberon property in Forsyth County, Georgia. Haven Trust Bank of Georgia, the lender to Mathis Partners related to the Gates at Luberon project was closed by the Federal Deposit Insurance Corporation in December 2008. The loan is now owned by the FDIC. The Company is awaiting information from the FDIC regarding its intended handling of the loan. About Comstock Homebuilding Based in Reston, Viginia, Comstock Homebuilding Companies, Inc. (NasdaqGM: CHCI) -- http://www.comstockhomebuilding.com-- develops, builds and markets single-family homes, townhouses and condominiums in the Washington D.C., Raleigh, North Carolina and Atlanta, Georgia metropolitan markets. The company also provides certain management and administrative support services to certain related parties. * * * As reported in the Troubled Company Reporter on April 3, 2008, PricewaterhouseCoopers LLP raised substantial doubt about the ability of Comstock Homebuilding Companies, 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 stated that the company has experienced declining market conditions and has significant debt maturing during 2008. The Troubled Company Reporter said on July 11, 2008, that Comstock has retained FTI Consulting Inc. as advisor to the company with respect to strategic and financial alternatives in the face of a prolonged real estate downturn. On January 29, 2009, Comstock Homebuilding Companies, Inc. and Comstock Penderbrook, L.C., a wholly owned subsidiary of the Company, entered into a forbearance agreement with Guggenheim Corporate Funding with respect to the $13.5 million outstanding under the company's secured Penderbrook project loan. The company had receive a notice of default from Guggenheim on August 22, 2008. In connection with the forbearance agreement the original maturity date of the loan was extended from February 22, 2010 to March 6, 2011. The terms of the forbearance agreement provide for additional incremental extensions until March 6, 2012, provided certain unit delivery requirement thresholds are met. About Mathis Partners Reston, Virgina-based Mathis Partners, LLC -- http://www.comstockhomebuilding.com/-- is a single purpose limited liability company that is a wholly owned subsidiary of Comstock Homebuilding Cos., Inc. It was formed by Parker Chandler Homes, Inc. to develop the Gates of Luberon residential development project in Forstyth County, Georgia, with Haven Trust as its lender. It filed its chapter 11 petition on March 31, 2008 (Bankr. N.D. Ga. Case No. 08-65876). Judge Margaret Murphy presides over the case. Paul Reece Marr, Esq., at Paul Reece Marr, PC, represents the Debtor in its restructuring efforts. The Debtor estimated both its assets and debts to be between $1 million and $10 million. MERISANT WORLDWIDE: Taps Blackstone as Financial Advisor -------------------------------------------------------- Merisant Worldwide Inc. and its debtor-affiliates ask the United States Bankruptcy Court for the District of Delaware for permission to employ Blackstone Advisory Services LP as their financial advisor. The firm will: a) assist in the evaluation of the Debtors' businesses and prospects; b) assist in the development of the Debtors' long-term business plan and related financial projections; c) assist in the development of financial data and presentations to the Debtors' Board of Directors, various creditors and other third parties; d) analyze the Debtors' financial liquidity and evaluate alternatives to improve such liquidity; e) analyze various restructuring scenarios and the potential impact of these scenarios on the recoveries of those stakeholders impacted by the Restructuring; f) provide strategic advice with regard to restructuring or refinancing the Debtors' Obligations; g) evaluate the Debtors' debt capacity and alternative capital structures; h) participate in negotiations among the Debtors and its creditors, suppliers, lessors and other interested parties; i) provide strategic advice and participate in discussions regarding the Debtors' communication plan and strategy with its creditors, suppliers, lessors and other interested parties; j) value securities offered by the Debtors in connection with a restructuring; k) advise the Debtors and negotiate with lenders with respect to potential waivers or amendments of various credit facilities; 1) assist in arranging equity financing, DIP Financing and Exit Financing, each as requested; m) provide expert witness testimony concerning any of the subjects encompassed by the other financial advisory services; and n) provide such other advisory services as are customarily provided in connection with the analysis and negotiation of a restructuring, as requested and mutually agreed. The firm will receive (i) a $175,000 advisory fee per month payable by the Debtors in advance on the third day of each month; (ii) $4,500,000 restructuring fee payable upon the consummation of the restructuring; (iii) A debt financing fee equal to 1% of any debt-related DIP and exit financing payable upon consummation of such facility; however, such fee will be 100% creditable against the restructuring fee; and (iv) an equity financing fee equal to 5% of the gross proceeds received from an equity financing pursuant to an exit financing, payable upon consummation; however, such fee will be 100% creditable against the Restructuring Fee; In addition, the firm will credit against the restructuring fee: 50% of the monthly fees paid in excess of $875,000; Provided that the monthly fee credit will not exceed the restructuring fee. Nicholas P. Leone, senior managing director at the 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. About Merisant Worldwide Headquartered in Chicago, Illinois, Merisant Worldwide Inc. -- http://www.merisant.com/-- sell low-calorie tabletop sweetener. The Debtor's brands are Equal(R) and Canderel(R). The Debtor has principal regional offices in Mexico City, Mexico; Neuchatel, Switzerland; Paris, France; and Singapore. In addition, the Debtor owns and operates manufacturing facilities in Manteno, Illinois, and Zarate, Argentina, and own processing lines that are operated exclusively for the Debtor at plants located in Bergisch and Stendal, Germany and Bangkrason, Thailand. As of March 28, 2008, the Debtor has 20 active direct and indirect subsidiaries, including five subsidiaries in the United States, six subsidiaries in Europe, five subsidiaries in Mexico, Central America and South America, and three subsidiaries in the Asia Pacific region, including Australia and India. Furthermore, the Debtor's Swiss subsidiary holds a 50% interest in a joint venture in the Philippines. Merisant Worldwide holds 100% interest in Merisant Company. The company and five of its units filed for Chapter 11 protection on January 9, 2009 (Bankr. D. Del. Lead Case No. 09-10059). Sidley Austin LLP represents the Debtors' in their restructuring efforts. The Debtors proposed Young, Conaway, Stargatt & Taylor LLP as their Delaware counsel; Blackstone Advisory Services LLP as financial advisor; and Epiq Bankruptcy Solutions LLC as claims agent. The Debtors have $331,077,041 in total assets and and 560,742,486 in total debts as of Nov. 30, 2008. MERRILL CORPORATION: S&P Affirms 'B' Corporate Credit Rating ------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its 'B' corporate credit rating on Merrill Corporation and removed it from CreditWatch, where it was placed with negative implications June 27, 2008. The rating outlook is negative. In addition, S&P lowered the issue-level rating on the company's senior secured credit facility to 'B' (at the same level as the corporate credit rating) from 'B+'. The recovery rating on the facility was revised to '3', indicating S&P's expectation of meaningful (50% to 70%) recovery for lenders in the event of a payment default, from '2'. The issue-level rating on the company's second-lien term loan remains unchanged at 'CCC+' (two notches lower than the corporate credit rating) with a recovery rating of '6', indicating S&P's expectation for negligible (0% to 10%) recovery in the event of a payment default. (For the complete recovery analysis, see Standard & Poor's recovery report on Merrill, to be published on RatingsDirect immediately following the release of this report.) The issue-level ratings on the credit facilities were also removed from CreditWatch, in conjunction with the removal of the corporate credit rating. "The affirmation of the 'B' corporate credit rating recognizes the company's surplus cash and ability to continue to generate discretionary cash flow despite the difficult operating conditions affecting many of Merrill's business segments, particularly financial print and the consumer segment of its Marketing and Communication Solutions business," said Standard & Poor's credit analyst Michael Listner. "We expect the surplus cash to provide flexibility during the challenging operating environment." Initially, S&P anticipate that part of the cash will be used to repurchase a portion of Merrill's first-lien term loan at a discount to par, as allowed per an amendment to its credit facilities that was executed on Jan. 23, 2009. The terms of the amendment allow for total repurchases throughout fiscal 2010 (ending Jan. 31, 2010) of up to $125 million, and require that cash on the balance sheet be used as the source of funds. On Jan. 27, Merrill completed a tender offer for a repurchase amount of $40 million of the first-lien term loan. Although the transaction occurred at a discount to par value, S&P views this tender offer as opportunistic for the company since challenging operating and credit market conditions have contributed to the heavily discounted trading range for Merrill's first-lien term loan. S&P expects that the willingness of term loan investors to accept the offer largely relates to their own investment strategies and/or liquidity needs. Standard & Poor's also anticipates that Merrill will generate about $50 million to $60 million in discretionary cash flow in fiscal 2009. Thus, had the tender been unsuccessful, Merrill would have had sufficient liquidity to fund its fixed charges over the intermediate term. Despite its excess cash balances and the repurchase of a portion of its first-lien term debt through a below-par tender offer, Standard & Poor's expects that Merrill is at risk of violating the leverage covenant under this facility during fiscal 2010, possibly as soon as the quarter ended April 30, 2009. Merrill's first-lien leverage covenant is calculated on a net debt basis, thus the calculation already incorporates the company's excess cash position. The tender offer, therefore, will only improve the company's position relative to this covenant to the extent of any discount received through the tender process. For the quarter ended Oct. 31, 2008, total leverage based on the bank's calculation of this measure was approximately one-half turn below the covenant requirement. The covenant threshold steps down by 0.25x for the quarter ending January 2009, and then again by another 0.25x for the quarter ending July 2009. As Standard & Poor's expects Merrill to experience up to a mid- to high-teens percentage decline in EBITDA in 2009, S&P believes the company has limited cushion under this covenant. As Merrill continues to have ample liquidity (from internally generated sources) to service its obligations, S&P believes that lenders would be amenable to amending covenants, although the resulting increase to pricing would likely be significant. S&P currently expects that EBITDA coverage of interest expense will be in the low-2x area for the 12 months ended Jan. 31, 2009. Pro forma for a mid- to high-teens percentage decline in EBITDA, considering S&P's estimate for a re-pricing of the company's debt, and assuming the existing tender offer is successful at a modest discount to par, S&P expects interest coverage to fall to about 1.5x for the fiscal year ending Jan. 31, 2010. Under this scenario, the company would continue to have excess cash, likely in the $30 million to $40 million range, although the cash could be a subject for negotiation with lenders in the event of a covenant violation. S&P expects the company's cash position and ability to continue to generate discretionary cash flow -- even if higher pricing is assumed under the bank facilities -- will provide Merrill with the flexibility to manage the difficult operating environment anticipated in fiscal 2010. MIDLAND FOOD: Reports Dec. Profit, Asks for More Time for Plan -------------------------------------------------------------- Midland Food Services LLC asks the U.S. Bankruptcy Court for the District of Delaware to extend until June 2, 2009, its exclusive period to file a Chapter 11 plan. According to Bloomberg's Bill Rochelle, Midland says it's still analyzing which stores to continue and which to close. Bloomberg adds that Midland has recently submitted to the bankruptcy court an operating report, disclosing net income of $2.8 million for four weeks ended Dec. 22. About Midland Food Independence, Ohio-based Midland Food Services, L.L.C. is a Pizza Hut franchisee. Midland Food filed for Chapter 11 bankruptcy before the United States Bankruptcy Court for the District of Delaware on August 6, 2008 (Bankr. D. Del. 08-11802). Tara L. Lattomus, Esq., at Eckert Seamans Cherin & Melot, L.L.C., represented the Debtor in their restructuring efforts. The Debtor first filed for Chapter 11 in October 2000. It emerged from bankruptcy one year later on Aug. 7, 2001. MODAVOX INC: Posts $1.2MM Net Loss in Nine Months Ended Nov. 30 --------------------------------------------------------------- Modavox Inc. disclosed in a regulatory filing with the Securities and Exchange Commission its financial results for three and nine months ended Nov. 30, 2008. For three months ended Nov. 30, 2008, the company posted a net loss of $634,963 compared with a net loss of $470,389 for the same period in the previous year. For nine months ended Nov. 30, 2008, the company posted a net loss of $1,284,295 compared with a net loss of $650,207 for the same period in the previous year. Liquidity and Capital Resources During the nine months ended Nov. 30, 2008, cash generated from revenues was not adequate to pay the company's operating expenses, fund research & development, and fund the Avalar, Inc. Asset Purchase. During the nine months ended Nov. 30, 2008, the company raised $1,265,882 through the issuance of common stock. These proceeds were used in part, to provide payment to non-operational activities such as the investigation of the former chief executive officer & chairman, fund out patent strategies, increase its product offering through the acquisition of the Avalar assets, and resolve legal matters. As of Nov. 30, 2008, Modavox has no outstanding debt other than the related party note payable of $17,069, has paid off the outstanding bank note, and intends to close the credit line opened by former management in 2003. The company believed that its required capital expenditures for fiscal year 2009 will exceed $500,000. While the company is making progress in achieving sustainable positive cash flow, the future growth of the company and negative cash flow until sustainable positive cash flow is achieved may require that the company raise additional capital. At Nov. 30, 2008, the company's balance sheet showed total assets of $6,446,155, total liabilities of $1,715,169 and stockholders' equity of $4,730,986. A full-text copy of the 10-Q is available for free at: http://ResearchArchives.com/t/s?38bf About Modavox Inc. Modavox Inc. (OTC BB: MDVX.OB) -- http://www.modavox.com/-- offers Internet broadcasting and produces and syndicates online audio and video. It also offers innovative, effective and comprehensive online tools for reaching targeted niche communities worldwide. Through patented Modavox technology, Modavox delivers content straight to desktops and Internet-enabled devices. Modavox provides managed access for live and on-demand Internet Radio Broadcasting, E-learning and Rich Media Advertising. Going Concern Doubt Houston-based Malone & Bailey, PC, expressed substantial doubt about Modavox Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the year ended Feb. 29, 2008. The auditor pointed the company's recurring losses. Modavox believes that additional losses may be incurred as it develops and executes a sales and distribution strategy for its products and expands the number of sales locations. These potential losses and capital expenditures needed for Modavox to expand its sales locations and fund increases in revenue will likely require Modavox to raise additional capital through the issuance of equity or debt. MORTGAGES LTD: DS Hearing on Investors Committee Plan Set March 4 ----------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Arizona has scheduled a March 4, 2009 hearing to consider the approval of the disclosure statement explaining the Plan of Reorganization of the Official Committee of Investors in Mortgage Ltd.'s Chapter 11 bankruptcy cases. The Debtor filed several motions to extend exclusivity beyond the original date of Oct. 24, 2007. Radical Bunny LLC ("RBLLC") and the Investors Committee filed a motion to end exclusivity and to be allowed to file their own joint plan. On Jan. 6, 2008, the Court denied any further extensions of exclusivity and ended the Debtor's exclusive right to file a Plan. Plan Overview Pursuant to the Plan, a Liquidating Trust is to be established to which all the Debtor's Non-Loan Assets shall be transferred as of the Effective Date. The Liquidating Trustee will be tasked with selling the Debtor's real estate and collecting two note receivables previously owned by the Debtor which have been transferred to the Liquidating Trust. The Liquidating Trustee will also be tasked with pursuing all of the Debtor's Causes of Action and Avoidance Actions against third parties. Distributions to General Unsecured Creditors, Radical Bunny LLC ("RBLLC"), MP Funds and Investors to the extent of their Investors Damages and other holders of Unsecured Claims will be made by the Liquidating Trust out of the Liquidation Fund in accordance with the terms of the Plan and the Liquidating Trust Agreement. Sufficient reserves shall be established to protect the Investor Damage Claims for the MP Funds and the Pass-Through Investors and for RBLLC's Claim, which are likely to be contingent and unliquidated for a period of time. General Unsecured Creditors who choose to participate in the Liquidating Trust will waive their right to pursue and will be estopped from pursuing the same targets of Causes of Action and Avoidance Actions as the Liquidating Trust. The net proceeds of any and all sales or refinancing of the Non- Loan Assets collected by the Liqudating Trust shall, after payment of the Secured Claims related thereto, be placed by the Liquidating Trustee in the Liquidating Fund for payment of the Administrative Expense Claims or Priority Non-Tax Claims, and Unsecured Claims as provided by the Plan. Recoveries from the Avoidance Actions and Causes of Action shall also be placed by the Liquidating Trustee in the Liquidation Fund for payment of the Unsecured Claims as provided by the Plan. A Trust Board shall be established on the Plan's Effective Date to approve all actions to be taken by the Liquidating Trustee with respect to the assets of the Liquidating Trust. On the Effective Date, the existing stock or shares of Equity Interests shall be extinguished and net stock in the Reorganized Debtor shall be issued to the Liquidating Trust. Confirmation of the Plan shall effectuate and approve the settlement of all causes of actions and disputes and legal issues, including (1) the validity of the security interest of RBLLC in the RBLLC Collateral, (2) the acknowledgment of the ownership of the ML Notes and ML Deeds of Trust by the MP Funds and Pass- Through Investors, (3) the settlement of the Avoidance Actions and Causes of Action as against RBLLC and the Investors (excluding Insiders), (4) the sharing of the RBLLC Collateral with the non- RBLLC, non-Borrower, and non-Investor General Unsecured Claimants, as set forth in Sec. 3.6(g) of the Plan, (5) if not already approved, the settlement between VTL Fund and the MP Funds, and (6) the allowance of Investor Damages by the Investors as unsecured Claims in the Liquidating Trust. Prior to the Effective Date, a separate Loan LLC will be formed to hold each of the ML Loans and the ML Loan Documents associated with that ML Loan, including the ML Note and ML Deed of Trust. On the Effective Date, 100% of the fractional interests of each of the ML Loans, including all ML Loan Documents related to such ML Loan, will be transferred to the respective Loan LLC. On the Effective Date, membership interests in each applicable Loan LLC will be issued to RBLLC, the Pass-Through Investors and the MP Funds, in proportion to their respective fractional interests in a particular ML Loan and related Loan Documents, including the ML Deed of Trust. Classes of Claims Against and Interests A. Unclassified Claims Administrative Claims and Priority Tax Claims are not classified for purposes of voting on, or receiving distributions under the plan. Allowed Administrative Claims will be paid, in full satisfaction of such Claim: (a) a single Cash payment in the Allowed amount of the Claim on the Effective Date, or as soon thereafter as practical from the sale or refinancing of the Debtor's Non-Loan Assets; (b) in the ordinary course of business as said Claim matures; or (c) upon such other less favourable terms as may be agreedupon, or as ordered by the Bankruptcy Court. Each holder of an Allowed Priority Tax Claim will be paid: (i) the amount of such holders' Priority Tax Claim, with interest, in deferred Cash payments over a period of five (5) years, to be paid in equal quarterly instalments of principal and interest from the Liquidation Fund. B. Classified Claims The Plan segregates the Claims Against and Interests in the Debtors into 13 Classes and describes the treatment for each Class: Class 1 -- Priority Non-Tax Claims Unimpaired; Not Entitled to Vote Class 2 -- Secured Tax Claims Unimpaired; Not Entitled to Vote Class 3 -- Stratera Secured Claims Unimpaired; Not Entitled to Vote Class 4 -- Artemis Secured Claims Unimpaired; Not Entitled to Vote Class 5 -- Arizona Bank Secured Unimpaired; Not Entitled Claims to Vote Class 6 -- Mechanics Lien Claims Unimpaired; Not Entitled and Other Miscellaneous to Vote Secured Claims Class 7 -- RBLLC Secured Claims Impaired; Entitled to Vote Class 8 -- MP Funds and MP Fund Impaired; Entitled to Investors Claims Vote Class 9 -- VTC Fund Claims Impaired; Entitled to Vote Class 10 -- Pass-Through Investors Impaired; Entitled to Claims Vote Class 11 -- General Unsecured Impaired; Entitled to Creditor Claims Vote Class 12 -- Borrowers Claims Unimpaired; Not Entitled to Vote Class 13 -- Equity Interest Impaired; Deemed to Reject As of the Effective Date, the RBLLC Notes under Class 7 will be exchanged dollar for dollar for a pro rata membership interest in each of the Loan LLCs proportional to the fractional interest of the Debtor in each of the ML Loans. RBLLC will also have a Class 11 General Unsecured Claim, and will be a beneficiary of the Liquidating Trust to the extent that the unpaid obligations under the RBLLC Notes are not exchanged for a membership interest in a Loan LLC and for the amount of principal owed on the ML Loans that RBLLC does not receive from the Loan LLC after the ML Notes are paid in full or after reasonable collection eforts have been exhausted by the Loan LLC. On the Efective Date, each of the MP Funds under Class 8 will relinquish its fractional interests in each of the ML Loans and exchange those interests for membership interests in the applicable Loan LLC that holds the aplicable ML Loan. MP Funds will also have a Class 11 General Unsecured Claim, and will be beneficiaries of the Liquidating Trust to the extent of the Investors Damages. The VTL Fund under Class 9 will retain its lien in the MP Funds but the repayment of the obligations will be modified and resolved by the VTL Committee and the Investors Committee pursuant to the Plan or separately. On the Effective Date, holders of Class 10 Pass-Through Investors Claims will relinquish their respective fractional interests in each of the ML Loans and exchange those interests for membership interests in the applicable Loan LLC that holds the applicable ML Loan. Holders of Class 10 Pass-Through Investors Claims will also have a Class 11 General Unsecured Claim and will be beneficiaries of the Liquidating Trust to the extent of their Investors Damages as long as they do not exercise the Opt-Out Election. Holders of Class 11 General Unsecured Claims will be beneficaries of the Liquidating Trust to be established on the Effective Date of the Plan in accordance with the Plan. Claims and portions thereof that are treated in Class 11 and are beneficiaries of the Liquidating Trust become Channeled Claims unless they choose the Opt-Out Provision under the Plan. As of the Effective Date, all Equity Interests in the Debtor will be canceled and extinguished. Holders of Equity Interests will receive nothing under the Plan and they are deemed to have rejected the Plan. Financing the Plan and Operations In order to consummate the Plan, the Investors Committee will obtain credit financing. The Investors Committee will obtain financing in a sufficient amount to take out the Stratera Secured Claims, the Priority Non-Tax Claims and the Administrative Claims. The Investors Commitee will also obtain sufficient working capital for the operations of the Reorganized Debtor and the Liquidating Trust for 2009, as well as financing for the Loan LLC's to fund the servicing and other special needs of the LLCs. A full-text copy of the disclosure statement explaining the Investors Committee's Plan of Reorganization for Mortgages Ltd. is available for free at: http://bankrupt.com/misc/MortgagesLtdDS.InvestorsCommitteePlan.pdf A full-text copy of the Investors Committee's Plan of Reorganization dated Jan. 21, 2009, is available for free at: http://bankrupt.com/misc/MortgagesLtdInvestorsCommitteePlan.pdf Phoenix, Arizona-based Mortgages Ltd. -- http://www.mtgltd.com/ -- originates, invests in, sells and services its own short-term real-estate secured loans on properties within the state of Arizona in the US. It underwrites loans for commercial, industrial and residential properties for acquisition, entitlement, development, construction and investment. Mortgages Ltd. was the subject of an involuntary chapter 7 petition dated June 20, 2008, filed by KGM Builders Inc. -- a contractor for Grace Communities, a borrower of the company -- in the U.S. Bankruptcy Court for the District of Arizona. Central & Monroe LLC and Osborn III Partners LLC, divisions of Grace Communities, sought the appointment of an interim trustee for Mortgages Ltd. in the chapter 7 proceeding. Mortgages Ltd. is also facing lawsuits filed by Grace Communities and Rightpath Limited Development Group for its alleged failure to fully fund loans. Mortgages Ltd. denied the charges. It has filed a motion to dismiss the Rightpath suit. The Debtor's case was converted to a chapter 11 proceeding on June 24, 2008 (Bankr. D. Ariz. Case No. 08-07465). Judge Sarah Sharer Curley presides over the case. Carolyn Johnsen, Esq., and Bradley Stevens, Esq., at Jennings, Strouss & Salmon P.L.C., replaced Todd A. Burgess, Esq., at Greenberg Traurig LLP, as counsel to the Debtor. As of Dec. 31, 2007, the Debtor had total assets of $358,416,681 and total debts of $350,169,423. MOTOR COACH: Ct. Confirms Plan; FMA Subscribes to Rights Offering ----------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware confirmed on Jan. 28, 2009, the Debtors' Second Amended Joint Plan of Reorganization, clearing the way for the Debtorsemergence of the Debtors from Chapter 11 bankruptcy. In confirming the Plan, the Court ruled that the Debtors satisfied the requirements for confirmation pursuant to the appliable provisions of the Bankruptcy Code. Overview of the Plan The plan contemplates the substantive consolidation of the Debtors' estates for voting and distribution purposes, reorganization of each of the Debtors upon consummation of the plan, and the resolution of the outstanding claims against and interests in the Debtors. The plan will deleverage the Debtors' balance sheet by, among other things: -- reduce the Debtors' total prepetition indebtedness by paying in full about $160 million of second lien obligations and discharging an additional $480 million in prepetition indebtedness; -- improve cash flows by reducing ongoing interest expense; and -- provide investment of as much as $160 million in new capital through the rights offering to (i) fund the Debtors' emergence from Chapter 11, (ii) appropriately capitalize the reorganized Debtors, and (iii) facilitate the implementation of the Debtors' business plan. Under the plan, the Debtors will issue shares of new common stock to holders of allowed Class 4 claims and new preferred stock to the rights offering participants. The plan classifies interests against and liens in the Debtors in eight classes. The classification of treatment of interests and claims are: Treatment of Interests and Claims Types Estimated Class of Claims Treatment Recovery ----- --------- --------- --------- 1 other priority unimpaired 100% claims 2 other secured unimpaired 100% claims 3 secured second impaired 100% lien credit agreement claim 4 secured third impaired unknown lien credit agreement claim 5 general unimpaired 0% unsecured claim 6 intercompany unimpaired 100% claim 7 equity interest impaired 0% 8 intercompany unimpaired 100% interest Because the Plan was not accepted by Classes 5A-5G (General Unsecured Creditors, 7 (Equity Interests in Holdings) and 8A-8F (Intercompany Interests), the Debtors sought confirmation of the plan under Sec. 1129(b)(1), the "cramdown" provision of the Bankruptcy Code. The Court ruled that the Plan is confirmable becuase the Plan does not discrimate unfairly and is fair and equitable with respect to the Rejecting Classes. Classes 4A-4G (Secured Third Lien Credit Agreement Claims), the only voting Classes, have voted to accept the Plan, satisfying the requirement that at least one Class of Claims that is impaired under the Plan has accepted the Plan, determined without including any acceptance by any insider, as required under Sec. 1129(a)(10) of the Bankruptcy Code in all respects. The Court also ruled that each of the conditions precedent to confirmation set forth in Sec. 10.1 of the Plan has been satisfied or waived in accordance with the provisions of the Plan. These conditions are: (a) the Lock Up Agreement shall be in full force and effect and shall not have been terminated. (b) the Bankruptcy Court shall have approved a disclosure statement with respect to this Plan in form and substance acceptable to the Debtors and FMA. (c) the Confirmation Order, the Plan, and all exhibits and annexes to each of this Plan and the Confirmation shall be in form and substance acceptable to the Debtors and FMA. FMA refers to the following investment entitties affiliated with Franklin Mutual Advisers LLC: Mutual Beacon Fund, Mutual Discovery Fund, Mutual Qualified Fund, Mutual Shares Fund, Mutual Discovery Securities Fund, Mutual Shares Securities Fund and Franklin Mutual Recovery Fund. Based on the Rights Offering Certification, the Third Lien Lenders affiliated with FMA have subscribed for their pro rata share of the New Preferred Stock. The other Third Lien Lender, Monarch Master Funding Ltd. did not subscribe. Upon satisfaction of the conditions, FMA will purchase the unsubscribed New preferred Stock, thus providing the debtors with $160 million of cash proceeds from the Rights Offering. About Motor Coach Wilmington, Delaware-based Motor Coach Industries International, Inc. -- http://www.mcicoach.com/-- and its subsidiaries manufacture intercity coaches for the tour, charter, line-haul, scheduled service, and commuter transit sectors in the U.S. and Canada. They also operate seven sales centers and nine service centers in the U.S. and Canada and is the industry's supplier of aftermarket parts for most makes and models. The company and six (6) of its debtor-affiliates filed separate petitions for Chapter 11 relief on Sept. 15, 2008 (Bankr. D. Del. Lead Case No. 08-12136), to implement a pre-negotiated restructuring plan to be funded by Franklin Mutual Advisers, LLC and certain of its affiliates. The company's Canadian operations are not included in the filing. Kenneth S. Ziman, Esq., and Elisha D. Graff, Esq., at Simpson Thacher & Bartlett LLP, in New York; and Mark D. Collins, Esq., Jason M. Madron, Esq., and Lee E. Kaufman, Esq., at Richards Layton & Finger, P.A., in Wilmington, Delaware, represent the Debtors in their restructuring efforts. Attorneys at Womble Carlyle Sandridge & Rice PLLC and Brown Rudnick LLP, represent the Official Committee of Unsecured Creditors as counsel. Kurtzman Carson Consultants LLC serves as claims and notice agent. Rothschild Inc. and AlixPartners LLP also provide restructuring advice. At the time of filing, the Debtors listed assets of between $500,000,000 and $1,000,000,000 and liabilities of between $100,000,000 and $500,000,000. NATIONAL HERITAGE: Files for Chapter 11 Bankruptcy Protection ------------------------------------------------------------- Forbes reports that the National Heritage Foundation has filed for bankruptcy protection before the U.S. Bankruptcy Court for the Eastern District of Virginia, after a family from Texas tried to collect on the $6 million it was awarded in a case alleging that the NHF had misled it. According to Forbes, the NHF's Chapter 11 filing provides the company with a relief from paying debt and some time to work out deals with creditors. The bankruptcy filing, says Forbes, could also draw attention to fresh claims of the NHF's questionable activities, which includes a $14 million investment in a nonpublic firm operated by an unlicensed investment adviser to the foundation. Citing the NHF board of directors, Forbes relates that the charity "is unable to meet its obligations as they become due in the usual course of business . . . can no longer continue in business profitably" and that "various creditors have threatened to prosecute their claims." The NHF said in its financial statement that the present value of what the annuitants are owed was $15 million. Court documents say that the NHF listed 18 of its 20 largest unsecured creditors as individual annuitants, owed as much as $165,000 per year. According to the NHF's latest audited financial statement, for 2007, the company had a negative $7.5 million cash flow from operations, increased borrowings, and $2.4 million in cash. Forbes relates that contributions dropped by almost half to $21 million from $41 million. Forbes states that the NHF's balance sheet showed $208 million in net assets, about $133 million of that was in donated non-cash interests in charitable family limited partnerships and limited liability firms that seem to put out little cash. Forbes relates that $12 million was listed in publicly traded stocks and bonds, a sum that has likely dropped since the report, due to market conditions last year. Forbes says that about $49 million was listed on the balance sheet as mutual funds. Testimony in the court case triggering the bankruptcy suggests that the mutual funds category includes individual, illiquid securities generating no return, Forbes reports. Falls Church, Virginia-based National Heritage Foundation, Inc. -- http://www.nhf.org/-- is a non-profit tax-exempt charitable institution. The company filed for Chapter 11 bankruptcy protection on Jan. 24, 2009 (Bankr. E.D. Va. Case No. 09-10525). Alan Michael Noskow, Esq., at Patton Boggs LLP assists the company in its restructuring effort. The company listed more than $100 million in assets and $1 million to $100 million in debts. NAVISTAR INTERNATIONAL: Harbinger Et Al. Discloses Equity Stake --------------------------------------------------------------- Harbinger Capital Partners Master Fund I, Ltd., et al., disclosed in a regulatory filing dated January 26, 2009, that they may be deemed to beneficially own shares of Navistar International Corporation's common stock: Shares Beneficially Entity Owned ------ ----------- Harbinger Capital Partners Master Fund I, Ltd. 3,291,081 Harbinger Capital Partners Offshore Manager, L.L.C. 3,291,081 HMC Investors, L.L.C. 3,291,081 Harbinger Capital Partners Special Situations Fund L.P. 3,150,969 Harbinger Capital Partners Special Situations GP, LLC 3,150,969 HMC - New York, Inc. 3,150,969 Harbert Management Corporation 3,150,969 Philip Falcone 6,442,050 Raymond J. Harbert 6,442,050 Michael D. Luce 6,442,050 As of November 30, 2008, the number of shares outstanding of Navistar's common stock was 71,228,856, net of treasury shares. Entity Percentage ------ --------- Harbinger Capital Partners Master Fund I, Ltd. 4.6% Harbinger Capital Partners Offshore Manager, L.L.C. 4.6% HMC Investors, L.L.C. 4.6% Harbinger Capital Partners Special Situations Fund L.P. 4.4% Harbinger Capital Partners Special Situations GP, LLC 4.4% HMC - New York, Inc. 4.4% Harbert Management Corporation 4.4% Philip Falcone 9.0% Raymond J. Harbert 9.0% Michael D. Luce 9.0% Harbinger Capital Partners Offshore Manager, L.L.C. is the investment manager of Harbinger Capital Partners Master Fund I, Ltd. HMC Investors, L.L.C., is its managing member. HMC - New York, Inc., is the managing member of Harbinger Capital Partners Special Situations GP, LLC, which is the general partner of the Harbinger Capital Partners Special Situations Fund, L.P. Harbert Management Corporation is the parent of HMC - New York, Inc. Philip Falcone is a member of HMC Investors, a shareholder of HMC and the portfolio manager of the Master Fund and the Special Fund. Raymond J. Harbert is also a member of HMC Investors and a shareholder of HMC. Michael D. Luce is a member of HMC Investors and a shareholder of HMC. About Navistar International Corporation Based in Warrenville, Illinois, Navistar International Corporation (NYSE: NAV) -- http://www.navistar.com/-- produces International(R) brand commercial and military vehicles, MaxxForce(TM) brand diesel engines, IC brand school and commercial buses, and Workhorse(R) brand chassis for motor homes and step vans, and is a private label designer and manufacturer of diesel engines for the pickup truck, van and SUV markets. Navistar is also a provider of truck and diesel engine parts. Another affiliate offers financing services. The Troubled Company Reporter reported on Jan. 7, 2009, that Navistar had $10.3 billion in total assets and $11.7 billion in total liabilities, resulting in $1.4 billion in stockholders' deficit as of October 31. The company also had $2.3 billion in accumulated deficit as of October 31. The TCR reported on June 2, 2008, that Fitch Ratings affirmed and simultaneously removed from Rating Watch Negative the ratings for Navistar International Corporation and Navistar Financial Corp. to reflect progress in filing audited financial statements. The ratings are: Navistar International Corp. -- Issuer Default Rating 'BB-'; -- Senior unsecured bank facility 'BB-'. Navistar Financial Corp. -- IDR 'BB-'; -- Senior unsecured bank lines 'BB-'. The TCR also reported on Feb. 25, 2008 that Standard & Poor's Ratings Services removed its 'BB-' corporate credit ratings on Navistar International Corp. and subsidiary Navistar Financial Corp. from CreditWatch with negative implications, where they were placed Jan. 17, 2006. NAVISTAR INTERNATIONAL: OppenheimerFunds Discloses 8.94% Stake -------------------------------------------------------------- OppenheimerFunds, Inc., disclosed in a regulatory filing dated January 27, 2009, that it may be deemed to beneficially own 6,368,099 shares of Navistar International Corporation's Common Stock or 8.94% of the total outstanding shares. OppenheimerFunds, Inc., is an investment adviser. Based in Warrenville, Illinois, Navistar International Corporation (NYSE: NAV) -- http://www.navistar.com/-- produces International(R) brand commercial and military vehicles, MaxxForce(TM) brand diesel engines, IC brand school and commercial buses, and Workhorse(R) brand chassis for motor homes and step vans, and is a private label designer and manufacturer of diesel engines for the pickup truck, van and SUV markets. Navistar is also a provider of truck and diesel engine parts. Another affiliate offers financing services. The Troubled Company Reporter reported on Jan. 7, 2009, that Navistar had $10.3 billion in total assets and $11.7 billion in total liabilities, resulting in $1.4 billion in stockholders' deficit as of October 31. The company also had $2.3 billion in accumulated deficit as of October 31. The TCR reported on June 2, 2008, that Fitch Ratings affirmed and simultaneously removed from Rating Watch Negative the ratings for Navistar International Corporation and Navistar Financial Corp. to reflect progress in filing audited financial statements. The ratings are: Navistar International Corp. -- Issuer Default Rating 'BB-'; -- Senior unsecured bank facility 'BB-'. Navistar Financial Corp. -- IDR 'BB-'; -- Senior unsecured bank lines 'BB-'. The TCR also reported on Feb. 25, 2008 that Standard & Poor's Ratings Services removed its 'BB-' corporate credit ratings on Navistar International Corp. and subsidiary Navistar Financial Corp. from CreditWatch with negative implications, where they were placed Jan. 17, 2006. NAVISTAR INTERNATIONAL: To Close Indianapolis Engine Plant ---------------------------------------------------------- Navistar International Corporation will close its Indianapolis engine plant and Indianapolis Casting Corporation foundry as a result of changes in its business relationship with Ford Motor Company, the facilities' primary customer. Ford and Navistar previously announced that they will end their diesel engine supply agreement. Navistar intends to cease operations at its Indianapolis campus as of July 31, 2009. On November 12, 2008, Navistar International Corporation concluded that it would incur material charges related to its VEE Business Unit. These charges were occasioned by the significant reduction in demand from Ford Motor Company for diesel engines produced by Navistar, Inc., at the VEE Business Unit and the expectation that Ford's demand for diesel engines would continue to be below previously anticipated levels. The company further disclosed on January 14, 2009 that Ford and the company reached an agreement to restructure their ongoing business relationship, settle all existing litigation between the companies and end their diesel engine supply agreement effective December 31, 2009. The company disclosed that it was assessing the impact of the Ford settlement on its ongoing business and would take the necessary actions to address excess capacity and fixed costs. On January 23, 2009, executive management of the company concluded that as a result of these events, it committed to close its Indianapolis Engine Plant and its foundry. The major type of charges expected to be incurred relate to employee related costs and other contractual obligations. The assessment of these costs is ongoing and the company will provide an estimate of the amount or range of charges expected to be incurred once a good faith determination can be made. "This is a difficult decision because of the impact it has on our employees and the community where we live and work," said Eric Tech, vice president and general manager, Navistar Engine Group, in a press release. "But the significant change in Ford's business plans has forced us to make this decision." Navistar will continue to produce diesel engines for Ford through 2009. The companies also will continue to collaborate on a range of initiatives, including their existing Blue Diamond Truck and Parts joint ventures and their diesel engine supply agreement in South America. "Over the past 30 years, Ford and Navistar dominated the diesel- powered, heavy-duty pickup truck market, providing value to both companies' customers and shareholders," Tech added. "While this phase of our relationship will end, we look forward to continuing to work together through our existing joint ventures and South American partnership." Meanwhile, Navistar has continued to ensure the viability its engine business through successful customer and product diversification efforts. These include expansion into China and India, as well as a broadening of product offerings through the introduction of the MaxxForce(TM) 11/13 and recently announced plans to produce a proprietary 15-liter engine. In addition, the company's mid-range diesel engine business has grown beyond International Truck, due to the strength of Navistar's military business, as well as new business with global and OEM customers. Navistar International Corporation (NYSE: NAV) is a holding company whose wholly owned subsidiaries produce Internationalr brand commercial and military trucks, MaxxForceT brand diesel engines, IC brand school and commercial buses, and Workhorser brand chassis for motor homes and step vans. It also is a private- label designer and manufacturer of diesel engines for the pickup truck, van and SUV markets. The Company also provides truck and diesel engine parts and service. Another affiliate offers financing services. Additional information is available at. About Navistar International Corporation Based in Warrenville, Illinois, Navistar International Corporation (NYSE: NAV) -- http://www.navistar.com/-- produces International(R) brand commercial and military vehicles, MaxxForce(TM) brand diesel engines, IC brand school and commercial buses, and Workhorse(R) brand chassis for motor homes and step vans, and is a private label designer and manufacturer of diesel engines for the pickup truck, van and SUV markets. Navistar is also a provider of truck and diesel engine parts. Another affiliate offers financing services. The Troubled Company Reporter reported on Jan. 7, 2009, that Navistar had $10.3 billion in total assets and $11.7 billion in total liabilities, resulting in $1.4 billion in stockholders' deficit as of October 31. The company also had $2.3 billion in accumulated deficit as of October 31. The TCR reported on June 2, 2008, that Fitch Ratings affirmed and simultaneously removed from Rating Watch Negative the ratings for Navistar International Corporation and Navistar Financial Corp. to reflect progress in filing audited financial statements. The ratings are: Navistar International Corp. -- Issuer Default Rating 'BB-'; -- Senior unsecured bank facility 'BB-'. Navistar Financial Corp. -- IDR 'BB-'; -- Senior unsecured bank lines 'BB-'. The TCR also reported on Feb. 25, 2008 that Standard & Poor's Ratings Services removed its 'BB-' corporate credit ratings on Navistar International Corp. and subsidiary Navistar Financial Corp. from CreditWatch with negative implications, where they were placed Jan. 17, 2006. NEWARK GROUP: Liquidity Pressures Prompt Moody's Junk Ratings ------------------------------------------------------------- Moody's Investors Service downgraded the Corporate Family Rating and Probability of Default Rating of The Newark Group Inc. to Caa3 from B3 while concurrently downgrading the senior secured credit- linked facility to Caa1 and the senior subordinated notes to Ca. The SGL-4 Speculative Grade Liquidity rating was affirmed and the ratings outlook remains negative. The downgrade to Caa3 was driven by near-term liquidity pressures. At the end of the second fiscal quarter ended October 31, 2008, TNG reported $8 million of cash, predominantly held outside the United States, and $20 million of availability on its $85 million senior secured borrowing base revolver (unrated by Moody's). Since then, however, demand has deteriorated sharply in TNG's end markets and, in Moody's opinion, will lead to a steep shortfall in revenue over the medium term. Free cash flow generation has been negative in each of the last five quarters and, despite a recent decline in input costs, Moody's expects the drop-off in sales volumes to materially impact EBITDA and exacerbate the company's cash drain. Record low recycled fiber costs may cause TNG's inventory balance, and thus the borrowing base calculation and revolver availability, to shrink. In addition, the maximum senior leverage covenant on the credit- linked facility is scheduled to step down a turn to 3.5 times as of January 31, 2009, and Moody's does not believe TNG will be in compliance, which could prevent further access to the revolver. The $9.3 million semi-annual interest payment on the subordinated notes is due on March 15, 2009 and required pension payments are also due in the fiscal fourth quarter. The negative outlook reflects the general macroeconomic outlook for both the U.S. and Europe, as well as industry-wide demand trends within the recycled paperboard markets. The ratings outlook also incorporates Moody's concerns over whether TNG can meet its liquidity requirements over the intermediate term under its current capital structure. Moody's downgraded these ratings: -- Corporate Family Rating, to Caa3 from B3 -- Probability of Default Rating, to Caa3 from B3 -- $90 million senior secured credit-linked facility due 2012, to Caa1 (LGD2, 22%) from Ba3 (LGD2, 22%) -- $175 million senior subordinated notes due 2014, to Ca (LGD5, 75%) from Caa1 (LGD5, 75%) This rating was affirmed: -- Speculative Grade Liquidity Rating, SGL-4 The last rating action occurred on September 19, 2008, when Moody's downgraded TNG's CFR to B3, downgraded the liquidity rating to SGL-4 and changed the ratings outlook to negative. The Newark Group Inc., headquartered in Cranford, New Jersey, is an integrated producer of 100% recycled paperboard and paperboard products in North America and Europe. For the twelve months ended October 31, 2008, the company generated revenues of approximately $1 billion. NORTEL NETWORKS: Oplink Discloses $805,000 in Receivables --------------------------------------------------------- Fremont, California-based Oplink Communications, Inc., said it has $805,000 in shipments of products for Nortel Networks. Oplink on Thursday reported its financial results for its fiscal 2009 second quarter, ended December 31, 2008. Oplink said revenue for the quarter was $37.6 million, compared to revenue of $43.0 million reported for the first quarter of fiscal 2009. Oplink said revenue for the second quarter of fiscal 2009 excluded the $805,000 related to the Nortel shipments. Revenue for the second quarter would have been $38.4 million if this revenue had not been deferred, Oplink said. Incorporated in 1995, Oplink provides design, integration and optical manufacturing solutions for optical networking components, modules and subsystems. The Company offers advanced and cost- effective optical-electrical components and subsystem manufacturing through its facilities in Zhuhai and Shanghai, China. In addition, Oplink maintains optical-centric front-end design, application, and customer service functions at its offices in Fremont and Calabasas, California and has research facilities in Zhuhai and Wuhan, China and Hsinchu Science-Based Industrial Park in Taiwan. The company's customers include telecommunications, data communications and cable TV equipment manufacturers around the globe. About Nortel Networks Headquartered in Ontario, Canada, Nortel Networks Corporation (NYSE/TSX: NT) -- http://www.nortel.com/-- delivers next- generation technologies, for both service provider and enterprise networks, support multimedia and business-critical applications. Nortel's technologies are designed to help eliminate today's barriers to efficiency, speed and performance by simplifying networks and connecting people to the information they need, when they need it. Nortel does business in more than 150 countries around the world. Nortel Networks Limited is the principal direct operating subsidiary of Nortel Networks Corporation. Nortel Networks Corp., Nortel Networks Inc. and other affiliated corporations in Canada sought insolvency protection under the Companies' Creditors Arrangement Act in the Ontario Superior Court of Justice (Commercial List). Ernst & Young has been appointed to serve as monitor and foreign representative of the Canadian Nortel Group. The Monitor also sought recognition of the CCAA Proceedings in the Bankruptcy Court under Chapter 15 of the Bankruptcy Code. Nortel Networks Inc. and 14 affiliates filed separate Chapter 11 petitions on January 14, 2009 (Bankr. D. Del. Case No. 09-10138). Judge Kevin Gross presides over the case. James L. Bromley, Esq., at Cleary Gottlieb Steen & Hamilton, LLP, in New York, serves as general bankruptcy counsel; Derek C. Abbott, Esq., at Morris Nichols Arsht & Tunnell LLP, in Wilmington, serves as Delaware counsel. The Chapter 11 Debtors' other professionals are Lazard Freres & Co. LLC as financial advisors; and Epiq Bankruptcy Solutions LLC as claims and notice agent. The Chapter 15 case is Bankr. D. Del. Case No. 09-10164. Mary Caloway, Esq., and Peter James Duhig, Esq., at Buchanan Ingersoll & Rooney PC, in Wilmington, Delaware, serves as Chapter 15 petitioner's counsel. Certain of Nortel's European subsidiaries have also made consequential filings for creditor protection. The Nortel Companies related in a press release that Nortel Networks UK Limited and certain subsidiaries of the Nortel group incorporated in the EMEA region have each obtained an administration order from the English High Court of Justice under the Insolvency Act 1986. The applications were made by the EMEA Subsidiaries under the provisions of the European Union's Council Regulation (EC) No. 1346/2000 on Insolvency Proceedings and on the basis that each EMEA Subsidiary's centre of main interests is in England. Under the terms of the orders, representatives of Ernst & Young LLP have been appointed as administrators of each of the EMEA Companies and will continue to manage the EMEA Companies and operate their businesses under the jurisdiction of the English Court and in accordance with the applicable provisions of the Insolvency Act. Several entities, particularly, Nortel Government Solutions Incorporated and Nortel Networks (CALA) Inc., have material operations and are not part of the bankruptcy proceedings. As of September 30, 2008, Nortel Networks Corp. reported consolidated assets of $11.6 billion and consolidated liabilities of $11.8 billion. The Nortel Companies' U.S. businesses are primarily conducted through Nortel Networks Inc., which is the parent of majority of the U.S. Nortel Companies. As of September 30, 2008, NNI had assets of about $9 billion and liabilities of $3.2 billion, which do not include NNI's guarantee of some or all of the Nortel Companies' about $4.2 billion of unsecured public debt. Bankruptcy Creditors' Service, Inc., publishes Nortel Networks Bankruptcy News. The newsletter tracks the chapter 11 proceeding and ancillary foreign proceedings undertaken by Nortel Networks Corp. and its various affiliates. (http://bankrupt.com/newsstand/ or 215/945-7000) NORTEL NETWORKS: Ends Joint Pact with Alvarion for Mobile WiMAX --------------------------------------------------------------- Nortel Networks Inc. said it has decided to discontinue its mobile WiMAX business and end its joint agreement with Alvarion Ltd. This decision, which will have no impact on Nortel's other solutions, will allow Nortel to narrow its focus, better manage its investments and strengthen its broader carrier business to better position itself for long-term competitiveness. Nortel will work closely with Alvarion to transition its mobile WiMAX customers to help ensure that ongoing support commitments are met without interruption. "We are taking rapid action to narrow our strategic focus to areas where we can drive maximum return on investment. We will work closely with Alvarion to transition our mobile WiMAX customers to them and assure customers that they will continue to benefit from leading-edge technology and high-quality service," said Richard Lowe, president of carrier networks, Nortel. "Our continued success in the wireless business requires us to focus our energy on opportunities with long-standing customers. This will position Nortel more effectively to capitalize on future resurgence of carrier spend levels and drive value to the business." The agreement, announced in June 2008, outlined the integration of Alvarion's advanced radio access network technology with Nortel's core network solutions, backhaul solutions, and global services. It also covered the resale by Nortel of the Alvarion platform of WiMAX access products. "Our priority is to minimize the effect on customers," said Tzvika Friedman, president and CEO, Alvarion. "We will work closely with Nortel to ensure that the transition will be as smooth as possible." About Nortel Networks Headquartered in Ontario, Canada, Nortel Networks Corporation (NYSE/TSX: NT) -- http://www.nortel.com/-- delivers next- generation technologies, for both service provider and enterprise networks, support multimedia and business-critical applications. Nortel's technologies are designed to help eliminate today's barriers to efficiency, speed and performance by simplifying networks and connecting people to the information they need, when they need it. Nortel does business in more than 150 countries around the world. Nortel Networks Limited is the principal direct operating subsidiary of Nortel Networks Corporation. Nortel Networks Corp., Nortel Networks Inc. and other affiliated corporations in Canada sought insolvency protection under the Companies' Creditors Arrangement Act in the Ontario Superior Court of Justice (Commercial List). Ernst & Young has been appointed to serve as monitor and foreign representative of the Canadian Nortel Group. The Monitor also sought recognition of the CCAA Proceedings in the Bankruptcy Court under Chapter 15 of the Bankruptcy Code. Nortel Networks Inc. and 14 affiliates filed separate Chapter 11 petitions on January 14, 2009 (Bankr. D. Del. Case No. 09-10138). Judge Kevin Gross presides over the case. James L. Bromley, Esq., at Cleary Gottlieb Steen & Hamilton, LLP, in New York, serves as general bankruptcy counsel; Derek C. Abbott, Esq., at Morris Nichols Arsht & Tunnell LLP, in Wilmington, serves as Delaware counsel. The Chapter 11 Debtors' other professionals are Lazard Freres & Co. LLC as financial advisors; and Epiq Bankruptcy Solutions LLC as claims and notice agent. The Chapter 15 case is Bankr. D. Del. Case No. 09-10164. Mary Caloway, Esq., and Peter James Duhig, Esq., at Buchanan Ingersoll & Rooney PC, in Wilmington, Delaware, serves as Chapter 15 petitioner's counsel. Certain of Nortel's European subsidiaries have also made consequential filings for creditor protection. The Nortel Companies related in a press release that Nortel Networks UK Limited and certain subsidiaries of the Nortel group incorporated in the EMEA region have each obtained an administration order from the English High Court of Justice under the Insolvency Act 1986. The applications were made by the EMEA Subsidiaries under the provisions of the European Union's Council Regulation (EC) No. 1346/2000 on Insolvency Proceedings and on the basis that each EMEA Subsidiary's centre of main interests is in England. Under the terms of the orders, representatives of Ernst & Young LLP have been appointed as administrators of each of the EMEA Companies and will continue to manage the EMEA Companies and operate their businesses under the jurisdiction of the English Court and in accordance with the applicable provisions of the Insolvency Act. Several entities, particularly, Nortel Government Solutions Incorporated and Nortel Networks (CALA) Inc., have material operations and are not part of the bankruptcy proceedings. As of September 30, 2008, Nortel Networks Corp. reported consolidated assets of $11.6 billion and consolidated liabilities of $11.8 billion. The Nortel Companies' U.S. businesses are primarily conducted through Nortel Networks Inc., which is the parent of majority of the U.S. Nortel Companies. As of September 30, 2008, NNI had assets of about $9 billion and liabilities of $3.2 billion, which do not include NNI's guarantee of some or all of the Nortel Companies' about $4.2 billion of unsecured public debt. Bankruptcy Creditors' Service, Inc., publishes Nortel Networks Bankruptcy News. The newsletter tracks the chapter 11 proceeding and ancillary foreign proceedings undertaken by Nortel Networks Corp. and its various affiliates. (http://bankrupt.com/newsstand/ or 215/945-7000) NORTHWEST AIRLINES: Delta Posts $8.9 Billion Full Year 2008 Loss ---------------------------------------------------------------- Eight of the nine major U.S. airlines that have disclosed fourth quarter and full year 2008 results have posted losses aggregating $19.6 billion. Only Southwest Airlines posted a net profit. Net Profit Net Profit Full Year 2008 Full Year 2007 -------------- -------------- Delta Air Lines, Inc. ($8,900,000,000) $1,600,000,000 AMR Corp. (2,100,000,000) 504,000,000 Southwest Air Lines 178,000,000 645,000,000 UAL Corp. (5,348,000,000) 403,000,000 US Airways Group Inc. (2,210,000,000) 427,000,000 Continental Airlines Inc. (585,000,000) 459,000,000 Alaska Air Group Inc. (135,900,000) 124,300,000 Skywest Inc. -- -- JetBlue Airways Corp. (76,000,000) 41,000,000 AirTran Holdings, Inc. (273,829,000) 52,683,000 Skywest is expected to release its fourth quarter 2008 results on February 11. The figures provided by JetBlue were pre-tax profit (or losses). Net Profit Net Profit 4th Quarter '08 4th Quarter '07 --------------- --------------- Delta Air Lines, Inc. ($1,400,000,000) ($70,000,000) AMR Corp. (340,000,000) (69,000,000) UAL Corp. (1,303,000,000) (53,000,000) Southwest Airlines (56,000,000) 111,000,000 US Airways (541,000,000) (79,000,000) Continental Airlines (266,000,000) (32,000,000) Alaska Air Group Inc. (75,200,000) (7,400,000) Skywest Inc. -- -- Jetblue Airways Corp. (49,000,000) (3,000,000) AirTran Holdings, Inc. (118,391,000) (2,171,000) High Fuel Jet Prices The airlines said high fuel prices for most of 2008 have contributed to their losses. AMR, the parent of American Airlines, said that historically high and volatile jet fuel prices continued to challenge it in the fourth quarter of 2008. AMR paid $133 million and $2.7 billion more for fuel in the fourth quarter and for all of 2008, respectively, than it would have paid at prevailing prices from the corresponding prior-year periods. Delta faced over $2 billion in increased fuel costs in 2008. While fuel prices dropped in the fourth quarter 2008, Delta paid for high fuel prices due to its fuel hedging contracts. Delta would have reported a $167 million net profit excluding special items in the December 2008 quarter, if fuel had been purchased at market prices. UAL said the historic peak in prices and the impact on hedges driven by the rapid decline resulted in a $2.9 billion increase in cost compared to 2007 fuel prices. UAL recorded $370 million in cash losses on fuel hedges that settled in the quarter, as the recent fall in fuel prices drove losses on hedges put in place earlier in the year to mitigate the steep increase in prices that had occurred in the second and third quarters of 2008. In addition, the company also recorded non-cash, net mark-to-market losses on its fuel hedges of $566 million. US Airways Group Chairman and CEO Doug Parker stated, "Like other airlines that have reported before us, our financial results reflect the staggering increase in fuel prices that we faced throughout most of 2008. In fact, had our 2008 fuel price including realized gains and losses on fuel hedging instruments remained at 2007 levels, the company's fuel expense would have been approximately $1.4 billion lower. Lower Revenues Due to Recession Delta Air Lines, which completed its merger with Northwest Airlines in 2008, said that during the fourth quarter, on a combined basis, passenger revenue fell 1%, or $54 million, compared to the prior year period due to a 4% decline in capacity, partially offset by a 3% increase in unit revenue. These results reflect the weakening of the revenue environment during the quarter caused by the global economic recession. According to UAL, total passenger revenue for the quarter decreased 8.7% year-over- year as consolidated capacity declined 10.6% , consolidated yield increased 2.4% and load factor decreased 0.3 points. Continental Airlines, which have been mentioned in possible merger talks with other U.S. airlines in 2008, said weakening economic conditions and highly volatile fuel prices presented financial challenges for the airline in the fourth quarter 2008. Continental recorded a fourth quarter net loss of $266 million. Dave Barger, JetBlue's CEO, said that while he was appointed to report a loss, he has been satisfied with JetBlue's performance in 2008. "Against the backdrop of record fuel prices and unprecedented economic challenges, we effectively managed our capacity and strengthened our network. We also made significant progress in our efforts to further enhance the JetBlue experience for our customers. JetBlue's industry-leading unit revenue growth throughout the year reflects the outstanding work of our crewmembers. "2008 was an especially tough and challenging year," said Bob Fornaro, AirTran Airways' chairman, president and chief executive officer. "We thank our dedicated, hard-working Crew Members and our loyal customers for helping us overcome the many obstacles we faced in 2008. Our Crew Members continue to strive to provide exceptional customer service, and a high-quality product while offering value to the traveling public. Despite the industry challenge shifting from high oil costs to concerns regarding consumer demand, our 2008 initiatives have us well positioned to return to profitability in 2009." Liquidity, Bankruptcy Concerns Delta, UAL and AirTran said that they have strengthened their liquidity that would allow them to face the challenges of 2009. Michael Lowry, project manager for AVIATION WEEK's Top- Performing Companies report, said in September 2008 that USAirways, AMR, Northwest Airlines, AirTran and Continental would have high bankruptcy risk in 2009. The September report also said that USAir was a high risk to file for bankruptcy again in 2008 -- it had entered and exited bankruptcy protection twice -- but USAir has been able, so far, to survive the crisis. Only smaller airlines filed for bankruptcy in 2008. These included Frontier Airlines, Skybus Airlines Inc., Aloha Airgroup Inc. and ATA Airlines Inc., who made its second Chapter 11 filing. Northwest Airlines has completed its merger with Delta Air to form one of the world's largest airlines. Delta noted that as of Dec. 31, 2008, it had $6.1 billion in total liquidity and cash collateral posted with hedge counterparties. As of Dec. 31, 2007, Delta had $3.3 billion in cash, cash equivalents and short-term investments. UAL said it completed several transactions during the fourth quarter that helped strengthen its liquidity. It raised $215 million from aircraft financing transactions that closed during the quarter along with $66 million in proceeds from asset sales. The company also received net proceeds of $107 million through equity issuances during the quarter. AirTran noted that it ended the fourth quarter with $340.5 million in unrestricted cash and investments, its highest year-end balance since 2005. 2009 Outlook Most of the airlines expect weak revenues in 2008, but expect those revenues to be offset by lower fuel prices and savings from cost cutting measures. Some of the airlines have also disclosed capacity cuts for 2009. AMR has decided not to use MD-80s to backfill flying associated with the seven 737s that no longer will be delivered in 2009. Largely as a result of this decision, the company's 2009 mainline capacity will decline by more than one percentage point compared to previous guidance provided in October. "Our fourth quarter and full-year 2008 results reflect the difficulties all airlines faced last year, but we believe our steps to reduce capacity, bolster liquidity, and improve revenue helped us better manage the challenges of record fuel prices and a weak economy," said AMR Chairman and CEO Gerard Arpey. "While significant hurdles remain, I am guardedly optimistic we can regain momentum in 2009," Mr. Arpey said. "Despite the difficult economic environment, we expect to be solidly profitable in 2009 driven by lower fuel costs, capacity discipline, and merger synergies," said Richard Anderson, Delta's chief executive officer. "Delta people have a great track record for achieving their goals, and I am confident that 2009 will be another successful year." "Delta's proactive decision to reduce domestic capacity during 2008 mitigated the impact of the decline in demand we saw over the course of the fourth quarter. We expect the worldwide economy to be difficult throughout 2009; however, if fuel prices remain at current levels, we believe the benefit of lower fuel prices will more than offset the revenue decline." said Edward Bastian, Delta's president. "Delta has the tools required to manage through these tough economic times -- with the broadest, most diverse network in the industry; an estimated $2 billion in annual merger synergies to be obtained; best-in-class costs; a solid liquidity balance; unmatched fleet flexibility; and the discipline and drive of the new Delta team." Delta projects that consolidated passenger revenue in 2009 will be down 4% to $4.8 billion. Fuel price will be $2.15 per gallon. During the December 2008 quarter, Delta hedged 58% of its fuel consumption, resulting in an average fuel price of $2.90 per gallon -- included in the fuel price is $507 million in fuel hedge losses in the fourth quarter. In 2007, when Delta paid $2.21 a gallon, it noted that its operating results were significantly impacted by changes in the price and availability of aircraft fuel. In 2007, its average fuel price per gallon rose 5% to $2.21, as compared to an average price of $2.10 in 2006, which was 15% higher than our average price of $1.79 in 2005. UAL believes that for full year 2009 revenues will be down 8% to 7%. United said it is on track to complete the previously announced removal of 100 aircraft from its fleet by the end of 2009. United added it is taking additional steps in 2009 to reduce overhead costs. The company will further reduce the number of salaried and management employees by approximately 1,000 positions by the end of 2009. This is in addition to the 1,500 positions the company announced in the second quarter, and when completed, will bring the total reduction in its salaried and management staff to approximately 2,500, or nearly 30% , since the beginning of 2008. "Last year was by any measure a challenging year -- defined by unprecedented volatility and unpredictability, but for United it was also characterized by steady and durable improvements," said Glenn Tilton, United's chairman, president and CEO. "Our management team made timely decisions that resulted in fundamental improvements across our business, which will hold us in good stead in 2009." Alaska Air Group, which operates Alaska Air and Horizon Air, noted that excluding special items, it had net income of $16.4 million in the 4th quarter of 2008 compared to a $17.9 million net loss in the same period in 2007. "In a year of unprecedented volatility that included soaring fuel prices and an economic meltdown, we were pleased to eke out a small profit for 2008, excluding special items, and be one of only a few major airlines to do so," said Bill Ayer, Alaska Air Group's chairman and chief executive officer. "Our concerted efforts to control costs, improve our operation and tailor our schedule to better match customer demand have prepared us to face whatever hurdles the current year brings." According to Mr. Parker, USAir CEO, measures executed by the airlines before aimed at offsetting high fuel prices in 2008 have significantly softened the blow from the economic downturn that the airline industry now faces. "As we begin the new year, US Airways is well prepared for a difficult global macroeconomic environment. We are running a great operation, have restructured our business model through the introduction of new fees, reduced capacity and increased our liquidity. With the help of falling fuel prices, we believe we are well positioned for the challenges ahead," concluded Parker. Larry Kellner, Continental's chairman and chief executive officer, said, "While there are continuing hard times ahead, thanks to our team, we are well-positioned to maintain our place as an industry leader." Continental said it will inaugurate daily nonstop service between New York and Shanghai in March 2009. For the full year 2009, JetBlue expects to report an operating margin between 12 and 14%. Capacity, according to JetBlue, for the full year 2009 is expected to decrease between zero and 2% over 2008 and stage length is expected to decrease about 6% over full year 2008. Full Year 2008 Net Profit for Southwest The usually profitable Southwest Airlines also posted a fourth quarter loss -- $56,000,000 net loss. However, Southwest noted that excluding special charges and other items, its fourth quarter 2008 net income was $61 million, bringing it to its 71st consecutive quarter of profitability. Gary C. Kelly, CEO of Southwest, stated: "We are very proud to report another profitable year in one of the most difficult years in aviation's 100-year-plus history. We certainly had our challenges in 2008, but thanks to the extraordinary efforts and Warrior Spirit of our People, we persevered to report our 36th consecutive year of profitability." "We celebrated many operational successes throughout 2008 and enhanced our already exceptional Brand and Customer Experience. With one full year of our new boarding system and Business Select product offering, the Customer response has been overwhelmingly favorable. We've made significant advancements in our revenue management and network optimization capabilities. And, we've made great progress on the technology side to lay the foundation for improved Customer Service, a new southwest.com, a new Rapid Rewards program, and international codeshare agreements with WestJet to Canada and Volaris to Mexico. "Despite the difficult credit markets, we were able to boost our liquidity by $1.1 billion during fourth quarter 2008 through several financing transactions to end the year with $1.8 billion in unrestricted cash and short-term investments. After yearend, we raised an additional $173 million in cash upon the closing of the second tranche of our sale and leaseback transaction for an additional five of our 737-700 aircraft. "Due to the rapid collapse in energy prices during fourth quarter 2008, we substantially reduced our net fuel hedge position to approximately ten percent of our estimated fuel gallons in each year from 2009 through 2013. Based on this current 2009 portfolio and future market prices for energy (as of January 20, 2009), we estimate our economic fuel costs per gallon, including fuel taxes, to be approximately $1.80 and under $1.90, for first quarter and full year 2009, respectively. This current full year 2009 projection is more than $1 billion lower than we were projecting last summer for 2009. About AirTran Airways AirTran Airways, a subsidiary of AirTran Holdings, Inc. (NYSE: AAI), a Fortune 1000 company, is ranked number one in the 2008 Airline Quality Rating study. The airline offers coast-to-coast flights, North America's newest all-Boeing fleet, friendly service and Business Class and complimentary XM Satellite Radio on every flight. To book a flight, visit http://www.airtran.com. * * * The Troubled Company Reporter said on Aug. 29, 2008, that Standard & Poor's Ratings Services has lowered its ratings on AirTran Holdings Inc., including the corporate credit rating, which it lowered to 'CCC+' from 'B-'. At the same time, S&P removed the ratings from CreditWatch, where they had been placed with negative implications on May 22, 2008. The outlook is stable. About Delta Air Lines With its acquisition of Northwest Airlines, Atlanta, Georgia-based Delta Air Lines (NYSE: DAL) -- http://www.delta.com/or http://www.nwa.com/-- is now the world's largest airline. From its hubs in Atlanta, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-JFK, Salt Lake City and Tokyo-Narita, Delta, its Northwest subsidiary and Delta Connection carriers offer service to more than 376 destinations worldwide in 66 countries and serves more than 170 million passengers each year. Delta's marketing alliances allow customers to earn and redeem either SkyMiles or WorldPerks on more than 16,000 daily flights offered by SkyTeam and other partners. The merger closed on October 29, 2008. Prior to the merger, Delta was the world's second-largest airline in terms of passengers carried and Northwest was the world's fourth largest airline. Northwest and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington, represented the Northwest Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors retained Scott L. Hazan, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C. as its bankruptcy counsel. When the Northwest Debtors filed for bankruptcy, they listed $14.4 billion in total assets and $17.9 billion in total debts. On May 21, 2007, the Court confirmed the Northwest Debtors' amended plan. That amended plan took effect May 31, 2007. (Northwest Airlines Bankruptcy News Issue No. 114; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). Delta 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, represented the Delta Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provided the Delta Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provided 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, served as the Committee's financial advisors. On April 25, 2007, the Court confirmed the Delta 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; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). About United Airlines United Airlines (NASDAQ: UAUA) operates more than 3,000* flights a day on United and United Express to more than 200 U.S. domestic and international destinations from its hubs in Los Angeles, San Francisco, Denver, Chicago and Washington, D.C. With key global air rights in the Asia-Pacific region, Europe and Latin America, United is one of the largest international carriers based in the United States. United also is a founding member of Star Alliance, which provides connections for our customers to 912 destinations in 159 countries worldwide. United's 49,500 employees reside in every U.S. state and in many countries around the world. News releases and other information about United can be found at the company's Web site at united.com. * * * As reported in the Troubled Company Reporter on July 29, 2008, Standard & Poor's Ratings Services lowered its ratings on UAL Corp. and subsidiary United Air Lines Inc. (both rated B- /Negative/--), including lowering the long-term corporate credit ratings on both entities to 'B-' from 'B', and removed the ratings from CreditWatch, where they had been placed with negative implications May 22, 2008, as part of an industrywide review. The outlook is negative. About US Airways US Airways, along with US Airways Shuttle and US Airways Express, operates more than 3,100 flights per day and serves 200 communities in the U.S., Canada, Europe, the Caribbean and Latin America. The airline employs nearly 34,000 aviation professionals worldwide and is a member of the Star Alliance network, which offers our customers more than 16,500 daily flights to 912 destinations in 159 countries worldwide. Travel + Leisure Magazine named US Airways as one of the top-three airlines for 2008 in on- time performance for the year (based on Department of Transportation data for Sept. 1, 2007 through Aug. 31, 2008). And for the tenth consecutive year, the airline received a Diamond Award for maintenance training excellence from the Federal Aviation Administration (FAA) for its Charlotte, North Carolina hub line maintenance facility. For more company information, visit usairways.com. (LCCF) About JetBlue New York-based JetBlue Airways has created a new airline category based on value, service and style. Known for its award-winning service and free TV as much as its low fares, JetBlue is now pleased to offer customers Lots of Legroom and super-spacious Even More Legroom seats. JetBlue introduced complimentary in-flight e- mail and instant messaging services on aircraft "BetaBlue," a first among U.S. domestic airlines. JetBlue is also America's first and only airline to offer its own Customer Bill of Rights, with meaningful and specific compensation for customers inconvenienced by service disruptions within JetBlue's control. Visit www.jetblue.com/promise for details. JetBlue serves 52 cities with 600 daily flights. New service to San Jose, Costa Rica, begins in 2009. With JetBlue, all seats are assigned, all travel is ticketless, all fares are one-way, and an overnight stay is never required. For information or reservations call 1-800- JETBLUE (1-800-538-2583) or visit www.jetblue.com. About Continental Airlines Based in Houston, Texas, Continental Airlines Inc. (NYSE: CAL) -- http://continental.com/-- is the world's fifth largest airline. Continental, together with Continental Express and Continental Connection, has more than 3,000 daily departures throughout the Americas, Europe and Asia, serving 140 domestic and 139 international destinations. More than 550 additional points are served via SkyTeam alliance airlines. With more than 46,000 employees, Continental has hubs serving New York, Houston, Cleveland and Guam, and together with Continental Express, carries approximately 69 million passengers per year. * * * The Troubled Company Reporter said on Aug. 13, 2008, that Standard & Poor's Ratings Services took various actions on its ratings on Continental Airlines Inc. (B/Negative/B-3). S&P affirmed its 'B' long-term corporate credit rating, 'B-3' short-term corporate credit rating, all ratings on unsecured debt and on selected enhanced equipment trust certificates. S&P lowered S&P's ratings on other enhanced equipment trust certificates, particularly those secured by regional jets, and raised other ratings. All ratings were removed from CreditWatch, where they were placed with negative implications May 22, 2008, as part of an industrywide review. The rating outlook is negative. Continental Airlines, Inc. reported a working capital deficit of US$202 million, with current assets of US$4.713 billion and current liabilities of US$4.915 billion. At Dec. 31, 2007, the Company had a positive working capital of US$112 million, with US$4.561 billion in current assets and US$4.449 billion in current liabilities. As of Sept. 30, 2008, the Company had US$2.9 billion in unrestricted cash, cash equivalents and short-term investments, which is US$83 million higher than at Dec. 31, 2007. At Sept. 30, 2008, the Company also had US$164 million of restricted cash, cash equivalents and short-term investments, which is primarily collateral for estimated future workers' compensation claims, credit card processing contracts, letters of credit and performance bonds. Restricted cash, cash equivalents and short- term investments at Dec. 31, 2007, totaled US$179 million. Additionally, the Company held student loan-related auction rate securities reported as long-term investments at Sept. 30, 2008 with a par value of US$147 million and a fair value of US$130 million. OCEANOGRAFIA SA: Fitch Downgrades Issuer Default Rating to 'B-' --------------------------------------------------------------- Fitch Ratings has downgraded these ratings of Oceanografia S.A. de C.V.: -- Foreign currency Issuer Default Rating to 'B-' from 'B'; -- Local currency IDR to 'B-'from 'B'; -- US$335 million senior secured notes due 2015 to 'B/RR3' from 'B+/RR3'. In addition, all of these ratings have been placed on Rating Watch Negative. The downgrade reflects poor cash flow generation in the third quarter of 2008 which resulted in a latest-12-months EBITDA of US$104 million, a decline from US$135 million during 2007. The poor performance of the company during the past quarter exacerbates the company's weak liquidity position. As of Sept. 30, 2008, Oceanografia's liquidity comprised US$10 million of cash and marketable securities and a US$9 million revolver. Short-term debt was approximately US$200 million. The strong liquidity restrictions in the national and international markets and the difficulty to monetize accounts receivables of about $300 million have raised Oceanografia's refinancing risk. Most of these receivables are with PEMEX, the company's key client, whose accounts receivables can not be securitized under Mexican law. As of Sept. 30, 2008, Oceanografia had US$633 million of total debt compared to $499 million at the end of 2007, resulting in a leverage ratio (Debt/EBITDA) of 6.1 times compared to 3.7x in 2007. Including Oceanografia's pending vessels acquisitions leverage would increase even further. Credit protection measures are likely to remain under pressure in the near term due to the expected lower cash flow generation at the end of the year and the depreciation of the Mexican peso. The Negative Watch is based on the difficulties that Oceanografia will have to re-establish its liquidity position in the short term and a more uncertain business environment. In 2009, lower oil prices could drive PEMEX to postpone investments or delay payments to Oceanografia. In 2008, the company received covenant relief from its banks. Given the company's current situation, it likely will have to request waivers and/or ask for an extension of maturity dates with its banks. Oceanografia is a privately held marine contracting service company that provides marine services to PEMEX. The company began operations primarily as an engineering and consulting company over 40 years ago and has grown to be a key provider of vessel chartering, inspection, maintenance and repair. In 2005, Oceanografia entered the underwater pipeline construction business, which is a higher margin, more cyclical segment than Oceanografia's traditional business segments. During 2007, 72% of Oceanografia's revenues were derived from pipeline construction. Maintenance and repair work were the second largest segment of the company's business portfolio, accounting for 17% of revenues, while vessel chartering accounted for the remaining 11% of revenues. PARMALAT SPA: US Court Lets Lawsuit Against Deloitte to Proceed --------------------------------------------------------------- Grant McCool at Reuters reports that Judge Lewis Kaplan of the U.S. District Court in Manhattan has allowed a lawsuit by Parmalat SpA shareholders against Deloitte Touche Tohmatsu -- the parent company of accounting firm Deloitte & Touche LLP -- and its affiliates. Reuters relates that buyers of Parmalat shares between January 1999 and December 2003, the month that the dairy company was declared insolvent in Italy, filed the lawsuit against Deloitte Touche in 2004. The report says that Parmalat and its subsidiaries collapsed after the discovery of a fraud involving the understatement of the company's debt by almost $10 billion and overstatement of net assets by $16.4 billion. According to Reuters, Judge Kaplan denied Deloitte's request to dismiss the complaint against Parmalat's accountants, banks, and others. Deloitte Touche had "exercised substantial control over the manner in which the member firms conducted their professional activities," Reuters says, citing Judge Kaplan. The report states that Deloitte Touche's members are Deloitte & Touche SpA in Italy and Deloitte & Touche in the U.S. Deloitte, according to Reuters, said that it was "confident of victory" at any trial of the matter. Deloitte said in a statement, "Deloitte U.S. issued no audit reports on Parmalat and had nothing to do with Parmalat's alleged misconduct. The same judge has dismissed two complaints filed against Deloitte U.S. for their audits of Parmalat's U.S. operations. Deloitte Touche Tohmatsu is a Swiss Verein (membership association) and provided no services of any kind to any Parmalat entity." Reuters quoted Stuart Grant, the attorney for the Parmalat shareholders, as saying, "Judge Kaplan's ruling finally makes the law meet with reality. These accounting firms sell themselves as a seamless worldwide organization and finally they are going to be held responsible for the organization they created." Deloitte had argued that the Parmalat shareholders failed t present any facts as to whether Deloitte Touche and Deloitte Italy had a principal-agent relationship, Reuters states, citing Judge Kaplan. "Plaintiffs, however, point to numerous facts that could be taken as indicating that DTT structured and conducted itself in a manner that permitted it to exercise control over its member firms, including Deloitte Italy," Reuters quoted him as saying. Headquartered in Milan, Italy, Parmalat S.p.A. -- http://www.parmalat.net/-- sells nameplate milk products that can be stored at room temperature for months. It also has about 40 brand product lines, which include yogurt, cheese, butter, cakes and cookies, breads, pizza, snack foods and vegetable sauces, soups and juices. The company's U.S. operations filed for chapter 11 protection on Feb. 24, 2004 (Bankr. S.D.N.Y. Case No. 04-11139). Gary Holtzer, Esq., and Marcia L. Goldstein, Esq., at Weil Gotshal & Manges LLP, represent the Debtors. When the U.S. Debtors filed for bankruptcy protection, they reported more than US$200 million in assets and debts. The U.S. Debtors emerged from bankruptcy on April 13, 2005. Parmalat S.p.A. and its Italian affiliates filed separate petitions for Extraordinary Administration before the Italian Ministry of Productive Activities and the Civil and Criminal District Court of the City of Parma, Italy on Dec. 24, 2003. Dr. Enrico Bondi was appointed Extraordinary Commissioner in each of the cases. The Parma Court has declared the units insolvent. On June 22, 2004, Dr. Bondi filed a Sec. 304 Petition, Case No. 04-14268, in the United States Bankruptcy Court for the Southern District of New York. Parmalat has three financing arms: Dairy Holdings Ltd., Parmalat Capital Finance Ltd., and Food Holdings Ltd. Dairy Holdings and Food Holdings are Cayman Island special-purpose vehicles established by Parmalat S.p.A. The Finance Companies are under separate winding up petitions before the Grand Court of the Cayman Islands. Gordon I. MacRae and James Cleaver of Kroll (Cayman) Ltd. serve as Joint Provisional Liquidators in the cases. On Jan. 20, 2004, the Liquidators filed Sec. 304 petition, Case No. 04- 10362, in the United States Bankruptcy Court for the Southern District of New York. In May 2006, the Cayman Island Court appointed Messrs. MacRae and Cleaver as Joint Official Liquidators. Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP, and Richard I. Janvey, Esq., at Janvey, Gordon, Herlands Randolph, represent the Finance Companies in the Sec. 304 case. The Honorable Robert D. Drain presides over the Parmalat Debtors' U.S. cases. On June 21, 2007, the U.S. Court granted Parmalat permanent injunction. (Parmalat Bankruptcy News, Issue No. 108; Bankruptcy Creditors' Service Inc.; http://bankrupt.com/newsstand/or 215/945-7000). PERFUMANIA HOLDINGS: To Pay Default Interest on $250MM Credit ------------------------------------------------------------- Perfumania Holdings Inc., said it would pay additional interest after it violated a leverage covenant on its $250 million revolving credit, which violation constitutes an event of default. Perfumania said in a regulatory filing that at November 1, 2008, it was not in compliance with the maximum leverage ratio covenant under its $250 million revolving credit facility with a syndicate of banks for which General Electric Capital Corporation serves as agent. Non-compliance with this covenant constitutes an Event of Default under the Senior Credit Facility. On January 22, 2009, GE notified Perfumania that, effective on January 23, 2009, based on the continuance of the Event of Default, GE has elected to impose the Default Rate of interest on outstanding borrowings as permitted by the Senior Credit Facility. The Default Rate is 2% higher than the interest rate otherwise applicable to outstanding borrowings under the Senior Credit Facility, which is currently the higher of (i) The Wall Street Journal corporate "base rate" or (ii) the federal funds rate plus 0.50%, plus in either case a margin of 1.25%. The Default Rate will apply until the Event of Default has been cured or waived. Perfumania also has outstanding obligations aggregating $55 million to certain trusts established by, and $35 million to a corporation owned by, members of the Nussdorf family, who are principal shareholders of the Company. These obligations bear interest at a rate equal to 2%, for the trusts, and 1%, for the corporation, over the rate in effect from time to time on the revolving loans under the Senior Credit Facility. Accordingly, as of January 23, 2009, the 2% increase in the interest rate on the Senior Credit Facility caused similar increases in the rates payable on these obligations. No interest was payable under any of these obligations until January 31, 2009. However, all these obligations are subordinated to the Senior Credit Facility, and no payments may be made on any of these obligations until the Event of Default under the Senior Credit Facility has been cured or waived. This constitutes a default under each of the subordinated obligations. As a result, commencing on February 13, 2009, each of the subordinated obligations will also accrue additional interest at the 3% default rate provided by their terms until the Company is permitted to begin making payments on those obligations. As provided in the subordination agreement with GE, this additional default interest amount may not be paid until the Senior Credit Facility is paid in full and terminated. In addition, Perfumania has outstanding a $5 million convertible note held by Stephen and Glenn Nussdorf. This note, which is also subordinated to the Senior Credit Facility, bears interest at the prime rate plus 1%, requires quarterly interest payments, and matures on January 29, 2009. As a result of the Event of Default under the Senior Credit Facility, the Company was prohibited by the subordination agreement with GE from making the December 31, 2008 interest payment under the convertible note. This triggered a default under the convertible note, resulting in an increase of 2% in the applicable interest rate. As provided in the subordination agreement with GE, neither the principal of the convertible note nor this additional default interest amount may be paid until the Senior Credit Facility is paid in full and terminated. The Event of Default under the Senior Credit Facility also permits the lenders to accelerate the indebtedness and terminate the Senior Credit Facility, which would cause all amounts outstanding, including all accrued interest and unpaid fees, to become immediately due and payable. Management has requested a waiver of non-compliance from the lenders and while management believes that the Company will receive such waiver, there can be no assurance that the waiver will be received or that there will not be a material cost for a waiver. Any such action taken by the lenders could result in the Company's having to refinance the Senior Credit Facility and obtain an alternative source of financing. Due to the current weakness in the credit markets, there is no assurance that such financing would be obtained, or if such refinancing is obtained, that the terms of a new facility would be on terms comparable to the current Senior Credit Facility. If the Company is unable to obtain such financing, its operations and financial condition would be materially adversely affected and it would be forced to seek an alternative source of liquidity, such as by selling additional securities, to continue operations, or to limit its operations. According to Bloomberg's Bill Rochelle, the stock fell 41 cents Jan. 28 to a 52-week low of $3.46 in trading on the Nasdaq Stock Market. The one-year high was $27.96 on Feb. 13, 2008. About Perfumania Holdings Perfumania Holdings Inc., formerly E Com Ventures, Inc., performs all its operations, through two wholly owned subsidiaries, Perfumania, Inc. (Perfumania), which is a specialty retailer and wholesaler of fragrances and related products, and perfumania.com, Inc., (perfumania.com), which is an Internet retailer of fragrances and other specialty items. Perfumania operates a chain of retail stores in the sale of fragrances at discounted prices up to 75% below the manufacturers' suggested retail prices. Perfumania's wholesale division distributes fragrances and related products to an affiliate. Perfumania.com offers a selection of the Company's products for sale over the Internet and serves as an alternative shopping experience to Perfumania retail customers. The Company operates in two industry segments, specialty retail sales and wholesale distribution of fragrances and related products. In August 2008, the Company announced that it had completed the acquisition of Model Reorg, Inc. PILGRIM'S PRIDE: Can Hire Baker & McKenzie as Special Counsel ------------------------------------------------------------- Judge Michael Lynn of the U.S. Bankruptcy Court for the Northern District of Texas authorizes Pilgrim's Pride Corporation and its debtor-affiliates to employ Baker & McKenzie LLP as special counsel. William Snyder, the Debtors' chief restructuring officer, has said the Debtors require Baker & Mckenzie's assistance with several important matters, including asset sales, postpetition financing transactions, corporate matters that are supportive of the bankruptcy restructuring, collection and analysis of information needed in these Chapter 11 cases, and litigation. Baker & Mckenzie's long-standing relationship with the Debtors gave it great deal of knowledge about the Debtors' business and financial affairs, Mr. Snyder has told the Court. Baker and Mckenzie has been the Debtors' primary corporate, securities, finance, intellectual property, employment benefits, immigration, tax and litigation counsel for a number of years, he tells the Court. As special counsel, Baker & Mckenzie will represent and advise the Debtors in connection with: * general corporate Securities and Exchange Commission matters; * domestic and international labor, employment, benefits and immigration matters; * intellectual property matters; * ongoing litigation and governmental investigation matters and future litigation or governmental investigation matters; * tax matters; * other non-bankruptcy matter; * postpetition financing transactions; and * corporate matters that are supportive of the Chapter 11 case. Baker & McKenzie will also assist the Debtors with gathering information needed in their Chapter 11 cases. Baker & Mckenzie will be compensated on an hourly basis, plus reimbursement of actual, necessary expenses incurred by the law firm. Baker & Mckenzie's hourly rates are: Professional Hourly rate ------------ ----------- Partners $400 - $850 OF counsel $395 - $825 Associates $250 - $570 Para-professionals $80 - $210 David W. Parham, a partner at Baker & McKenzie, has ascertained that his law firm is a "disinterested person" as defined by Section 101(14), and does not hold any interest adverse to the Debtors' estates. Mr. Parham said the Debtors paid $6,846,570 to Baker & Mckenzie for the services and expenses it incurred during the first 90 days prior to the Petition Date. The firm has $350,000 remaining as retainer balance. The Debtors have agreed that any portion of the advance payment remaining in retainer not used as compensation for Baker & Mckenzie for its prepetition services and expenses will be used by Baker & Mckenzie to apply against other Baker & Mckenzie bills and will be placed in a segregate account. Mr. Parham further said, among others, that Baker & McKenzie currently represents certain of the Debtors' officers, directors and employees in litigation in which those individuals' interests are aligned with the Debtors' interests. In particular, Baker & McKenzie represents Pilgrim's Pride Corporation and Lonnie "Bo" Pilgrim, Lonnie Ken Pilgrim, Rick Cogdill, Clinton Rivers and Clifford Butler in two class action securities cases brought against Pilgrim's Pride Corporation and those individuals. Headquartered in Pittsburgh, Texas, Pilgrim's Pride Corporation (NYSE: PPC) -- http://www.pilgrimspride.com/-- produces, distributes and markets poultry processed products through retailers, foodservice distributors and restaurants in the U.S., Mexico and in Puerto Rico. In addition, the company owns 34 processing plants in the United States and 3 processing plants n Mexico. The processing plants are supported by 42 hatcheries, 31 feed mills and 12 rendering plants in the United States and 7 hatcheries, 4 feed mills and 2 rendering plants in Mexico. Moreover, the company owns 12 prepared food production facilities in the United States. The company employs about 40,000 people and has major operations in Texas, Alabama, Arkansas, Georgia, Kentucky, Louisiana, North Carolina, Pennsylvania, Tennessee, Virginia, West Virginia, Mexico, and Puerto Rico, with other facilities in Arizona, Florida, Iowa, Mississippi and Utah. Pilgrim's Pride Corp. and six other affiliates filed Chapter 11 petitions on December 1, 2008 (Bankr. N.D. Tex. Lead Case No. 08-45664). The Debtors' operations in Mexico and certain operations in the United States were not included in the filing and continue to operate as usual outside of the Chapter 11 process. Pilgrim's Pride has engaged Stephen A. Youngman, Esq., Martin A. Sosland, Esq., and Gary T. Holzer, Esq., at Weil, Gotshal & Manges LLP, as bankruptcy counsel. The Debtors have also tapped Baker & McKenzie LLP as special counsel. Lazard Freres & Co., LLC is the company's investment bankers and William K. Snyder of CRG Partners Group LLC as chief restructuring officer. The company's claims and noticing agent is Kurtzman Carson Consulting LLC. At Sept. 27, 2008, the company's balance sheet showed total assets of $3,298,709,000, total liabilities of $2,946,968,000 and stockholders' equity of $351,741,000. A nine-member committee of unsecured creditors has been appointed in the case. Bankruptcy Creditors' Service, Inc., publishes Pilgrim's Pride Bankruptcy News. The newsletter tracks the chapter 11 proceeding of Pilgrim's Pride Corp. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) PILGRIM'S PRIDE: Files Schedules of Assets and Liabilities ---------------------------------------------------------- Pilgrim's Pride Corp. delivered to the U.S. Bankruptcy Court for the Northern District of Texas its schedules of assets and liabilities, disclosing: A. Real Property $709,271,024 See list at http://bankrupt.com/misc/ppc_props.pdf B. Personal Property B.1 Cash on hand - Petty cash 145,962 B.2 Bank Accounts Checking, Savings or other financial accounts Certificates of deposit, or shares in banks savings and loan, thrift, building and loan brokerage houses, or cooperatives 16,826,410 B.3 Security Deposit Prepaid Insurance 468,711 Prepaid Commodity Futures 1,664,157 Prepaid Legal Services 5,491,523 Prepaid - Other 1,996,431 Security Deposits 595,550 B.9 Insurance Policies John Hancock Life Insurance Company (Lonnie "Bo" Pilgrim as insured) with Pilgrim's Pride Corp. as beneficiary 554,757 Northwest Mutual Life Insurance Co. (various former Gold Kist employees listed as insured and Gold Kist Inc. as listed beneficiary 7,148,749 B.12 Interests in IRA, ERISA, or other pension plans Deferred trust assets in company's deferred compensation plan 16,051,620 GoldKist Benefit Plan Trusts 4,029,951 B.13 Business Interests and Stocks Agriland Stock 1,000 Valley Rail 201,631 PPC Marketing 272 Pilgrim's Pride Funding 2,501,000 Pilgrim's Pride Affordable Housing 201,000 Pilgrim's Pride of Nevada 11,100,004 Avicola Pilgrim's Pride de Mexico 32,989,202 Luker Inc. 398,170 GC Properties 9,894 PPC of Alabama, Inc. 559,816 PPC of Delaware 26,980 PFS Distribution Company 4,908,123 PPC of West Virginia, Inc. 69,899,077 Texas Egg Products LLC 135,959 Tyson Rail Partnership 584,432 ADM/Pilgrim's Pride LLC Equity 4,166,204 CoBank Equity "E" Stock 2,948,927 Universal Cooperative 2,920,747 Farm Credit Services 2,000 Southern Hens, Inc. 178,550 Mayflower Insurance Company 1,250,000 GK Insurance Company 2,500,000 Other Cooperatives 35,552 Merit Provisions, LLC 490,000 Delaware Business Trust 23,526,547 Pilgrim's Turkey Co. 20,218,568 B.16 Accounts Receivable Trade, net of uncollectible accounts 292,168,875 Property, plant & equipment sold awaiting receipt of proceeds 2,147,191 B.18 Other Liquidated Debts Tax refund - Internal Revenue Service 16,240,997 B.22 Patents Gold Kist Trade Name 4,766,662 B.23 Licenses, franchises & other intangibles Gold Kist Non-compete Agreements 108,338 Gold Kist Customer Relationships 43,480,770 B.25 Vehicles Trucks 107,934 Utility Equipment 1,838,349 Trailers 23,829 B.28 Office Equipment, furnishings, and supplies 34,224,454 B.29 Machinery, fixtures, equipment and supplies 530,592,003 B.30 Inventory 740,126,234 B.35 Other Personal Property Assets Held for Sale: Land 188,955 Assets Held for Sale: Buildings 8,347,158 Assets Held for Sale: Equipment 5,765,592 Assets Held for Sale: Furniture 176,167 Assets Held for Sale: Vehicles 37,526 Deferred Tax Asset 13,919,979 Investment in Lake Property 3,252,735 Capitalized Loan Financing Costs 23,021,184 Land under Construction 4,577,956 Buildings under Construction 14,596,782 Furniture under Construction 49,813 Equipment under Construction 33,974,703 Other Items under Construction 4,247,401 TOTAL SCHEDULED ASSETS $2,723,980,108 =========================================================== C. Property Claimed as Exempt $0 D. Creditors Holding Secured Claims BMO Capital Markets Financing, Inc. 310,795,372 CoBank, as Administration Agent 1,126,398,471 E. Creditors Holding Unsecured Priority Claims Payroll 468,236 Austin, Texas Internal Revenue Service 4,906,054 Other Taxes 911,374 See list at: http://bankrupt.com/misc/ppc_unsec_prioclaims.pdf F. Creditors Holding Unsecured Airgas Dryice 1,319,084 American Express, Inc. 1,263,587 Aviagen, Inc. 2,905,094 Bank of New York Mellon 7,344,731 C R England & Sons, Inc. 1,793,320 Cobb Vantress, Inc. 2,040,144 CSXT N/A 105577 1,446,733 Demeter LP 1,067,710 Elkhart Grain 1,290,843 Motion Industries, Inc. 1,003,659 Packaging Specialties, Inc. 1,087,791 Riceland Foods, Inc. 1,637,718 Tate & Lyle Ingredients 1,148,641 Trouw Nutrition USA, LLC 1,365,016 Union Pacific Railroad Co. 1,013,911 Wells Fargo 262,155,381 Younglove Construction 1,354,790 Others 191,694,539 See lists at: http://bankrupt.com/misc/ppc_unsec_nonprio_claims1.pdf http://bankrupt.com/misc/ppc_unsec_non_prio_claims2.pdf TOTAL SCHEDULED LIABILITIES $1,926,412,199 ============================================================ Pilgrim's Pride also filed with the Court its statement of financial affairs. Pilgrim's Pride Corp. reports that during the two years immediately preceding the Petition Date, it received income from gross sales from operations, excluding intercompany operations: Amount Date ------ ---- $1,229,726,796 Sept. 28, 2008 to Nov. 29, 2008 7,678,730,560 Sept. 30, 2007 to Sept. 28, 2008 6,661,106,030 Oct. 1, 2006 to Sept. 29, 2007 The Debtor said that it received $301,569 in the form of interest income for the period September 30, 2007 to September 27, 2008 for the fiscal year 2008. According to William Snyder, Pilgrim's Pride Corp.'s chief restructuring officer, the Debtor made payments to more than a thousand creditors within 90 days immediately preceding the Petition Date, with the value of each transfer not less than $5,475. A list of the 90-Day transfers is available for free at: http://bankrupt.com/misc/ppc_90day_transfers.pdf Mr. Snyder says that the Debtor also gave gifts or charitable contributions within one year preceding the Petition Date, except ordinary and usual gifts to family members aggregating less than $200 in value per individual family, and charitable contributions aggregating less than $1,000 per recipient. A list of the gifts and contributions is available for free at: http://bankrupt.com/misc/ppc_gifts.pdf The losses of the Debtor from fire, theft, other casualty or gambling within one year preceding the Petition Date or since the Petition Date are: Description Description of Property value Circumstance Date -------------- -------------- ---- Protein Conversion Electrical arc ignited 7/21/2008 Facility in Mt. Pleasant, destroying 75% of the Texas protein conv. facility Processing Facility in Fuel ignited and caused 1/14/2008 Gainsville, GA a boiler explosion The payments or property transfers made by the Debtor to any other person on behalf of the Debtor's consultation concerning debt consolidation, relief under the bankruptcy law or preparation of the petition in bankruptcy within one year immediately preceding the Petition Date were paid to: Name of Payee Amount Date ---- -------- ------ ---- Ableco Finance LLC $250,000 10/09/08 Alvarez & Marshall 1,025,970 11/25/08 Bain Corporate Renewal Group, LLC 2,147,500 11/04/08 Baker & McKenzie 6,367,092 11/28/08 Bank of Montreal 325,240 10/27/08 Caylon 147,000 11/25/08 Campbell Killin Brittan & Ray, LLC 13,999 10/27/08 CoBank 1,169,725 11/25/08 CRG Partners 751,931 11/28/08 Fairway Finance Company, LLC 363,160 11/25/08 FTI Consulting 1,161,641 11/26/08 Fullbright & Jaworski LLP 644,625 11/25/08 ING 426,000 11/28/08 Kurtzman Carson Consultants 77,715 11/21/08 Lazard Freres & Co. LLC 1,765,284 11/28/08 Mayer Brown LLP 238,741 11/28/08 Merrill Communications LLC 5,413 10/23/08 Morgan Lewis & Bockius LLP 502,117 11/23/08 Patton Bogs LLP 20,859 11/26/08 Weil Gotshal & Manges LLP 2,700,000 11/24/08 PPC acquired the assets of Gold Kist in January 2007, for $1,139,000,000. PPC sold assets of its Turkey Business for $18,600,000 in March 2008. Within two years immediately preceding the Petition Date, Richard A. Cogdill, chief financial officer, secretary and treasurer, served as bookkeeper or accountant and supervised the keeping of PPC's books and records. Within two years preceding the filing of the Debtors' bankruptcy Case, the corporation's books of accounts and records were audited by Ernst & Young LLP. At the Petition Date, PPC's books and records were in the possession of Richard A. Cogdill and Gary D. Tucker. These officers or directors own, control, or hold 5% or more of the voting securities of PPC: Direct Ownership ---------------- Pilgrim's Pride Corporation Sole Shareholder Indirect Ownership ------------------ Lonnie "Bo" Pilgrim Shareholder Lonnie Ken Pilgrim Shareholder Pilgrim Interests, Ltd. Shareholder FMR LLC Shareholder M&G Investment Management Ltd Shareholder S.A.C. Capital Advisors, LLC Shareholder Eastbourne Capital Management, LLC Shareholder Directors ----------- Lonnie "Bo" Pilgrim Senior Chairman Lonnie Ken Pilgrim Chairman Charles L. Black Director Linda Chavez Director S. Key Coker Director Keith W. Hughes Director Blake D. Lovete Director Vance C. Miller, Sr. Director Donald L. Wass, PhD Director James G. Vetter, Jr. Director Officers -------- J. Clinton Rivers President and CEO Richard A. Cogdill Chief Financial Officer Robert A. Wright Chief Operating Officer The last two inventories on PPC's property were taken in October and November 2008. The amount of the October inventory was $805,967,151 and the amount of the November inventory was $740,126,234. Both inventories were supervised by Jason Brownlee. Pilgrim's Pride made withdrawals within one year immediately preceding the Petition Date. A list of those withdrawals is available for free at: http://bankrupt.com/misc/ppc_withdrawals.pdf Headquartered in Pittsburgh, Texas, Pilgrim's Pride Corporation (NYSE: PPC) -- http://www.pilgrimspride.com/-- produces, distributes and markets poultry processed products through retailers, foodservice distributors and restaurants in the U.S., Mexico and in Puerto Rico. In addition, the company owns 34 processing plants in the United States and 3 processing plants n Mexico. The processing plants are supported by 42 hatcheries, 31 feed mills and 12 rendering plants in the United States and 7 hatcheries, 4 feed mills and 2 rendering plants in Mexico. Moreover, the company owns 12 prepared food production facilities in the United States. The company employs about 40,000 people and has major operations in Texas, Alabama, Arkansas, Georgia, Kentucky, Louisiana, North Carolina, Pennsylvania, Tennessee, Virginia, West Virginia, Mexico, and Puerto Rico, with other facilities in Arizona, Florida, Iowa, Mississippi and Utah. Pilgrim's Pride Corp. and six other affiliates filed Chapter 11 petitions on December 1, 2008 (Bankr. N.D. Tex. Lead Case No. 08-45664). The Debtors' operations in Mexico and certain operations in the United States were not included in the filing and continue to operate as usual outside of the Chapter 11 process. Pilgrim's Pride has engaged Stephen A. Youngman, Esq., Martin A. Sosland, Esq., and Gary T. Holzer, Esq., at Weil, Gotshal & Manges LLP, as bankruptcy counsel. The Debtors have also tapped Baker & McKenzie LLP as special counsel. Lazard Freres & Co., LLC is the company's investment bankers and William K. Snyder of CRG Partners Group LLC as chief restructuring officer. The company's claims and noticing agent is Kurtzman Carson Consulting LLC. At Sept. 27, 2008, the company's balance sheet showed total assets of $3,298,709,000, total liabilities of $2,946,968,000 and stockholders' equity of $351,741,000. A nine-member committee of unsecured creditors has been appointed in the case. Bankruptcy Creditors' Service, Inc., publishes Pilgrim's Pride Bankruptcy News. The newsletter tracks the chapter 11 proceeding of Pilgrim's Pride Corp. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) PILGRIM'S PRIDE: Gets Go-Signal to Hire Weil Gotshal as Counsel --------------------------------------------------------------- Judge Michael Lynn authorizes Pilgrim's Pride Corp. and its affiliates to employ Weil Gotshal & Manges, LLP, as lead bankruptcy counsel. As bankruptcy counsel, WG&M will: (a) take all necessary action to protect and preserve the Debtors' estates, including the prosecution of actions on the Debtors' behalf, the defense of any actions commenced against the Debtors, the negotiation of disputes in which the Debtors are involved, and the preparation of objections to claims filed against the Debtors' estates; (b) prepare on behalf of the Debtors, as debtors-in- possession, all necessary motions, applications, answers, orders, reports, and other papers in connection with the administration of their estates; (c) to take all necessary actions in connection with a Chapter 11 plan of reorganization and related disclosure statement and all related documents, and further actions as may be required in connection with the administration of the Debtors' estates; and (d) perform all other necessary legal services in connection with the prosecution of the Chapter 11 cases. The Debtors will pay WG&M's according to its current customary hourly rates at: Professional Hourly Rates ------------ ------------ Members and counsel $675 to $950 Associates $355 to $630 Paraprofessionals $155 to $290 The Debtors will also reimburse WG&M of its necessary expenses. Stephen A. Youngman, a member of WG&M, attests that his firm is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code, and does not represent any interest adverse to the Debtors or their estates. Mr. Youngman discloses that in the one year prior to December 1, 2008, WG&M received $2,700,000 from the Debtors on account of services to be performed and expenses incurred in connection with the services to be provided by WG&M, including the commencement and prosecution of the Debtors' Chapter 11 cases. As of the Petition Date, the fees and expenses incurred by WG&M and debited, or input into WG&M's billing system to be debited, against the amounts advanced to it by the Debtors approximated $2,393,000. The precise amount will be determined upon the final recording of all time and expense charges. Accordingly, as of the Petition Date, WG&M had a remaining credit balance in favor of the Debtors in the approximate amount of $300,000 for additional professional services performed and to be performed and expenses incurred and to be incurred in connection with the Chapter 11 cases. After application of amounts for payment of any additional prepetition professional services and related expenses, the excess advance amount will be held by WG&M in accordance with the Local Rules for the Northern District of Texas, in a trust account for application to and payment of postpetition fees and expenses that are allowed by the Court. Mr. Youngman also discloses that WG&M has, in the past, represented underwriters in connection with certain debt instruments issued by the Debtors, including Credit Suisse, Lehman Brothers, Legacy Partners Group, LLC, Merrill Lynch & Co., JP Morgan Chase, Morgan Stanley, Donaldson, Lufkin & Jenrette, and A.G. Edwards. WG&M will not represent these entities in connection with the Chapter 11 cases. Headquartered in Pittsburgh, Texas, Pilgrim's Pride Corporation (NYSE: PPC) -- http://www.pilgrimspride.com/-- produces, distributes and markets poultry processed products through retailers, foodservice distributors and restaurants in the U.S., Mexico and in Puerto Rico. In addition, the company owns 34 processing plants in the United States and 3 processing plants n Mexico. The processing plants are supported by 42 hatcheries, 31 feed mills and 12 rendering plants in the United States and 7 hatcheries, 4 feed mills and 2 rendering plants in Mexico. Moreover, the company owns 12 prepared food production facilities in the United States. The company employs about 40,000 people and has major operations in Texas, Alabama, Arkansas, Georgia, Kentucky, Louisiana, North Carolina, Pennsylvania, Tennessee, Virginia, West Virginia, Mexico, and Puerto Rico, with other facilities in Arizona, Florida, Iowa, Mississippi and Utah. Pilgrim's Pride Corp. and six other affiliates filed Chapter 11 petitions on December 1, 2008 (Bankr. N.D. Tex. Lead Case No. 08-45664). The Debtors' operations in Mexico and certain operations in the United States were not included in the filing and continue to operate as usual outside of the Chapter 11 process. Pilgrim's Pride has engaged Stephen A. Youngman, Esq., Martin A. Sosland, Esq., and Gary T. Holzer, Esq., at Weil, Gotshal & Manges LLP, as bankruptcy counsel. The Debtors have also tapped Baker & McKenzie LLP as special counsel. Lazard Freres & Co., LLC is the company's investment bankers and William K. Snyder of CRG Partners Group LLC as chief restructuring officer. The company's claims and noticing agent is Kurtzman Carson Consulting LLC. At Sept. 27, 2008, the company's balance sheet showed total assets of $3,298,709,000, total liabilities of $2,946,968,000 and stockholders' equity of $351,741,000. A nine-member committee of unsecured creditors has been appointed in the case. Bankruptcy Creditors' Service, Inc., publishes Pilgrim's Pride Bankruptcy News. The newsletter tracks the chapter 11 proceeding of Pilgrim's Pride Corp. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) PILGRIM'S PRIDE: Panel Taps Andrews Kurth as Bankruptcy Counsel --------------------------------------------------------------- Judge Michael Lynn of the U.S. Bankruptcy Court for the Northern District of Texas approved, on an interim basis, request of the Official Committee of Unsecured Creditors in the bankruptcy cases of Pilgrim's Pride Corp. and its affiliates, to hire Andrews Kurth LLP, as bankruptcy counsel. Judge Lynn gave parties-in-interest until February 1, 2009, to file an objection. If no objections are timely filed and received, the Order will become final without any further action or the Court. The Committee selected AK because of its significant expertise in the bankruptcy and restructuring arenas. The Committee has told the Court that the retention of AK as counsel is necessary and appropriate under the circumstances given that the firm has substantial experience in the bankruptcy and restructuring, corporate, and tax areas. Due to the breadth of practice disciplines and expertise within AK, the Committee said AK has the ability to assist it and its constituents. As counsel, Andrews Kurth will: (a) advise the Committee with respect to its rights, powers and duties in these cases; (b) advise and consult with the Committee concerning (i) legal questions arising in administering the Debtors? estates and (ii) unsecured creditors' rights and remedies in connection with the estates; (c) analyze the various facets of the Debtors' cases, including acts, conduct, assets, liabilities, intercompany relationships and claims and financial condition of the Debtors, the existence of estate causes of action and the operation of the businesses; (d) work with the Debtors concerning the administration of their Chapter 11 cases; (e) preserve, protect and maximize the value of the Debtors' assets; (f) prepare pleadings, motions, answers, notices, orders, and reports that are necessary or required for the protection of the Committee's interests and the orderly administration of the Debtors' estates; (g) work to formulate, prepare and confirm a Chapter 11 plan of reorganization for the Debtors which maximizes value to creditors; (h) review and analyze all applications, motions, orders, statements of operations and schedules filed with the Court and advising the Committee with respect thereto; and (i) perform any and all other legal services for the Committee that the Committee determines are necessary and appropriate to faithfully discharge its duties or otherwise relevant to these Chapter 11 cases. For its services, Andrews Kurth will be compensated at its established hourly rates and reimbursed of reasonable necessary out-of-pocket expenses. The firm's hourly rates are: Professional Hourly rate ------------ ----------- Paul N. Silverstein, Esq. $910 Jason S. Brookner, Esq. 585 Jonathan I. Levine, Esq. 545 Other Attorneys $250 to $910 Paraprofessionals $90 to $275 Paul N. Silverstein, Esq., a member at Andrews Kurth, has assured the Court that his firm does not hold or represent any interest adverse to the Committee or to its constituents in connection with the Debtors' Chapter 11 cases. Bank of Montreal, as agent for the DIP Lenders and as Prepetition BMO lenders, on behalf of the Lenders, disagreed with the Debtors' application for the employment of Andrews Kurth pursuant to Section 328, unless the orders providing for its employment specifically provide that its compensation will be pursuant to the provisions of Section 330. Headquartered in Pittsburgh, Texas, Pilgrim's Pride Corporation (NYSE: PPC) -- http://www.pilgrimspride.com/-- produces, distributes and markets poultry processed products through retailers, foodservice distributors and restaurants in the U.S., Mexico and in Puerto Rico. In addition, the company owns 34 processing plants in the United States and 3 processing plants n Mexico. The processing plants are supported by 42 hatcheries, 31 feed mills and 12 rendering plants in the United States and 7 hatcheries, 4 feed mills and 2 rendering plants in Mexico. Moreover, the company owns 12 prepared food production facilities in the United States. The company employs about 40,000 people and has major operations in Texas, Alabama, Arkansas, Georgia, Kentucky, Louisiana, North Carolina, Pennsylvania, Tennessee, Virginia, West Virginia, Mexico, and Puerto Rico, with other facilities in Arizona, Florida, Iowa, Mississippi and Utah. Pilgrim's Pride Corp. and six other affiliates filed Chapter 11 petitions on December 1, 2008 (Bankr. N.D. Tex. Lead Case No. 08-45664). The Debtors' operations in Mexico and certain operations in the United States were not included in the filing and continue to operate as usual outside of the Chapter 11 process. Pilgrim's Pride has engaged Stephen A. Youngman, Esq., Martin A. Sosland, Esq., and Gary T. Holzer, Esq., at Weil, Gotshal & Manges LLP, as bankruptcy counsel. The Debtors have also tapped Baker & McKenzie LLP as special counsel. Lazard Freres & Co., LLC is the company's investment bankers and William K. Snyder of CRG Partners Group LLC as chief restructuring officer. The company's claims and noticing agent is Kurtzman Carson Consulting LLC. At Sept. 27, 2008, the company's balance sheet showed total assets of $3,298,709,000, total liabilities of $2,946,968,000 and stockholders' equity of $351,741,000. A nine-member committee of unsecured creditors has been appointed in the case. Bankruptcy Creditors' Service, Inc., publishes Pilgrim's Pride Bankruptcy News. The newsletter tracks the chapter 11 proceeding of Pilgrim's Pride Corp. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) PILGRIM'S PRIDE: Files Amendment to Annual Report ------------------------------------------------- Pilgrim's Pride Corporation filed on January 26, 2009, Amendment No. 1 on Form 10-K/A to the company's Annual Report for the fiscal year ended September 27, 2008, originally filed on December 11, 2008. The Amendment includes information required by Part III and not included in the Original Filing as the company will not file its definitive proxy statement within 120 days of the end of the Company's fiscal year ended September 27, 2008. Part III refers to: -- directors, executive officers and corporate governance -- executive compensation -- security ownership of certain beneficial owners and management and related stockholder matters -- certain relationships and related transactions, and director independence -- principal accountant fees and services A full-text copy of Amendment No. 1 is available for free at: http://researcharchives.com/t/s?38cf Headquartered in Pittsburgh, Texas, Pilgrim's Pride Corporation (NYSE: PPC) -- http://www.pilgrimspride.com/-- produces, distributes and markets poultry processed products through retailers, foodservice distributors and restaurants in the U.S., Mexico and in Puerto Rico. In addition, the company owns 34 processing plants in the United States and 3 processing plants n Mexico. The processing plants are supported by 42 hatcheries, 31 feed mills and 12 rendering plants in the United States and 7 hatcheries, 4 feed mills and 2 rendering plants in Mexico. Moreover, the company owns 12 prepared food production facilities in the United States. The company employs about 40,000 people and has major operations in Texas, Alabama, Arkansas, Georgia, Kentucky, Louisiana, North Carolina, Pennsylvania, Tennessee, Virginia, West Virginia, Mexico, and Puerto Rico, with other facilities in Arizona, Florida, Iowa, Mississippi and Utah. Pilgrim's Pride Corporation and six other affiliates filed Chapter 11 petitions on December 1, 2008 (Bankr. N. D. of Texas, Lead Case No. 08-45664). The Debtors' operations in Mexico and certain operations in the United States were not included in the filing and continue to operate as usual outside of the Chapter 11 process. Pilgrim's Pride has engaged Stephen A. Youngman, Esq., Martin A. Sosland, Esq., and Gary T. Holzer, Esq., at Weil, Gotshal & Manges LLP, as bankruptcy counsel. The Debtors have also tapped Baker & McKenzie LLP as special counsel. Lazard Freres & Co., LLC is the company's investment bankers and William K. Snyder of CRG Partners Group LLC as chief restructuring officer. The company's claims and noticing agent is Kurtzman Carson Consulting LLC. At Sept. 27, 2008, the company's balance sheet showed total assets of $3,298,709,000, total liabilities of $2,946,968,000 and stockholders' equity of $351,741,000. A nine-member committee of unsecured creditors has been appointed in the case. Bankruptcy Creditors' Service, Inc., publishes Pilgrim's Pride Bankruptcy News. The newsletter tracks the chapter 11 proceeding of Pilgrim's Pride Corp. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) POLAROID CORP: Names Genii as Lead Bidder for Brand & Key Assets ---------------------------------------------------------------- Polaroid Holding Company has entered into a "stalking horse" Asset Purchase Agreement with PHC Acquisitions, LLC, an affiliate of Genii Capital, S.A., a Luxembourg based private equity firm. Under the terms of the agreement, PHC Acquisitions would acquire certain of the company's assets including, but not limited to, all of Polaroid's intellectual property rights and the "Polaroid" name and brand. Genii Capital is a shareholder in Zink Imaging Inc., inventor and manufacturer of ZINK Paper(TM) and the Zero Ink(TM) Printing Technology. The technology is used in the Polaroid PoGo(TM) Instant Mobile Printer and the recently introduced Polaroid PoGo(TM) Instant Digital Camera. Mary L. Jeffries, Polaroid's chief executive officer, said entering into the Asset Purchase Agreement marks progress in Polaroid's financial restructuring and provides a key milestone on the path out of bankruptcy protection. "Genii Capital's interest in Polaroid affirms the viability of the company and the brand. Polaroid is going to emerge a sustainable business where people are employed and vendors and customers will have an opportunity to continue to do business with Polaroid." Consummation of the transactions contemplated by the Asset Purchase Agreement is subject to higher or otherwise better offers, approval of the Bankruptcy Court and customary closing conditions. As part of the Asset Purchase Agreement, Polaroid Holding Company is filing motions for orders granting authority to sell certain assets to PHC Acquisitions, establishing bidding procedures, designating PHC Acquisitions as the stalking horse bidder and setting a hearing date on the sale of the assets. Upon the Bankruptcy Court's approval of bidding procedures, Polaroid Holding Company intends to engage in a bidding process with all interested parties. The Asset Purchase Agreement and bidding procedures specify terms with which any competing bids must comply to be considered qualified for the bidding process. About Genii Capital Genii Capital(TM) is a private investment firm that focuses on value creation by investing in innovative ideas, brands and projects. Based in Luxembourg, Genii Capital's portfolio includes cutting-edge companies in sectors such as telecommunication, security, hosting services, alternative energies and consumer electronics. About Polaroid Corporation Polaroid Corporation -- http://www.polaroid.com-- makes and sells films, cameras, and other imaging products. The company and 20 of its affiliates first filed for bankruptcy protection on October 12, 2001 (Bankr. D. Del. Lead Case No. 01-10864). Skadden, Arps, Slate, Meagher & Flom LLP represented the Debtors in their previous restructuring efforts. At that time, the company blamed steep decline in its revenue and the resulting impact on its liquidity. On June 28, 2002, the U.S. Bankruptcy Court for the District of Dealware approved the purchase of substantially all of Polaroid's business by One Equity Partners. The bid provides for cash consideration of $255 million plus a 35% interest in the new company for unsecured creditors. Polaroid Corp., together with 11 affiliates, filed its second voluntary petition for Chapter 11 on Dec. 18, 2008 (Bankr. D. Minn., Lead Case No. 08-46617). Judge Gregory F. Kishel handles the Chapter 22 case. James A. Lodoen, Esq., at Lindquist & Vennum P.L.L.P, is the Debtors' counsel. According to the company, the financial structuring process and the second bankruptcy filing are the result of events at Petters Group Worldwide, which has owned Polaroid since 2005. The founder of Petters Group and certain associates are currently under investigation for alleged acts of fraud that have compromised the financial condition of Polaroid and other entities owned by Petters Group. The company and its leadership team are not subjects of the ongoing investigation involving Petters Group. POLAROID CORP: Gets Permission to Access Lenders' Cash Collateral ----------------------------------------------------------------- Polaroid Corp. obtained from the U.S. Bankruptcy Court for the District of Minnesota permission to use its lender's cash collateral. According to Bloomberg's Bill Rochelle, Polaroid will survive at least for now in the new reorganization begun Dec. 18 as a result of having been granted authorization this week to use cash over creditors' objections. About Polaroid Corporation Polaroid Corporation -- http://www.polaroid.com-- makes and sells films, cameras, and other imaging products. The company and 20 of its affiliates first filed for bankruptcy protection on October 12, 2001 (Bankr. D. Del. Lead Case No. 01-10864). Skadden, Arps, Slate, Meagher & Flom LLP represented the Debtors in their previous restructuring efforts. At that time, the company blamed steep decline in its revenue and the resulting impact on its liquidity. On June 28, 2002, the U.S. Bankruptcy Court for the District of Dealware approved the purchase of substantially all of Polaroid's business by One Equity Partners. The bid provides for cash consideration of $255 million plus a 35% interest in the new company for unsecured creditors. Polaroid Corp., together with 11 affiliates, filed its second voluntary petition for Chapter 11 on Dec. 18, 2008 (Bankr. D. Minn., Lead Case No. 08-46617). Judge Gregory F. Kishel handles the Chapter 22 case. James A. Lodoen, Esq., at Lindquist & Vennum P.L.L.P, is the Debtors' counsel. According to the company, the financial structuring process and the second bankruptcy filing are the result of events at Petters Group Worldwide, which has owned Polaroid since 2005. The founder of Petters Group and certain associates are currently under investigation for alleged acts of fraud that have compromised the financial condition of Polaroid and other entities owned by Petters Group. The company and its leadership team are not subjects of the ongoing investigation involving Petters Group. PROGRESSIVE GAMING: Enter Into Various Pacts With Private Equity ---------------------------------------------------------------- Between January 16, 2009 and January 19, 2009, Progressive Gaming International Corporation and certain of its subsidiaries entered into various agreements with Private Equity Management Group Financial Corporation, PGIC's senior secured lender, and International Game Technology and certain of its affiliates, pursuant to which IGT acquired substantially all of PGIC's domestic and foreign assets, along with all of PEM's rights under PGIC's existing senior credit facility, for an aggregate cash purchase price of $16,237,000. Specifically, IGT acquired: 1. all right and title of PGIC and its subsidiaries in collateral pledged by PGIC to PEM, pursuant to a Secured Party Assignment and Bill of Sale, dated January 16, 2009, executed by PEM for the benefit of IGT and its designees, accepted and consented to by IGT, PGIC and various PGIC subsidiaries; 2. all shares in the capital of Progressive Gaming International (Netherlands) B.V., pursuant to a Share Purchase Agreement, dated January 16, 2009, among PGIC, PEM and IGT-Europe B.V.; 3. all of the stock capital of PGIC Holdings Limited, pursuant to a Share Purchase Agreement, dated January 16, 2009, among PEM, PGIC and IGT-UK Gaming Limited; 4. substantially all of the assets of Progressive Gaming International (Australasia) Pty Ltd, pursuant to an Asset Purchase Deed, dated January 16, 2009, among PEM, PGI Australia and IGT (Australia) Pty Ltd; 5. all of the share capital of PGI (Macao) Limited, pursuant to a Sale of Shares in Share Capital, dated January 19, 2009, among PGIC; PGI Australia; PGI Macao; PEM; IGT Asia, LDA; and IGT; and 6. all of PEM's rights under PGIC's existing senior credit facility, pursuant to an Assignment and Acceptance Agreement, dated January 16, 2009, between PEM and PGIC and consented to by PEM and PGIC. The company further disclosed that effective January 16, 2009, Robert A. Parente resigned from the position of Executive Vice President-Americas of PGIC to pursue other interests. About Progressive Gaming Progressive Gaming International Corporation -- http://www.progressivegaming.net/-- is a leading global supplier of integrated casino and jackpot management solutions for the gaming industry. Standard & Poor's Ratings Services said that it lowered its corporate credit rating on Progressive Gaming International Corporation to 'D' from 'CCC', after Progressive announced on Dec. 24, 2008, that it will allow its secured lender to foreclose on its assets. PGIC had violated covenants under its senior credit facilities for the quarter ended Sept. 30, 2008. On Nov. 7, 2008, PGIC's senior lender issued an acceleration notice for the company's senior secured revolving credit facility and term loan. Subsequent to this, the lenders entered into a forbearance agreement which expired on Nov. 21, 2008. The ratings were lowered ratings to 'D' because the forbearance agreement between the lenders and PGIC has expired without the loans being repaid, and because the lenders are now pursuing recovery through the sale of collateral. QPC LASERS: Receives Notice of Default from 10% Debenture Holders ----------------------------------------------------------------- QPC Lasers, Inc., received a formal notice of default from one of the holders of its May 2007 10% Secured Convertible Debentures. The holder has demanded payment in cash for all amounts due under the debentures. Under the 2007 Debentures, upon the occurrence of an "Event of Default", a holder of a 2007 Debenture may elect upon written notice to the company to require the company to immediately pay The holder an amount equal to the greater of i) 115% times the sum of (x) the aggregate outstanding principal amount of such debenture plus (y) all accrued and unpaid interest thereon for the period beginning on the issue date and ending on the date of payment of the Default Amount, plus (z) any accrued and unpaid Debenture Failure Payments and other required cash payments, if any (the outstanding principal amount of the debenture on the date of payment plus the amounts referred to in (y) and (z) is collectively known as the "Default Sum"); or ii) (a) the number of shares of the company's Common Stock that would be issuable upon the conversion of such Default Sum in accordance with the terms of 2007 Debentures, without giving any effect to any ownership limitations on the conversion of the 2007 Debentures contained therein, multiplied by (b) the greater of (i) the Closing Price (as defined therein) for the Common Stock on the default notice date or (ii) the Closing Price on the date the company pays the Default Amount. If the Default Amount is not paid within five business days of written notice that such amount is due and payable, then interest will accrue on the Default Amount at 18% per annum, compounded monthly. A holder of a 2007 Debenture may elect upon written notice to the company to require the company to issue, in lieu of payment of all or any specified portion of the unpaid portion of the Default Amount, a number of shares of Common Stock, subject to the ownership limitations on the conversion of the 2007 Debentures contained therein and the availability of sufficient authorized shares), equal to all or the specified portion of the Default Amount divided by the Default Reset Price then in effect. As of Jan. 19, 2009, the aggregate outstanding principal amount due under the 2007 Debentures was $16,030,420 and accrued and unpaid interest totaled $921,487. In addition, holders of the Debentures may have additional remedies under the terms of the Security Agreements entered into with the company as part of the financing with respect to the collateral securing the company's obligations under the Debentures, which consists of substantially all of the company's assets. January Conversion Price Reset under 2007 and 2008 Debentures The company is in default of its obligations under its 10% Secured Convertible Debentures issued in April and May of 2007. After an Event of Default, the conversion price for the 2007 Debentures will be decreased on the first trading day of each calendar month thereafter until the Default Amount is paid in full, to a conversion price equal to the lesser of (i) the conversion price then in effect, or (ii) the lowest "Market Price" that has occurred on any Default Adjustment Date since the date the Event of Default began. The "Market Price" is defined in the 2007 Debentures as the volume weighted average price of the common stock during the ten consecutive trading days period immediately preceding the date in question. As of Jan. 1, 2009, the Default Reset Price is $0.0004. A holder of a 2007 Debenture may elect upon written notice to require the company to issue, in lieu of payment of all or any specified portion of the unpaid portion of the Default Amount, a number of shares of common stock, subject to the ownership limitations on the conversion of the 2007 Debentures contained therein, equal to all or the specified portion of the Default Amount divided by the Default Reset Price then in effect. However, with the new lower conversion price, the company will not be able to honor any conversions that cause its issued shares to exceed the 180,000,000 shares authorized for issuance under its Articles of Incorporation unless the company obtains shareholder consent to authorize the issuance of additional shares. As of Jan. 16, 2009, the company has 170,021,623 shares of common stock issued and outstanding. In addition, the conversion price of the company's 10% Secured Convertible Debentures issued in May and July of 2008 has been adjusted to the Default Reset Price pursuant to the conversion price adjustment provisions of the 2008 Debentures. It is very likely that the company will file for protection under Chapter 7 or Chapter 11 of the federal bankruptcy laws due to its lack of cash and that its common stock will have no value after liquidation of the company is completed. About QPC Lasers, Inc. QPC Lasers, Inc. designs and manufactures laser diodes through its wholly-owned subsidiary, Quintessence Photonics Corporation. Quintessence was incorporated in November 2000 by Jeffrey Ungar, Ph.D. and George Lintz, MBA. The Founders began as entrepreneurs in residence with DynaFund Ventures in Torrance, California and wrote the original business plan during their tenure at DynaFund Ventures from November 2000 to January 2001. The business plan drew on Dr. Ungar's 17 years of experience in designing and manufacturing semiconductor lasers and Mr. Lintz's 15 years of experience in finance and business; the primary objective was to build a state of the art wafer fabrication facility and hire a team of experts in the field of semiconductor laser design. As reported by the Troubled Company Reporter on Dec. 15, 2008, QPC Lasers, Inc., disclosed in a regulatory filing with the Securities and Exchange Commission that as of Dec. 1, 2008, the Default Reset Price is $0.0021. The company is in default of its obligations under its 10% Secured Convertible Debentures issued in April and May of 2007. After an Event of Default, the conversion price for the 2007 Debentures will be decreased on the first trading day of each calendar month thereafter until the Default Amount is paid in full, to a conversion price equal to the lesser of (i) the conversion price then in effect, or (ii) the lowest "Market Price" that has occurred on any Default Adjustment Date since the date the Event of Default began. The "Market Price" is defined in the 2007 Debentures as the volume weighted average price of the common stock during the ten consecutive trading days period immediately preceding the date in question. REGAL ENTERTAINMENT: Moody's Keeps 'Ba3' Corporate Family Rating ---------------------------------------------------------------- Moody's Investors Service affirmed its Ba3 corporate family and probability of default ratings for Regal Entertainment Group, as well as the Ba2 ratings for Regal Cinemas Corporation's $1.8 billion of senior secured bank credit facilities ($100 million revolving credit facility due 2011 and $1.65 billion term loan facility due 2013). The rating outlook remains stable. The rating affirmations follow Regal's recent announcements related to the amendment of its bank credit facilities and the reduction of its quarterly dividend to $0.18 per share (from $0.30 per share). The dividend reduction improves free cash flow (annual savings of approximately $75 million), more than offsetting the modest impact of increased pricing, and the amendment increases the cushion of compliance with bank financial covenants. As such, both actions modestly enhance liquidity and lend support to maintenance of the Ba3 CFR and stable rating outlook. In conjunction with lower capital expenditures as projected and notwithstanding increased pricing under the bank credit facilities, Moody's anticipates that the reduced dividend will result in modest yet positive free cash flow, with debt-to-EBITDA expected to remain in the mid-5x range deemed acceptable for the rating category. Moreover, the bank amendment lessens the restrictiveness of the company's financial maintenance covenants (both the maximum consolidated adjusted leverage and maximum consolidated leverage covenant will remain at current levels through the second quarter of 2011), allows for the repurchase of up to $300 million of the credit facility (for 270 days after the effective date of the amendment, and permits the incurrence of subordinated debt (up to $200 million) which would be excluded from certain financial covenant calculations as a means of potentially repaying amounts outstanding under its term loan facility prior to maturity (the latter two of which presumably would only occur at less than face values, if at all). In connection with the amendment, the company paid a 50bp fee and will incur a 2% increase in pricing. Moody's has taken these rating actions: Regal Entertainment Group * Corporate Family Rating -- Affirmed Ba3 * Probability of Default Rating -- Affirmed Ba3 Regal Cinemas Corporation * Senior Secured Bank Credit Facility -- Affirmed Ba2 (to LGD 3, 40% from LGD 3, 39%) The last rating action was on March 11, 2008 when Moody's affirmed Regal's Ba3 CFR and PDR. Regal Entertainment Group is the parent company of Regal Cinemas and its subsidiaries. Regal operates the largest theater circuit in the United States, consisting of 6,782 screens in 551 theaters in 39 states and the District of Columbia (as of September 25, 2008). The company maintains its headquarters in Knoxville, Tennessee. The company's revenues for the twelve months ended September 25, 2008 were $2.7 billion. ROBERT L'ABBATE: Case Summary & Eight Largest Unsecured Creditors ----------------------------------------------------------------- Debtor: Robert Julius L'Abbate 93 President Road Township Of Washingt, NJ 07676 Bankruptcy Case No.: 09-11845 Debtor-affiliates filing separate Chapter 11 petitions: Entity Case No. ------ -------- LD II, LLC 09-11850 LRI II, LLC 09-11852 SkyMark Holdings, Inc. 09-11853 Lakeview Liquors, LLC 09-11855 Bergen 73, LLC 09-11856 Lancaster Property Management, LLC 09-11857 High Point Holdings, LLC 09-11858 Lakeview at High Point, LLC 09-11859 High Point Golf Club, LLC 09-11860 411 Brinkerhoff Avenue, LLC 09-11861 Club Drive, LLC 09-11863 Chapter 11 Petition Date: January 28, 2009 Court: District of New Jersey (Newark) Judge: Rosemary Gambardella Debtor's Counsel: Heidi J. Sorvino, Esq. hsorvino@sgrlaw.com Smith, Gambrell & Russell, LLP 250 Park Avenue, Suite 1900 New York, NY 10177 Tel: (212) 907-9700 Fax: (212) 907-9800 Estimated Assets: $1 million to $10 million Estimated Debts: $50 million to $100 million The Debtor's Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Oritani personal guaranty $2,0370,000 370 Pascack Road Township Of Washington, NJ 07676 Grand Pacific Finance Corp. personal guaranty $ 6361168 Wells Fargo NA 41-99 Main Street Flushing, NY 11355 Kuiken Brothers Company, Inc. vendor service $500,000 PO Box 1040 Fair Lawn, NJ 07410 Mobile Group, LLC 297 Palisades Ave. $350,000 personal guaranty Kind and Dasoff personal guaranty $106,312 Lowenstein Sandler Attorneys attorney services $103,922 at Law Stuart Katz hold harmless $103,908 agreement Martin Ender hold harmless $100,000 agreement ROYCE INTERNATIONAL: Files Bare-Bones Chapter 11 Petition --------------------------------------------------------- According to Bloomberg's Bill Rochelle, Royce International Investment Co. filed a "bare-bones" Chapter 11 petition on Jan. 26 before the U.S. Bankruptcy Court for the Central District of California. According to Bloomberg, Royce's petition wasn't accompanied by the motions and other papers typically filed on the first day of a bankruptcy reorganization. In its bankruptcy petition, it estimated assets of $100 million to $500 million, and debts of $50 million to $100 million. Royce's largest unsecured creditor is American Integrated Services, owed $685,595. Daniel J. McCarthy, Esq., at Hill Farrer & Burrill LLP, in Los Angeles California, represents Royce in its bankruptcy case. Santa Barbara, California-based Royce International Investment Co. owns partially developed real property in California and Colorado. SAFENET INC: S&P Keeps 'B' Corp. Credit Rating; Outlook Positive ---------------------------------------------------------------- Standard & Poor's Ratings Services said that it revised its outlook on Belcamp, Maryland-based SafeNet Inc. to positive from negative as a result of the completion of its 2006 and 2007 audited financial statements, and an improved financial profile since its LBOtransaction in April 2007. At the same time, S&P affirmed the ratings on the company, including the 'B' corporate credit rating. "SafeNet had not filed its financial statements with the SEC since the quarter ended March 2006 because of investigations into stock options grant backdating," said Standard & Poor's credit analyst David Tsui. In April 2007, the company was acquired by its sponsors in an LBO transaction, funded with proceeds from first and second lien term loans totaling $370 million. Under the terms of the credit agreement, SafeNet has until March 31, 2009, to file its 2008 and earlier audited financial statements. The company recently completed and filed its 2006 and 2007 audited financial statements and S&P anticipates that 2008 will be completed in the required timeframe. The rating on SafeNet reflects S&P's view of the risks of competition from larger vendors with stronger financial profiles, its acquisitive growth strategy, and a still highly leveraged financial profile. At the same time, S&P believes these factors are offset partially by the company's diversified product portfolio and strong customer and partner relationships. SafeNet's classified government segment faces competition from larger defense contractors with greater financial resources and broader technical capabilities. Maintaining strong relationships with the National Security Agency, the Department of Defense, and other government agencies will be key to the company's growth in this segment. Revenues during the 12 months ended Sept. 30, 2008, were up 7% year over year. S&P believes SafeNet's revenue base is supported by the current equipment upgrade cycle in the government information technology security market, repeat businesses from the commercial enterprise segment, and, to a lesser extent, maintenance contracts and royalties. SafeNet also has a modest backlog, and S&P expects sales growth will be supported by ongoing government IT security initiatives and an increase in wireless network usage and security needs. Operational streamlining efforts have lifted EBITDA margins to the low-20% area from 19% in 2006. Favorable market dynamics and acquisitions have enabled SafeNet to diversify its product portfolio, resulting in strong revenue growth over the past few years, and a quadrupling in size since 2003. In January 2009, SafeNet's sponsor announced the proposed acquisition of Aladdin Knowledge Systems, an Israel-based digital rights management and enterprise security solutions provider, and that it will eventually merge the two companies. The nature of the merger transaction is unclear at this point, but for purposes of the rating, S&P assume SafeNet will fund the eventual net cost of the acquisition of Aladdin with additional debt issuance. The merger transaction could potentially be more favorable from a credit perspective. Operating lease-adjusted leverage improved, with debt to EBITDA of 5.5x on September 30, 2008, down from 6.6x one year ago. Beyond Aladdin, S&P expects the company to limit itself to small tuck-in acquisitions, and that cost savings and organic growth will continue to increased EBITDA. Based on S&P's assumption of debt financing for the original net acquisition cost of the Aladdin purchase, S&P expects that the eventual merger with Aladdin will not materially impact leverage. SEMGROUP LP: J. Catsimatidis May Present Plan by January 31 ----------------------------------------------------------- John A. Catsimatidis, chairman of Red Apple Group, may have a plan of reorganization ready for SemGroup, L.P., and its debtor affiliates by Jan. 31, 2009, the Tulsa World reported. Mr. Catsimatidis previously said reorganization of SemGroup will deliver far more value to the oil and energy trader's creditors than liquidation. Mr. Catsimatidis has met with various SemGroup employees in late December 2008 to announce his intent of leading the company's reorganization. He obtained five of the nine seats on SemGroup G.P., L.L.C.'s Management Committee, equivalent of SemGroup L.P.'s board of directors, thus giving him enough controlling stake to change the course of the oil company's reorganization. During a recently concluded omnibus hearing in SemGroup's bankruptcy case, the Tulsa World related that Mr. Catsimatidis informed Judge Brendan Linehan Shannon of the U.S. Bankruptcy Court for the District of Delaware, of his timeline for the company's reorganization. SemGroup's chief executive officer, Terence Ronan said in a public statement that the company will consider all restructuring proposals, including any plan Mr. Catsimatidis may file for the company. Mr. Ronan also clarified that any reorganization plan Mr. Catsimatidis may file still need the nods of SemGroup's creditors and the approval of Judge Shannon. SemGroup's bankruptcy counsel, Martin Sosland, Esq., at Weil, Gotshal & Manges LLP, in Dallas, Texas, told Tulsa World on Jan. 23 that Mr. Catsimatidis has met with SemGroup's creditors and financial advisers but has not offered a specific plan. Tulsa World said Mr. Catsimatidis has vowed to put in $450 million of his own money and $1 billion from a consortium of possible investors to hold SemGroup and its affiliates together. Mr. Ronan, in his statement, did not rule out the possibility of selling SemGroup and its affiliates by selling off some units and reorganizing other units. Mr. Ronan did assure creditors that SemGroup's management committee and officers are "committed to maximizing recoveries for its creditors and equity holders as required by the Bankruptcy Code." Mark Chehi, Esq., at Skadden Arps Slate Meagher & Flom LLP, in Wilmington, Delaware, represents Mr. Catsimatidis in SemGroup's bankruptcy case. Skadden Arps has filed a notice of appearance in the bankruptcy case. SemGroup and its debtor affiliates' exclusive right to file reorganization plan runs until March 19, 2009. About SemGroup LP SemGroup L.P. -- http://www.semgrouplp.com/-- is a midstream service company providing the energy industry means to move products from the wellhead to the wholesale marketplace. SemGroup provides diversified services for end users and consumers of crude oil, natural gas, natural gas liquids, refined products and asphalt. Services include purchasing, selling, processing, transporting, terminaling and storing energy. SemGroup serves customers in the United States, Canada, Mexico, Wales, Switzerland and Vietnam. SemGroup L.P. and its debtor-affiliates filed for Chapter 11 protection on July 22, 2008 (Bankr. D. Del. Lead Case No. 08- 11525). These represent the Debtors' restructuring efforts: John H. Knight, Esq., L. Katherine Good, Esq. and Mark D. Collins, Esq. at Richards Layton & Finger; Harvey R. Miller, Esq., Michael P. Kessler, Esq. and Sherri L. Toub, Esq. at Weil, Gotshal & Manges LLP; and Martin A. Sosland, Esq. and Sylvia A. Mayer, Esq. at Weil Gotshal & Manges LLP. Kurtzman Carson Consultants L.L.C. is the Debtors' claims agent. The Debtors' financial advisors are The Blackstone Group L.P. and A.P. Services LLC. Margot B. Schonholtz, Esq., and Scott D. Talmadge, Esq., at Kaye Scholer LLP; and Laurie Selber Silverstein, Esq., at Potter Anderson & Corroon LLP, represent the Debtors' prepetition lenders. SemGroup L.P.'s affiliates, SemCAMS ULC and SemCanada Crude Company, sought protection under the Companies' Creditors Arrangement Act (Canada) on July 22, 2008. Ernst & Young, Inc., is the appointed monitor of SemCanada Crude Company and its affiliates' reorganization proceedings before the Canadian Companies' Creditors Arrangement Act. The CCAA stay expires on Nov. 21, 2008. SemGroup L.P.'s consolidated, unaudited financial conditions as of June 30, 2007, showed $5,429,038,000 in total assets and $5,033,214,000 in total debts. In their petition, they showed more than $1,000,000,000 in estimated total assets and more than $1,000,000,000 in total debts. SEMGROUP LP: Serves Subpoenas to Former Executives -------------------------------------------------- Louis J. Freeh, the Court-appointed examiner in Semgroup L.P. and its affiliates' Chapter 11 cases, notifies the U.S. Bankruptcy Court for the District of Delaware that he has served subpoenas on: * Brent Cooper, former treasurer of SemGroup LP, and * PricewaterhouseCoopers LLP. The Examiner is investigating the Debtors' prepetition trading activities and any fraudulent acts by its former officers and directors that could have led to the Debtors' bankruptcy filings. SemGroup L.P. -- http://www.semgrouplp.com/-- is a midstream service company providing the energy industry means to move products from the wellhead to the wholesale marketplace. SemGroup provides diversified services for end users and consumers of crude oil, natural gas, natural gas liquids, refined products and asphalt. Services include purchasing, selling, processing, transporting, terminaling and storing energy. SemGroup serves customers in the United States, Canada, Mexico, Wales, Switzerland and Vietnam. SemGroup L.P. and its debtor-affiliates filed for Chapter 11 protection on July 22, 2008 (Bankr. D. Del. Lead Case No. 08- 11525). These represent the Debtors' restructuring efforts: John H. Knight, Esq., L. Katherine Good, Esq. and Mark D. Collins, Esq. at Richards Layton & Finger; Harvey R. Miller, Esq., Michael P. Kessler, Esq. and Sherri L. Toub, Esq. at Weil, Gotshal & Manges LLP; and Martin A. Sosland, Esq. and Sylvia A. Mayer, Esq. at Weil Gotshal & Manges LLP. Kurtzman Carson Consultants L.L.C. is the Debtors' claims agent. The Debtors' financial advisors are The Blackstone Group L.P. and A.P. Services LLC. Margot B. Schonholtz, Esq., and Scott D. Talmadge, Esq., at Kaye Scholer LLP; and Laurie Selber Silverstein, Esq., at Potter Anderson & Corroon LLP, represent the Debtors' prepetition lenders. SemGroup L.P.'s affiliates, SemCAMS ULC and SemCanada Crude Company, sought protection under the Companies' Creditors Arrangement Act (Canada) on July 22, 2008. Ernst & Young, Inc., is the appointed monitor of SemCanada Crude Company and its affiliates' reorganization proceedings before the Canadian Companies' Creditors Arrangement Act. The CCAA stay expires on Nov. 21, 2008. SemGroup L.P.'s consolidated, unaudited financial conditions as of June 30, 2007, showed $5,429,038,000 in total assets and $5,033,214,000 in total debts. In their petition, they showed more than $1,000,000,000 in estimated total assets and more than $1,000,000,000 in total debts. SEMGROUP LP: J. Aron to Tender $89.7-Mil. to Bankruptcy Estate -------------------------------------------------------------- J. Aron & Company seeks authority from the U.S. Bankruptcy Court for the District of Delaware to tender $89,776,874 of net pre- bankruptcy amounts to SemGroup, L.P., subject to deductions for legal fees and other costs under a certain trading agreement. Aron reserves its right to appeal any decision or any final declaratory judgment. Separately, J. Aron also filed an adversary complaint against these parties seeking declaration that no oil producer, interest owner, or other claimant has a valid lien, constructive trust, or other type of claim against Aron: * the Debtors; * Bank of America, as administrative agent for secured parties; * producers of oil and gas products; * operators and interest owners of oil and gas wells that sell products to the Debtors; * the Official Producers' Committee; * the Official Committee of Unsecured Creditors; and * individuals or entities asserting a right or claim on the tendered amount or the trading agreement. In the complaint, Aron also seeks a declaration that no secured lender or any other party-in-interest has a valid claim against Aron. It also seeks a declaration that Aron will have no obligation to pay more than the Tendered Amount. William P. Bowden, Esq., at Ashby & Geddes, P.A., in Wilmington, Delaware, tells the Judge Brendan Linehan Shannon that Aron seeks to efficiently and equitably resolve fundamental legal disputes in connection with the Debtors' bankruptcy, which have a real potential to create inter-jurisdictional chaos. Aron is currently facing litigation in the Court, as well as in two proceedings in the State of Oklahoma, and is threatened by the filing of additional claims by numerous other claimants. On November 1, 2008, Aron and SemGroup agreed that Aron will tender approximately $90,000,000 for the benefit of SemGroup's estate. Subject to the Court's approval, the declarations sought by Aron will ensure that Aron will not have to pay the amount twice. Specifically, Aron seeks a declaration that no oil producer, interest owner, or other claimant has a valid lien, constructive trust, or other type of claim against Aron. Additionally, no secured lender or any other party-in-interest has a valid claim against Aron. It also seeks a declaration that Aron will have no obligation to pay more than the Tendered Amount. To memorialize the agreement, Aron and SemGroup entered into a stipulation on November 1, 2008, calculating the net obligations at $89,776,874. The Tendered Amount will be in full and complete satisfaction of all amounts owed under the Trading Agreement. The Official Producers' Committee, joined by New Dominion, LLC, Samson, and Pioneer Natural Resources (USA), Inc., had opposed the Stipulation, stating that the producers' asserted lien and constructive trust rights are attached to the funds owed between Aron and SemGroup. Subsequently, the Debtors unilaterally withdrew the Stipulation on November 25, 2008. Mr. Bowden reasserts before the Court that the proposed payment should be approved since the Debtors have agreed that the calculation is correct under the Trading Agreement. Relief from the automatic stay should also be granted to Aron, to the extent required by the Court. The Court will convene a hearing on February 26, 2009, to consider Aron's request. Objections are due on February 10. In a separate filing, J. Aron seeks permission to file an answer and counterclaims in eight state-specific adversary proceedings: Plaintiff Case Number --------- ----------- Arrow Oil & Gas, Inc., et al. 08-51444 Samson Resources Company, et al. 08-51445 Mull Drilling Company, et al. 08-51446 Samson Resources Company 08-51448 DE Exploration, Inc. 08-51453 Mull Drilling Company 08-51454 Prima Exploration, Inc., et al. 08-51455 Samson Resources Company 08-51458 Aron is party to an ISDA Master Agreement with SemGroup, L.P., dated November 19, 2007, under which it engaged in numerous financial derivatives and physical oil transactions with SemGroup, involving hundreds of millions of dollars. Prior to the Petition Date, Aron terminated all transactions under the Trading Agreement after the Debtors defaulted on their obligations, and exercised its express contractual rights to settle the transactions on a net basis. On September 26, 2008, the Court entered an order establishing procedures for resolution of liens asserted by the Debtors' oil and gas producers. Under the Producer Procedures Order, the Court had ruled that "any party-in-interest wishing to actively participate in one or more of the Declaratory Judgment Actions, by way of briefing, argument, or otherwise, may do so." Aron insists that it is a party-in-interest to the State-Specific Adversary Proceedings, since the determination of the Producers' alleged lien and trust rights under the various state-law statutes can potentially affect Aron's rights to net obligations existing under the Trading Agreement. About SemGroup LP SemGroup L.P. -- http://www.semgrouplp.com/-- is a midstream service company providing the energy industry means to move products from the wellhead to the wholesale marketplace. SemGroup provides diversified services for end users and consumers of crude oil, natural gas, natural gas liquids, refined products and asphalt. Services include purchasing, selling, processing, transporting, terminaling and storing energy. SemGroup serves customers in the United States, Canada, Mexico, Wales, Switzerland and Vietnam. SemGroup L.P. and its debtor-affiliates filed for Chapter 11 protection on July 22, 2008 (Bankr. D. Del. Lead Case No. 08- 11525). These represent the Debtors' restructuring efforts: John H. Knight, Esq., L. Katherine Good, Esq. and Mark D. Collins, Esq. at Richards Layton & Finger; Harvey R. Miller, Esq., Michael P. Kessler, Esq. and Sherri L. Toub, Esq. at Weil, Gotshal & Manges LLP; and Martin A. Sosland, Esq. and Sylvia A. Mayer, Esq. at Weil Gotshal & Manges LLP. Kurtzman Carson Consultants L.L.C. is the Debtors' claims agent. The Debtors' financial advisors are The Blackstone Group L.P. and A.P. Services LLC. Margot B. Schonholtz, Esq., and Scott D. Talmadge, Esq., at Kaye Scholer LLP; and Laurie Selber Silverstein, Esq., at Potter Anderson & Corroon LLP, represent the Debtors' prepetition lenders. SemGroup L.P.'s affiliates, SemCAMS ULC and SemCanada Crude Company, sought protection under the Companies' Creditors Arrangement Act (Canada) on July 22, 2008. Ernst & Young, Inc., is the appointed monitor of SemCanada Crude Company and its affiliates' reorganization proceedings before the Canadian Companies' Creditors Arrangement Act. The CCAA stay expires on Nov. 21, 2008. SemGroup L.P.'s consolidated, unaudited financial conditions as of June 30, 2007, showed $5,429,038,000 in total assets and $5,033,214,000 in total debts. In their petition, they showed more than $1,000,000,000 in estimated total assets and more than $1,000,000,000 in total debts. SEMGROUP LP: Oklahoma Producers Seek An Accounting of Deliveries ---------------------------------------------------------------- Samson Resources Company, Lone Star, LLC, Samson Contour Energy E&P, LLC, JMA Energy Company, L.L.C., New Dominion, L.L.C., Benson Mineral Group, Inc., The Mint Limited Partnership, Chesapeake Exploration Limited Liability Company, Chesapeake Energy Marketing, Inc., Special Energy Corporation, DC Energy, Inc., Dunne Equities, Inc., Lario Oil & Gas Company, McCoy Petroleum Corporation, Braden-Deem, Inc., W.D. Short Oil Co., L.L.C., Short & Short, L.L.C., Weinkauf Petroleum, Inc., Special Energy Corporation, Veenker Resources, Inc., Lance Ruffel Oil & Gas Corporation, and St. Mary Land Exploration Company, filed a complaint against the Debtors, seeking declaratory relief pursuant to Rule 7001(9) of the Federal Rules of Bankruptcy Procedure. The Oklahoma Producers ask that the U.S. Bankruptcy Court for the District of Delaware require the Debtors to provide an accounting of: (i) all Oklahoma Products sold during the period from June 1 to July 22, 2008; (ii) the sale and disposition of all Oklahoma Products sold to the Debtors during the period; (iii) the amount of Oklahoma Products, the Oklahoma Receivables and the Oklahoma Cash on hand as of the Petition Date; and (iv) the use or disposition of all Oklahoma Products, Oklahoma Receivables and Oklahoma Cash since the Petition Date. The Oklahoma Producers own and represent working interests, royalty interests, overriding interests and other interests under applicable law in the mineral acreage and oil and gas produced from various wells in the State of Oklahoma. They also operate numerous wells pursuant to operating agreements executed with non-operating interest owners as well as pooling orders issued by the Oklahoma Corporate Commission. As of the Petition Date, during the period from June 1 to July 22, 2008, the Debtors held unsold oil and gas product from wells located in the State of Oklahoma. The Debtors also held receivables representing accounts generated from the sale of Oklahoma Products, as well as cash representing payments for the sale of Oklahoma Products. Since the Petition Date, the Debtors continued to sell Oklahoma Products, generating additional Oklahoma Receivables. They have also made collections on account of the sale of Oklahoma Products, resulting in additional cash. The Oklahoma Producers assert that pursuant to the Oklahoma Production Revenue Standards Act, all proceeds from the sale of the Oklahoma Products will be regarded separate and distinct from all other funds until they are paid to legally entitled Oklahoma Producers, and any person holding proceeds from the sale is required to hold those for the benefit of the legally entitled owners of the proceeds. The Oklahoma Producers are owners, they assert, thus all revenue derived from the sale of Oklahoma Products must be held in trust until the Debtors have remitted the full payment. The Oklahoma Producers maintain that they hold a security interest and lien on all Oklahoma Products sold and delivered in June and July 2008, to secure the obligations of the Debtors. They also hold a security interest and lien in the Oklahoma Products, the Oklahoma Receivables and the Oklahoma Cash. According to the Oklahoma Producers, Bank of America, as administrative agent for the secured parties, asserts that it hold a first and prior security interest and lien in the Oklahoma Products, the Oklahoma Receivables and the Oklahoma Cash. The Oklahoma Producers contest the validity of BofA's liens and interests on the Oklahoma Products, and insist that those interests are subordinate to their own. They maintain that BofA's lien and interests do not attach to the Oklahoma Products because they constitute property held in trust. About SemGroup LP SemGroup L.P. -- http://www.semgrouplp.com/-- is a midstream service company providing the energy industry means to move products from the wellhead to the wholesale marketplace. SemGroup provides diversified services for end users and consumers of crude oil, natural gas, natural gas liquids, refined products and asphalt. Services include purchasing, selling, processing, transporting, terminaling and storing energy. SemGroup serves customers in the United States, Canada, Mexico, Wales, Switzerland and Vietnam. SemGroup L.P. and its debtor-affiliates filed for Chapter 11 protection on July 22, 2008 (Bankr. D. Del. Lead Case No. 08- 11525). These represent the Debtors' restructuring efforts: John H. Knight, Esq., L. Katherine Good, Esq. and Mark D. Collins, Esq., at Richards Layton & Finger; Harvey R. Miller, Esq., Michael P. Kessler, Esq., and Sherri L. Toub, Esq., at Weil, Gotshal & Manges LLP; and Martin A. Sosland, Esq. and Sylvia A. Mayer, Esq. at Weil Gotshal & Manges LLP. Kurtzman Carson Consultants L.L.C. is the Debtors' claims agent. The Debtors' financial advisors are The Blackstone Group L.P. and A.P. Services LLC. Margot B. Schonholtz, Esq., and Scott D. Talmadge, Esq., at Kaye Scholer LLP; and Laurie Selber Silverstein, Esq., at Potter Anderson & Corroon LLP, represent the Debtors' prepetition lenders. SemGroup L.P.'s affiliates, SemCAMS ULC and SemCanada Crude Company, sought protection under the Companies' Creditors Arrangement Act (Canada) on July 22, 2008. Ernst & Young, Inc., is the appointed monitor of SemCanada Crude Company and its affiliates' reorganization proceedings before the Canadian Companies' Creditors Arrangement Act. The CCAA stay expires on Nov. 21, 2008. SemGroup L.P.'s consolidated, unaudited financial conditions as of June 30, 2007, showed $5,429,038,000 in total assets and $5,033,214,000 in total debts. In their petition, they showed more than $1,000,000,000 in estimated total assets and more than $1,000,000,000 in total debts. SENTINEL MANAGEMENT: Survives BNY Opposition to $500MM Suit ----------------------------------------------------------- The U.S. Bankruptcy Court, Northern District of Illinois (Chicago) has allowed the liquidation trustee of Sentinel Management Group Inc., to move forward with its $500 million against Bank of New York Mellon Corp. The Court, according to Bloomberg's Bill Rochelle, allowed the suit to move forward with 5 of the 9 counts, despite a motion by BoNY to dismiss the suit. According to the report, the lawsuit alleged that BoNY aided the fraud conducted by Sentinel's management, which led to Sentinel's collapse in August 2007. As reported by the Troubled Company Reporter on January 2, 2009, the Court confirmed on December 15, 2008, the plan of liquidation of Sentinel. Frederick J. Grede, who was appointed trustee to manage the liquidation of Sentinel while in Chapter 11, has been appointed as liquidation trustee pursuant to the Plan. A copy of the Plan is available for free at: http://bankrupt.com/misc/SentinelManagement_4thAmendedPlan.pdf About Sentinel Management Based in Northbrook, Illinois, Sentinel Management Group Inc. -- http://www.sentinelmgi.com/-- is a full service firm offering a variety of security solutions. The company filed a voluntary chapter 11 petition on Aug. 17, 2007 (Bankr. N.D. Ill. Case No. 07-14987). Ronald Barliant, Esq., Randall Klein, Esq., and Kathryn A. Pamenter, Esq., at Goldberg, Kohn, Bell & Black Rosenbloom & Moritz, Ltd. represent the Debtor as counsel. Quinn, Emanuel Urquhart Oliver & Hedges, LLP, represents the Official Committee of Unsecured Creditors as counsel. DLA Piper US LLP is the Committee's co-counsel. When the Debtor sought bankruptcy protection, it listed assets and debts of more than $100 million. On Aug. 28, 2007, the Court approved Frederick Grede as the Debtor's Chapter 11 Trustee. Marc I. Fenton, Esq., at DLA Piper US LLP, and Vincent E. Lazar, Esq, at Jenner & Block LLP, represent the Chapter 11 Trustee as counsel. SMURFIT-STONE: Seeks March 27 Extension to File Schedules --------------------------------------------------------- Smurfit-Stone Container Corporation and its debtor affiliates ask the U.S. Bankruptcy Court for the District of Delaware to extend until March 27, 2009, the deadline to file their schedules of assets and liabilities and statement of financial affairs. Section 521 of the Bankruptcy Code and Rule 1007 of the Federal Rules of Bankruptcy Procedure require a debtor to file its (i) schedules of assets and liabilities; (ii) schedules of current income and expenditures; (iii) schedules of executory contracts and unexpired leases; and (iv) statements of financial affairs within 15 days after a debtor's bankruptcy filing. James P. Conlan, Esq., at Sidley Austin LLP, in Chicago, Illinois, the Debtors' proposed counsel, asserts that the Debtors may not be able to complete the documents within a month after the bankruptcy filing, given the size of their businesses. "Given the size and complexity of the Debtors' businesses, a significant amount of time must be accumulated, reviewed and analyzed to properly prepare the schedules and statements," Mr. Conlan maintains. "The data necessary for the schedules and statements is stored in numerous accounting systems and compiling and consolidating the data is a complex and time intensive task." The Debtors assure creditors and other parties-in-interests that their interests will not be harmed by the proposed extension of the filing deadline since the Schedules and Statements will be filed in advance of any planned bar date or other significant milestone event in the Debtors' cases. Smurfit-Stone Container Corp. -- http://www.smurfit-stone.com-- is one of the leading integrated manufacturers of paperboard and paper-based packaging in North America and one of the world's largest paper recyclers. The company operates 162 manufacturing facilities that are primarily located in the United States and Canada. The company also owns roughly one million acres of timberland in Canada and operates wood harvesting facilities in Canada and the United States. The company employs approximately 21,250 employees, 17,400 of which are based in the United States. For the quarterly period ended September 30, 2008, the company reported approximately $7.450 billion in total assets and $5.582 billion in total liabilities on a consolidated basis. Smurfit-Stone and its U.S. and Canadian subsidiaries filed to reorganize under Chapter 11 on January 26, 2009 (Bankr. D. Del. Lead Case No. 09-10235). Certain of the company's affiliates, including Smurfit-Stone Container Canada Inc., a wholly owned subsidiary of SSCE, and certain of its affiliates, filed to reorganize under the Companies' Creditors Arrangement Act in the Ontario Superior Court of Justice in Canada. According to Bloomberg News, Smurfit-Stone joins other pulp- and paper-related bankruptcies as rising Internet use hurts magazines and newspapers. Corp. Durango SAB, Mexico's largest papermaker, sought U.S. bankruptcy in October. Quebecor World Inc., a magazine printer and Pope & Talbot Inc., a pulp-mill operator, also sought cross-border bankruptcies for their operations in the U.S. and Canada. James F. Conlan, Esq., Matthew A. Clemente, Esq., Dennis M. Twomey, Esq., and Bojan Guzina, Esq., at Sidley Austin LLP, in Chicago, Illinois; and Robert S. Brady, Esq., and Edmon L. Morton, Esq., at Young Conaway Stargatt & Taylor in Wilmington, Delaware, serve as the Debtors' bankruptcy counsel. PricewaterhouseCooper LLC, serves as the Debtors' financial and investment consultants. Lazard Freres & Co. LLC acts as the Debtors' investment bankers. Epiq Bankruptcy Solutions LLC, acts as the Debtors' notice and claims agent. Bankruptcy Creditors' Service, Inc., publishes Smurfit-Stone Bankruptcy News. The newsletter tracks the chapter 11 proceeding and ancillary foreign proceedings undertaken by Smurfit-Stone Container Corp. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) SPARKS REGIONAL: Liquidity Declines Spur Moody's Junk Ratings ------------------------------------------------------------- Moody's Investors Service has downgraded the bond rating assigned to Sparks Regional Medical Center to Caa1 from B2. Moody's last review was on November 14, 2008. The current rating downgrade is attributable to further liquidity declines, higher operating losses in recent months, and Moody's belief that the possibility of a bankruptcy filing is higher than it was two months ago. At this time Moody's are removing the rating from Watchlist and revising the outlook to negative. Legal security: The bonds are secured by a lien on the hospital and a gross revenue pledge of SRMC and are further secured by a joint and several guaranty of the Sparks Health System and Sparks Medical Foundation (an affiliated physician organization). Interest rate derivatives: None Challenges * Significant reduction in unrestricted cash and investments to a balance of $5.5 million as of December 31, 2008. The Sparks Foundation, an unaffiliated group, has committed to lend up to $2 million to Sparks, resulting in a combined balance of $7.5 million, translating into a weak 11 days cash on hand and 12% cash to debt. Moody's note that capital expenditures have totaled $6.9 million since FYE 2008, consuming additional cash. * Significant operating losses continue through six months FY 2009, with the system posting a consolidated operating loss of $12.9 million, and negative operating cash flow of $4.3 million. Management attributes the decline in recent months to a deteriorating payer mix. * Sizeable operating lease commitments of approximately $6 million annually. Conversion of operating lease commitments to debt equivalents stresses debt measures further. Recent Developments/Results The downgrade follows the receipt of six-month (unaudited) fiscal year 2009 statements showing a continuation of large operating losses and further deterioration in SRMC's unrestricted cash position. The downgrade is also based on Moody's belief that the likelihood of bankruptcy is higher than two months ago based on a very weak cash position and Moody's belief that SRMC's viable alternatives to restoring liquidity to meet debt service payments and operating needs are limited. Turnaround plans implemented by management have yet to result in significant operational improvements. Through six months FY 2009, consolidated operating losses totaled $12.9 million (-10.5% operating margin) and operating cash flow was a negative $4.3 million (-3.5% operating cash flow margin), ultimately resulting in a decline of the hospital's cash position to $5.5 million at December 31, 2008 from $7.7 million in November 2008 and $31.2 million at FYE 2008. Moody's also note that the FY 2008 audit was recently completed with the auditor expressing a qualified opinion regarding SRMC's ability to continue operations as a going concern. After declining precipitously during FY 2008 and the Q1 2009, SRMC's unrestricted cash and investments position has fluctuated between $5.5 million and $7.7 million for the last two months. Following an inability to secure a line of credit from a local bank, the Sparks Health System Foundation (an affiliated group that is not obligated on the bonds) recently agreed to lend SRMC up to $2 million. SRMC has not yet borrowed money from the Foundation, and continues to make bond monthly payments. For additional information, please see the report dated November 14, 2008. Outlook The negative outlook reflects the deteriorating financial position of SRMC and Moody's belief that if SRMC files for bankruptcy a lower rating may be warranted based on the estimated recovery value of the bonds. What could change the rating -- UP Given the near term liquidity and operating stresses. If SRMC is able to secure additional liquidity from an external source to provide at least medium-term liquidity and implement more significant turnaround initiatives to reduce operating losses, a rating upgrade would be considered. What could change the rating -- DOWN A further rating downgrade would be considered if there are further declines in unrestricted cash, a bankruptcy filing, or a payment default. Additionally, in the event of a default, a lower estimated recovery value could result in a lower rating. Key Indicators Assumptions & Adjustments: -- Based on financial statements for Sparks Health System -- First number reflects audit year June 30, 2008 -- Second number reflects un-audited year six months ended December 31, 2008 -- Investment returns normalized at 6% unless otherwise noted * Inpatient admissions: 12,776; 6,097 * Total operating revenues: $244.0 million; $123.3 million * Moody's-adjusted net revenue available for debt service: ($0.05) million; ($4.1) million * Total debt outstanding: $65.0 million; $62.0 million * Maximum annual debt service (MADS): $6.3 million; $6.3 million * MADS Coverage with reported investment income: 0.3 times; (0.7) times * Moody's-adjusted MADS Coverage with normalized investment income: (0.01) times; (1.93) times * Days cash on hand: 46 days; 11 days * Cash-to-debt: 48%; 12% * Operating margin: (6.6%); (10.5%) * Operating cash flow margin: (0.5%); (3.5%) Rated Debt (debt outstanding as of December 31, 2008) -- Series 2001; fixed rate ($53.1 million outstanding) rated Caa1 The last rating action was on November 14, 2008, when the rating of Sparks Regional Medical Center was downgraded to B2 from Baa3 and placed on Watchlist for further downgrade. STAR TRIBUNE: U.S. Trustee Forms 7-Member Creditors Committee ------------------------------------------------------------- Diana G. Adams, the U.S. Trustee for Region 2, selected seven members to the official committee of unsecured creditors in the Chapter 11 cases of Star Tribune Company and Star Tribune Holdings Corporation. The committee members are: 1. Wilmington Trust Company 591 Broadway - 2nd Floor New York, New York 10012 Attn: Mr. Boris Treyger, Vice President 2. Pension Benefit Guaranty Corporation 1200 K Street, N.W. Washington, D.C. 20005-4026 Attn: Marie-Christine Fogt, Financial Analyst 3. Global Leveraged Capital Management LLC 50 California Street, Suite 3260 San Francisco, CA 94111 Attn: Abraham T. Han, Principal 4. The Minnesota Newspaper Guild/Typographical Union 2855 Anthony Lane S, Suite 110 St. Anthony, Minnesota 55418-3265 Attn: Mike Bucsko, Executive Officer 5. Teamsters Local No. 120 9422 Ulysses ST NE, Suite 120 Blaine, MN 55434 Attn: Brad Slawson, Sr., Secretary-Treasurer 6. APAC Customer Services, Inc. 2333 Wauregan Road - Suite 100 Bannockburn, IL 60015 Attn: Robert Nachwalter, SVP and General Counsel 7. Royle Printing Company 745 S. Bird Sun Prairie, WI 53590 Attn: Scott Pierquet, Director of Finance Bloomberg's Bill Rochelle notes that the panel consists of the PBGC, two unions, one indenture trustee, two trade suppliers, and one investor. About Star Tribune Headquartered in Minneapolis, Minnesota, The Star Tribune Company -- http://www.startribune.com-- operate the largest newspaper in the U.S. state of Minnesota and published seven days each week in an edition for the Minneapolis-Saint Paul metropolitan area. The company and its affiliate, Star Tribune Holdings Corporation, filed for Chapter 11 protection on January 15, 2009 (Bankr. S.D. N.Y. Lead Case No. 09-10245). Marshall Scott Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. The Debtors proposed Blackstone Group LP as their financial advisor; and Curtis, Mallet-Prevost, Colt & Mosle LLP as conflict counsel; and Garden City Group Inc. as claims agent. When the Debtors filed for protection from their creditors, they listed assets and debts between $100 million to $500 million each. SUPERIOR OFFSHORE: Court Confirms Plan, Denies Conversion Motion ---------------------------------------------------------------- Judge Wesley Steen of the U.S. Bankruptcy Court for the Southern District of Texas confirmed on January 28, 2009, the First Amended Joint Plan of Liquidation filed by Superior Offshore International, Inc. and its Official Committee of Unsecured Creditors. Bankruptcy Law360 reports that the Court, at the same time, denied a request by Louis E. Schaefer, Jr., and Schaefer Holdings LP, the Debtor's founder and equity holder, to convert the Debtor's Chapter 11 restructuring case to a Chapter 7 liquidation proceeding. As reported by the Troubled Company Reporter, Superior Offshore and the Committee filed the Amended Plan and an accompanying disclosure statement on December 16, 2008. The Disclosure Statement was approved on January 9. The TCR says the Plan divides the claims and interests into 9 classes: Class 1 Administrative Claims Class 2 Priority Tax Claims Class 3 Priority Non-Tax Claims Class 4 Secured Claims Class 5 General Unsecured Claims Class 6 Subordinated Claims Class 7 Subordinated Securities Claims Class 8 Interests Class 9 Subordinated Interests All Allowed Class 1, Class 2 and Claims shall receive payment in full, in Cash. In the sole discretion of the Plan Agent, the holder of an allowed Class 4 Claim shall receive either (i) the proceeds of the Collateral securing such Claimant's Allowed Secured Claim after satisfaction in full of all superior liens up to the Allowed Amount of the Claimant's Class 4 Claim; or (ii) the Collateral securing such Claimant's Allowed Secured Claim in full and final satisfaction of such claim. Holders of Allowed General Unsecured Claims under Class 5 will receive a Pro Rata share of Distributions from Available Cash and any Plan Agent Recovery up to the Allowed Amount of such Class 5 Claim. The Plan Agent shall make additional future distributions to holders of Allowed Class 5 Claims from Available Cash and the Plan Agent Recovery as the Plan Agent determines appropriate. Each holder of an Allowed Class 6 Subordinated Claim will receive a Pro Rata share of Available Cash and Plan Agent Recovery up to the Allowed Amount of such Claim after payment in full of all Allowed Class 5 Claims. Each holder of an Allowed Class 7 Subordinated Securities Claim shall look first to the proceeds of the Debtor's available insurance policies for satisfaction of its Claim to the extent that such Claim is covered by insurance. Any remaining unpaid Allowed Class 7 Subordinated Securities Claim shall receive a Pro- Rata share with all Allowed Class 8 Interests of all remaining Available Cash and Plan Agent Recovery after payment in full of all Class 1, 2, 3, 4, 5, and 6 Claims. All Equity Interests under Class 8 shall be canceled as of the Effective Date. Holders of Allowed Equity Interests shall receive a Pro-Rata share with all Allowed Class 7 Claims remaining after application of any available insurance proceeds of all remaining Available Cash and Plan Agent Recovery after payment in full, with interest, of all Class 1, 2, 3, 4, 5, and 6 Claims. All Subordinated Interests under Class 9 shall be canceled as of the Effective Date and shall receive no Distributions. On the Effective Date, all remaining property of the Debtor and of the Estate will vest in the Liquidating Debtor, free and clear of liens, claims and encumbrances, except as otherwise provided in the Plan. From and after the Effective Date of the Plan, the Liquidating Debtor is authorized to (i) take such action as is necessary to complete an orderly wind-down of its operations, including completing all audits by the IRS; (ii) file claim objections; (iii) make distributions; (iv) prosecute causes of action owned by the Estate, including all claims and causes of action arising under the Bankruptcy Code; (v) pursue, liquidate and administer Estate property; (vi) file tax returns; and (vii) take such other action as provided for under the Plan. Pursuant to the Confirmation Order, these individuals will constitute the initial members of the Post-Confirmation Committee: -- Claire Davis -- Michael Parker -- Bruce Lucas -- Terry Braud -- L. Don Miller A full-text copy of the Debtors' and the Official Committee of Unsecured Creditors First Amended Joint Plan of Liquidation is available for free at: http://bankrupt.com/misc/SuperiorOffshore_1stAmendedJointPlan.pdf In his Conversion Motion, Mr. Schaefer said there is no reasonable likelihood that a plan will be confirmed. He said that Amended Plan is defective, and will not yield and equal or higher payout to claimants that would a case under Chapter 7. According to Mr. Schaefer, the amended plan violated the fair and equitable requirements of Section 1129 of the United States Bankruptcy Code. He said, among other things, that the amended plan improperly provide for the treatment of Class 7 and 8 claims because the procedure for the claims in not to be determined until postconfirmation. Mr. Schaefer said the Chapter 7 will maximize the value to creditors and will eliminate unnecessary administrative expenses incurred by various committees and professionals in the Debtor's case. Headquartered in Houston Texas, Superior Offshore International Inc. (Nasdaq: DEEP) -- http://www.superioroffshore.com/-- provides subsea construction and commercial diving services to the offshore oil and gas industry. The company's construction services include installation, upgrading and decommissioning of pipelines and production infrastructure. The company operates a fleet of seven service vessels and provides remotely operated vehicles and saturation diving systems for deepwater and harsh environment operations. Superior Offshore International, Inc., filed for bankruptcy protection on April 24, 2008 (Bankr. S.D. Tex. Case No. 08-32590). The Debtors listed total assets of $67,587,927 and total liabilities of $54,359,884 in its schedules. David Ronald Jones, Esq., and Joshua Walton Wolfshohl, Esq., at Porter & Hedges LLP, represent the Debtor as counsel. The U.S. Trustee for Region 7 appointed five creditors to serve on an Official Committee of Unsecured Creditors. Douglas S. Draper, Esq., at Heller Draper Hayden Patrick & Horn LLC, and Michael D. Rubenstein, Esq., at Liskow Lewis, represent the Committee as counsel. TALLYGENICOM LP: Taps Donlin Recano as Claims and Noticing Agent ---------------------------------------------------------------- TallyGenicom LP and its debtor-affiliates ask the United States Bankruptcy Court for the District of Delaware for permission to employ Donlin Recano & Company Inc. as their claims, noticing and balloting agent. The firm will: a) prepare and serve required notices in these chapter 11 cases, including, without limitation: i) the notice under section 341(a) of the Bankruptcy Code; ii) the notice of bar date for filing claims against the Debtors; iii) notice of hearings on a disclosure statement and confirmation of a plan of reorganization; and iv) other miscellaneous notices to any entities, as the Debtors or the Court may deem necessary or appropriate for an orderly administration of these chapter 11 cases. b) within five business days after the mailing of a particular notice, file with the Clerk's Office a declaration of service that includes a copy of the notice involved, an alphabetical list of persons to whom the notice was served and the date and manner of service; c) comply with applicable federal, state, municipal and local statutes, ordinances, rules, regulations, orders and other requirements; d) promptly comply with such further conditions and requirements as the Clerk's Office or Court may at any time prescribe; e) provide claims recordation services and maintain the official claims register; f) provide balloting and solicitation services, including preparing ballots, producing personalized ballots and tabulating creditor ballots on a daily basis; g) provide such other noticing, disbursing and related administrative services as may be required from time to time by the Debtors; and h) provide assistance with, among other things, certain data processing and ministerial administrative functions, including, but not limited to, such functions related to: 1) the Debtors' schedules, statements of financial affairs and master creditor lists, and any amendments thereto; and (2) the processing and reconciliation of claims. The Debtors have paid a $15,000 retainer to the firm. The firm's professionals will be paid at these rates: Designation Hourly Rate ----------- ----------- Senior Bankruptcy Consultant $205-250 Case Manager $180-200 Technology/Programming Consultant $115-195 Senior Analyst $115-175 Jr. Analyst $70-110 Clerical $40-65 Louis A. Recano, president of the 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. About TallyGenicom Headquartered in Chantilly, Virginia, TallyGenicom, L.P. aka Datacom Manufacturing LP -- http://www.tallygenicom.com-- provide an array of business and industrial imaging devices and printer parts. The company and two of its affiliates filed for Chapter 11 protection on January 27, 2009 (Bankr. D. Del. Lead Case No. 09-10266). Ann C. Cordo, Esq., and Gregory Thomas Donilon, Esq., at Morris Nichols Arsht & Tunnell LLP, represent the Debtors in their restructuring efforts. The Debtors proposed CRG Partners Group LLC as their financial advisor; Proskauer Rose LLP as special counsel. Suzzanne Uhland, Esq., at O'Melveny & Myers, LLP, and Mark D. Collins, Esq., at Richards, Layton & Finger, P.A., represent Printronix Inc., Stalking Horse Bidder. Randall L. Klein, Esq., at Goldberg Kohn Bell Black Rosenbloom & Moritz, Ltd., and Steven K. Kortanek, Esq. at Womble Carlyle Sandridge & Rice, PLLC, represent Dymas Funding Company LLC, agent to Printronix' lenders. When the Debtors filed for protection from their creditors, they listed assets and debts between $10 million and $50 million in their filing. THERMADYNE HOLDINGS: Moody's Affirms Corp. Family Rating to 'B3' ---------------------------------------------------------------- Moody's Investors Service affirmed Thermadyne Holdings Corporation's corporate family rating at B3 and changed the outlook to negative. In addition, Moody's affirmed the probability of default rating at B3 and the senior subordinated notes at Caa1. The negative outlook reflects the likelihood that global demand will remain soft and the uncertain business environment will have an adverse impact on Thermadyne's sales and earnings. As a result, Moody's anticipates that reduced earnings will tighten headroom under certain of Thermadyne's covenants while increasing prospective interest costs. Moody's cautions that precipitous declines in EBITDA, similar in scale to the drop in the fourth quarter, caused by either diminished demand or the inability to maintain gross margins due to the deterioration of a rational pricing environment, could be detrimental to the company's existing ratings. Moody's would likely consider further rating action if such a decline results in a deterioration of the company's liquidity, either in terms of revolver availability or the ability to generate positive cash flows. The rating affirmation reflects Thermadyne's solid credit metrics, on a trailing basis, and adequate liquidity profile. The ratings incorporate Thermadyne's dominant market position, geographic and end-market diversification, modest leverage, strong cash generation and the inherent cyclicality of its operations caused by its correlation to steel consumption. Ratings affirmed: -- Corporate Family Rating at B3; -- Probability of Default Rating at B3; -- Rating of Senior Subordinated Notes due 2014 at Caa1 (LGD assessment revised to LGD4/64% from LGD5/70%) The previous rating action on Thermadyne was the April 21, 2008, upgrade to B3 with a stable outlook. Thermadyne is a global designer and manufacturer of cutting and welding equipment. For the twelve months ending September 30, 2008, its sales totaled approximately $537 million. TOYOTA OF AUGUSTA: Files for Chapter 7 Liquidation -------------------------------------------------- News 12 reports that Toyota of Augusta has filed for Chapter 7 liquidation. Citing Toyota of Augusta's general manager, News 12 relates that the company was closed on Monday and Tuesday, and was open for business on Wednesday. Toyota of Augusta is negotiating a deal with the Milton Ruben Dealership to take over the company, News 12 states. Toyota of Augusta said in a statement, "We are negotiating a sale of assets transaction for a single dealership that is subject to a number of contingencies without a specific closing date. Some creditors were concerned about payment of outstanding obligations and 'jumped the gun' and filed an involuntary petition in bankruptcy. Upon the transaction closing, we have every expectation that the obligations to creditors will be paid. In any event, creditors will be paid before any owners will receive any of the proceeds of the company's assets. We will continue to be open for business selling and serving vehicles and satisfying customer needs." Toyota of Augusta is a dealership on Washington Road. TRANSNATIONAL AUTOMOTIVE: Nov. Balance Sheet Upside-Down by $2MM ---------------------------------------------------------------- Transnational Automotive Group Inc.'s balance sheet at Nov. 30, 2008, showed total assets of $ 6,924,900 and total liabilities of $9,683,147, resulting in a stockholders' deficit of $2,758,247. For the three month ended Nov. 30, 2008, the company posted net loss of 805,173 compared with net loss of $1,729,796 for the same period in the previous year. For the nine month ended Nov. 30, 2008, the company posted net loss of $295,556 compared with net loss of 5,235,019 for the same period in the previous year. Liquidity and Capital Resources As of Nov. 30, 2008, the company had cash and cash equivalents of $1,231,100 compared to cash and cash equivalents of $1,496,442 as of Nov. 30, 2007, representing a decrease in its cash and cash equivalents of $265,342. The decrease in its cash balances compared to the prior year was attributed to $4,227,500 of cash provided from the issuance of common stock and warrants in the prior year. A full-text copy of the -Q filing is available for free at: http://ResearchArchives.com/t/s?38c1 About Transnational Automotive Based in Los Angeles, California, Transnational Automotive Group Inc. (OTC BB: TAMG) -- http://www.transauto-group.com/-- and its wholly-owned and majority-owned subsidiaries are engaged in the development and operations of mass public transportation systems in Cameroon, Africa. The company's current operations are comprised of an intra-city bus transit system in the capital city of Yaounde under the brand name, LeBus, and an inter-city bus transit system between Yaounde and Douala, known as LeCar. Going Concern Kabani & Company Inc., in Los Angeles, expressed substantial doubt about Transnational Automotive Group Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the years ended Feb. 29, 2008, and 2007. The auditing firm pointed to the company's significant loss for the year ended Feb. 29, 2008, and working capital deficit. TRIBUNE COMPANY: Fitch Affirms 'D' Issuer Default Rating -------------------------------------------------------- Fitch Ratings has affirmed and withdrawn these ratings on Tribune Company: -- Issuer Default Rating 'D'; -- Senior guaranteed revolving credit facility 'CC/RR4'; -- Senior guaranteed term loan 'CC/RR4'; -- Senior unsecured bridge loan 'C/RR6'; -- Senior unsecured notes 'C/RR6'; -- Subordinated exchangeable debentures due 2029 'C/RR6'. Ratings may be withdrawn after 30 days have elapsed following a default. The withdrawal of Tribune's ratings reflects the company's Dec. 8, 2008 filing to voluntarily restructure its debt obligations under the protection of Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. TUSKEENA OXFORD: Case Summary & 16 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: Tuskeena Oxford Center LLC P O Box 8860 Mobile, AL 36689 Bankruptcy Case No.: 09-00268 Type of Business: Chapter 11 Petition Date: January 28, 2009 Court: Southern District of Mississippi (Jackson Divisional Office) Debtor's Counsel: Nicholas Van Wiser, Esq. nwiser@byrdwiser.com Byrd & Wiser P.O. Box 1939 Biloxi, MS 39533 Tel: (228) 432-8123 Fax: (228)432-7029 Estimated Assets: $1 million to $10 million Estimated Debts: $10 million to $50 million The Debtor's Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Merchants & Farmers Bank bank loan; $9,704,716 1111 East Jackson Avenue collateral: Oxford, MS 38655 $7,000,000 Gargis Construction trade debt $57,504 P.O. Box 883 Southhaven, MS 38671 City Of Oxford trade debt $45,822 107 Courthouse Square Oxford, MS 38655 Lafayette County Tax Collector trade debt $20,700 Hill's Construction LLC trade debt $14,029 Hartford Insurance Company trade debt $5,044 Mirror Lawn & Turf trade debt $4,040 Howorth & Associates trade debt $2,738 Matthews Landscape & trade debt $2,071 Maintenance City Of Oxford Electric trade debt $849 Department Simplex Grinnell trade debt $299 AT&T trade debt $268 Southeast Real Investment trade debt $105 Corp CT Corporation trade debt $112 Burr & Foreman LLP trade debt $66 Centerpoint Energy trade debt $27 The petition was signed by Christopher White. TWEETER HOME: Seeks Release of $300,000 Utility Reserve ------------------------------------------------------- Judge Peter J. Walsh of the U.S. Bankruptcy Court for the District of Delawere permits General Electric Capital Corporation to release to Tweeter Home Entertainment Group, Inc., and its affiliates $300,000 from the segregated blocked reserved funds. The Debtors will no longer be subject to additional adequate protection procedures under the Court's Utility Order. In connection with the previous operation of their businesses, the Debtors obtained utility services for water, natural gas, oil, electricity and telephone. To obtain continued services from the Utility Providers after the Petition Date, the Debtors deposited funds to serve as an adequate assurance of payment under Section 366 of the Bankruptcy Code. Sarah E. Pierce, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, in Wilmington, Delaware, relates the Debtors have sold substantially all of their assets and accordingly maintain no property at which they use any utility services. The Debtors no longer use or require any of the utility services, she avers. Ms. Pierce certified to the Court that no objection has been filed with respect to the Debtors' Motion. About Tweeter Home Based in Canton, Mass., Tweeter Home Entertainment Group Inc. -- http://www.tweeter.com/-- retails mid-to high-end audio and video consumer electronics products. Tweeter and seven of its affiliates filed for chapter 11 Protection on June 11, 2007 (Bankr. D. Del. Case Nos. 07-10787 through 07-10796). Gregg M. Galardi, Esq., Mark L. Desgrosseilliers, Esq., and Sarah E. Pierce, Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, represented the Debtors. Kurtzman Carson Consultants LLC acted as the Debtors' claims and noticing agent. Bruce Grohsgal, Esq., William P. Weintraub, Esq., and Rachel Lowy Werkheiser, Esq., at Pachulski Stang Ziehl & Jones LLP; and Scott L. Hazan, Esq., Lorenzo Marinuzzi, Esq., and Todd M. Goren, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C., represented the Official Committee of Unsecured Creditors. As of Dec. 21, 2006, Tweeter had total assets of $258,573,353 and total debts of $190,417,285. The Debtors' exclusive period to file a plan of reorganization expired on June 5, 2008. About Tweeter Opco Tweeter Opco, LLC, was formed in July 2007 to acquire the business operations and assets of Tweeter Home Entertainment Group, Inc. Tweeter Opco filed for Chapter 11 protection on Nov. 5, 2008 (Bankr. D. Del. Case No. 08-12646). Chun I. Jang, Esq., and Cory D. Kandestin, Esq., at Richards, Layton & Finger, P.A., assisted the company in its restructuring effort. The company listed assets of $50 million to $100 million and debts of $50 million to $100 million. Judge Mary Walrath of the U.S. Bankruptcy Court for the District of Delaware converted the Opco Debtors' Chapter 11 cases to Chapter 7 liquidation proceedings effective as of December 5, 2008. George L. Miller from the accounting firm Miller Coffey Tate has been appointed to serve as trustee of the Chapter 7 proceedings of Tweeter Opco, LLC, and its affiliates. Bankruptcy Creditors' Service, Inc., publishes Tweeter Bankruptcy News. The newsletter tracks the bankruptcy proceedings of Tweeter Home Entertainment Group, Inc., and its affiliates, and the subsequent bankruptcy cases of its buyer, Tweeter Opco LLC. (http://bankrupt.com/newsstand/or 215/945-7000) TWEETER OPCO: Gets Permission to Use Lenders' Cash Collateral ------------------------------------------------------------- Judge Mary Walrath of the U.S. Bankruptcy Court for the District of Delaware authorized, on a final basis, George L. Miller, as the Chapter 7 trustee overseeing the liquidation proceedings of Tweeter Opco LLC and its affiliates, to use cash collateral of their prepetition lenders, consisting any of the sales proceeds, from December 5, 2008 to the conclusion, of the disposition and liquidation of the Debtors' estate property by Apto Solutions, Inc. Judge Walrath has ordered the Chapter 7 Trustee to establish a reserve for his compensation and all his legal fees incurred in connection with the disposition of the Opco Debtor's estates. Upon payment by Apto Solutions of the Estates' Net Sale Proceeds, the Court authorizes the Chapter 7 Trustee to: (i) deduct his legal fees from the Net Sale Proceeds; (ii) deduct the estate's portion equal to 12.5%; and (iii) pay to the Second Lien Agent the remaining 87.5% of the Net Recovery. As adequate protection for the release and application of the Cash Collateral of the Prepetition First Lien and Second Lien Lenders, Judge Walrath prohibits the Chapter 7 Trustee to recover from the cash collateral (a) any amounts paid to or retained by Apto Solutions under the Chapter 7 Trustee's agreement with the firm, (b) the Trustee Fee; and (c) the Legal Fees. Parties' Objections to Cash Collateral Use Before the Court entered the Final Cash Collateral Order, several parties made known their objections to the Opco Debtors' request. Among those parties are: * SB Capital Group, LLC, Tiger Capital Group, LLC and Hudson Capital Partners, LLC, as liquidating consultants to the Opco Debtors; * Wells Fargo Bank Retail Finance LLC, as agent for the First Lien Lenders; and * Fort Bend County, Harris County, Montgomery County, and Cypress-Fairbanks Independent School District. The Consultants opposed the use of the cash collateral until portion of the sale proceeds are turned over to them. According to the Consultants, they have earned $1,752,162 in Consulting Fees; furniture, fixture & equipment fees; and unreimbursed expenses for the services they provided to the Opco Debtors pursuant to a Consulting Agreement they entered into the Debtors. The Consultants also sought $40,000 in legal fees and expenses. The Consultants note that as of January 6, 2009, they only received $1,324,622 of the sale proceeds. Thus, the Consultants sought the turnover of the remaining $467,539 to them. In the alternative, the Consultants sought that all proceeds be placed in an interest-bearing escrow account pending a full evidentiary hearing on the merits determining the nature and extent of their interest in the proceeds; and to the extent appropriate, that they be provided adequate protection for the Chapter 7 Trustee's use of the cash collateral. Wells Fargo Bank Retail Finance LLC, as administrative agent for the DIP Lenders, also opposed the use of its cash collateral to the extent that it is not provided adequate protection or an adequate indemnity reserve against any potential exposure for expenses which may be chargeable to it, pursuant to Section 506(c) of the Bankruptcy Code. Fort Bend County, Harris County, Montgomery County and Cypress- Fairbanks Independent School District, objected to the carve out agreement to the extent that it purports to pay Schultze Asset Management, a junior secured creditor of the Opco Debtors, from collateral in which they hold valid and perfected liens against. As senior secured creditors, the Taxing Authorities sought that approval of the Carve Out Agreement be conditioned on the inclusion of a carve out provision for the ad valorem tax liens. Subsequently, however, the Objecting Taxing Authorities withdrew their limited objection without prejudice. Objections Resolved Upon review of the cash collateral objections, Judge Walrath directs Wells Fargo to set aside and hold in reserve $106,114, which represents the claim amount of the Texas Taxing Authorities, pending further Court order. The Court also overruled the objection asserted by the Consultants, without prejudice to the Consultants' right to bring an appropriate proceeding or motion seeking payment of their postpetition claim. About Tweeter Opco Tweeter Opco, LLC, was formed in July 2007 to acquire the business operations and assets of Tweeter Home Entertainment Group, Inc. Tweeter Opco filed for Chapter 11 protection on Nov. 5, 2008 (Bankr. D. Del. Case No. 08-12646). Chun I. Jang, Esq., and Cory D. Kandestin, Esq., at Richards, Layton & Finger, P.A., assisted the company in its restructuring effort. The company listed assets of $50 million to $100 million and debts of $50 million to $100 million. Judge Mary Walrath of the U.S. Bankruptcy Court for the District of Delaware converted the Opco Debtors' Chapter 11 cases to Chapter 7 liquidation proceedings effective as of December 5, 2008. George L. Miller from the accounting firm Miller Coffey Tate has been appointed to serve as trustee of the Chapter 7 proceedings of Tweeter Opco, LLC, and its affiliates. About Tweeter Home Based in Canton, Mass., Tweeter Home Entertainment Group Inc. -- http://www.tweeter.com/-- retails mid-to high-end audio and video consumer electronics products. Tweeter and seven of its affiliates filed for chapter 11 Protection on June 11, 2007 (Bankr. D. Del. Case Nos. 07-10787 through 07-10796). Gregg M. Galardi, Esq., Mark L. Desgrosseilliers, Esq., and Sarah E. Pierce, Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, represented the Debtors. Kurtzman Carson Consultants LLC acted as the Debtors' claims and noticing agent. Bruce Grohsgal, Esq., William P. Weintraub, Esq., and Rachel Lowy Werkheiser, Esq., at Pachulski Stang Ziehl & Jones LLP; and Scott L. Hazan, Esq., Lorenzo Marinuzzi, Esq., and Todd M. Goren, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C., represented the Official Committee of Unsecured Creditors. As of Dec. 21, 2006, Tweeter had total assets of $258,573,353 and total debts of $190,417,285. The Debtors' exclusive period to file a plan of reorganization expired on June 5, 2008. Bankruptcy Creditors' Service, Inc., publishes Tweeter Bankruptcy News. The newsletter tracks the bankruptcy proceedings of Tweeter Home Entertainment Group, Inc., and its affiliates, and the subsequent bankruptcy cases of its buyer, Tweeter Opco LLC. (http://bankrupt.com/newsstand/or 215/945-7000) TWEETER OPCO: Court Rules on Disposition of Leases, Other Assets ---------------------------------------------------------------- Judge Mary Walrath of the U.S. Bankruptcy Court for the District of Delaware authorized George L. Miller, as the Chapter 7 trustee overseeing the liquidation proceedings of Tweeter Opco LLC and its affiliates, to sell 65 vehicles owned by the Opco Debtors, free and clear of liens for not less than $2,000 per van. The Court directs the Chapter 7 Trustee to file a certification of counsel, identifying the buyer and the purchase price for each vehicle. Judge Walrath also authorized the Chapter 7 trustee to reject effective as of December 31, 2008, more than 70 non-residential real property leases, a list of which can be accessed for free at http://researcharchives.com/t/s?3657 Judge Walrath directed the Chapter 7 Trustee's representatives to promptly return all keys, cards, or codes for the respective premises to the landlords. Before the Court entered its ruling, Highway 9 LLC contended that the Chapter 7 Trustee should not be permitted to reject its lease, without first surrendering possession of the premises. According to Highway 9, if the Chapter 7 Trustee is unable to do so by December 31, 2008, then it should be permitted to cut any locks at the premises, to disarm any security codes, and to take whatever actions necessary to gain access to the premises as of December 31, 2008. In a separate order, Judge Walrath authorized the Opco Debtors to reject 32 non-residential leases effective as of November 30, 2008. A list of the Rejected Leases can be accessed for free at: http://ResearchArchives.com/t/s?375d Peter C. Hughes, Esq., at Dilworth Paxson LLP, in Wilmington, Delaware, had informed the Court that no objections were filed against the Debtors' request. Pursuant to the Court's instructions, rejection of the PRGL Paxton Limited Partnership Lease will become effective on the earlier of (i) the date on which the Chapter 7 Trustee surrenders the property to PRGL; or (ii) December 31, 2008. Ch. 7 Trustee to Abandon Property in Rejected Leases Before their cases were converted to Chapter 7, the Opco Debtors rejected certain of their unexpired leases effective as of November 30, 2008. The lease rejection did not address the treatment of any of the personal property that remained on the leased premises. The Chapter 7 Trustee told the Court that he was informed that the First and Second Lien Lenders, Wells Fargo Retail Finance, LLC, and Schultze Agency Services, LLC, do not object to the abandonment of the personal property on the leased premises. Mr. Miller said that he has been informed that Suncoast Marketing, Inc., currently store printed invoices, sale slips, and signage, supposedly used by the Opco Debtors in the operation of their former business. Mr. Miller said he is presently has possession of titles to three vehicles that have been sold by the Opco Debtors prior to the Conversion Date. According to Mr. Miller, the purchasers have been in possession of the vehicles but the Opco Debtors have not conveyed title of the sold vehicles to the purchasers. The vehicles are: Unit Model Plate ---- ----- ----- 04259 Astro Cargo M76098 05292 G 2500 Cargo YWT6742 07401 G 3500 Cargo BDT0353 In this regard, Mr. Miller seeks the Court's authority to: (a) abandon any personal property of the Opco Debtors on premises previously leased, which leases were rejected as of November 30, 2008; (b) abandon any and all of the Opco Debtors' invoices, sale slips and other printed property currently being stored by Suncoast Marketing at various warehouses; and (c) transfer title of the three vehicles previously sold by the Opco Debtors prior to the Conversion Date. About Tweeter Opco Tweeter Opco, LLC, was formed in July 2007 to acquire the business operations and assets of Tweeter Home Entertainment Group, Inc. Tweeter Opco filed for Chapter 11 protection on Nov. 5, 2008 (Bankr. D. Del. Case No. 08-12646). Chun I. Jang, Esq., and Cory D. Kandestin, Esq., at Richards, Layton & Finger, P.A., assisted the company in its restructuring effort. The company listed assets of $50 million to $100 million and debts of $50 million to $100 million. Judge Mary Walrath of the U.S. Bankruptcy Court for the District of Delaware converted the Opco Debtors' Chapter 11 cases to Chapter 7 liquidation proceedings effective as of December 5, 2008. George L. Miller from the accounting firm Miller Coffey Tate has been appointed to serve as trustee of the Chapter 7 proceedings of Tweeter Opco, LLC, and its affiliates. About Tweeter Home Based in Canton, Mass., Tweeter Home Entertainment Group Inc. -- http://www.tweeter.com/-- retails mid-to high-end audio and video consumer electronics products. Tweeter and seven of its affiliates filed for chapter 11 Protection on June 11, 2007 (Bankr. D. Del. Case Nos. 07-10787 through 07-10796). Gregg M. Galardi, Esq., Mark L. Desgrosseilliers, Esq., and Sarah E. Pierce, Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, represented the Debtors. Kurtzman Carson Consultants LLC acted as the Debtors' claims and noticing agent. Bruce Grohsgal, Esq., William P. Weintraub, Esq., and Rachel Lowy Werkheiser, Esq., at Pachulski Stang Ziehl & Jones LLP; and Scott L. Hazan, Esq., Lorenzo Marinuzzi, Esq., and Todd M. Goren, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C., represented the Official Committee of Unsecured Creditors. As of Dec. 21, 2006, Tweeter had total assets of $258,573,353 and total debts of $190,417,285. The Debtors' exclusive period to file a plan of reorganization expired on June 5, 2008. Bankruptcy Creditors' Service, Inc., publishes Tweeter Bankruptcy News. The newsletter tracks the bankruptcy proceedings of Tweeter Home Entertainment Group, Inc., and its affiliates, and the subsequent bankruptcy cases of its buyer, Tweeter Opco LLC. (http://bankrupt.com/newsstand/or 215/945-7000) TWEETER OPCO: Court Sets May 26 As General Claims Bar Date ---------------------------------------------------------- The Bankruptcy Court for the District of Delaware set May 26, 2009, as the deadline for entities wishing to assert prepetition claims against Tweeter Opco LLC and its debtor-affiliates to file proofs of claim in their Chapter 7 cases. The Court has also set June 3, 2009, as the deadline for governmental units to file proofs of claim against the Opco Debtors. Proofs of claim must be filed on or before the Claims Bar date with the Clerk of the Bankruptcy Court at: Clerk of the Bankruptcy Court 824 Market Street, 3rd Floor Wilmington, Delaware 19801 Phone (302) 252-2900 Separately, George L. Miller, the Chapter 7 Trustee of the liquidations proceedings of the Opco Debtors, has asked the Court to establish: (a) March 30, 2009, as the last date of filing requests for payment of administrative expense claims or the "Administrative Expense Claim Bar Date," and (b) June 7, 2009, as the last date for governmental units to assert request for payment of Administrative Claim or Governmental Claim Bar Date. Mr. Miller asserts that a Bar Date will facilitate the resolution of claims in the Opco Debtors' Chapter 7 cases. He further points out that the use of the motion process for determination of each Chapter 11 Administrative Claim places an administrative burden on each Claimant and would cause additional litigation expenses. Thus, to avoid piecemeal litigation and unnecessary expenditure of the Claimant and estate resources, Mr. Miller proposes the use of a customized Claim Form, a copy of which can be accessed for free at: http://researcharchives.com/t/s?3802 Moreover, to efficiently evaluate and provide for the payment of Chapter 11 Administrative Claims, Mr. Miller asks the Court's authority to establish uniform procedures for the allowance of Chapter 11 administrative claims. Mr. Miller proposes that: (1) All proofs of claim for Chapter 11 Administrative Claims will conform substantially to the customized proof of claim form created by the Chapter 7 Trustee; (2) All proofs of claim for Chapter 11 Administrative Claims must be (i) be signed by the Claimant or its authorized agent; (ii) include supporting documentation; (iii) be in the English language; and (iv) denominated in United States currency; (3) Any holder of more than one Chapter 11 Administrative Claim must file a separate proof of claim with respect to each claim; (4) Any holder of a Chapter 11 Administrative Claim against more than one Debtor must file a separate proof of claim with respect to each Debtor; (5) All holders of Chapter 11 Administrative Claims must identify on their proofs of claim the specific Debtor against which their claim is asserted and the case number of the Debtor's bankruptcy case; (6) All Chapter 11 Administrative Claims that were filed by way of motion or application prior to the entry of the Admin Claims Procedures Motion and all Chapter 11 Administrative Claim that may be filed pursuant to the Court will be deemed to be timely filed Chapter 11 Administrative Claims in these bankruptcy cases; (7) Claimants who have or will file Chapter 11 Administrative Claims will not be entitled to immediate payment of those claims; (8) The allowance of all timely filed Chapter 11 Administrative Claims will be determined in accordance with the claims allowance process that generally applies to general prepetition and governmental claims filed in these bankruptcy cases; (9) Any hearings presently scheduled on any Motion or Application related to Administrative Claims filed before January 13, 2009, will be canceled upon the entry of a Administrative Claims Procedures Order. (10) Nothing in the Administrative Claims Procedures affects the rights and remedies of the Chapter 7 Trustee or any other party-in-interest to pursue any potential avoidance actions or other claims that the Chapter 7 Trustee or other estates may have, or to assert any rights under Chapter 11, all of which claims, rights and defenses are reserved and preserved. Claimants who have previously sought allowance and payment of a Chapter 11 Administrative Claim are not required to re-file their claims on the Claim Form. Any motion or application for allowance and payment of administrative claim that has been filed will be treated as having been timely and properly filed in accordance with the Procedures. Any person or entity that files an Administrative Expense Claim and asserts that all or any portion of that claim is chargeable against a property securing an allowed secured claim must be required to specifically indicate (l) that the claim is subject to Section 506(a) of the Bankruptcy Code and (2) the basis for its assertion. Each Administrative Claimant who failed to file within the Bar Date deadline will be forever barred, restrained and enjoined from asserting a claim against the Opco Debtors or their estates; and will not receive distribution on account of the claim. The proposed Procedures will provide clear guidance to all parties as to the process by which Chapter 11 Administrative Claims may be allowed and paid, Mr. Miller avers. Accordingly, Mr. Miller asks the Court to: (i) approve a customized claim form to be used by holders of Chapter 11 administrative expense claims; (ii) approve the proposed uniform procedures for the filing, allowance and payment of all Chapter 11 Administrative Claims; and (iii) terminate certain hearings relating to requests for allowance and payment of Chapter 11 Administrative Claims. About Tweeter Opco Tweeter Opco, LLC, was formed in July 2007 to acquire the business operations and assets of Tweeter Home Entertainment Group, Inc. Tweeter Opco filed for Chapter 11 protection on Nov. 5, 2008 (Bankr. D. Del. Case No. 08-12646). Chun I. Jang, Esq., and Cory D. Kandestin, Esq., at Richards, Layton & Finger, P.A., assisted the company in its restructuring effort. The company listed assets of $50 million to $100 million and debts of $50 million to $100 million. Judge Mary Walrath of the U.S. Bankruptcy Court for the District of Delaware converted the Opco Debtors' Chapter 11 cases to Chapter 7 liquidation proceedings effective as of December 5, 2008. George L. Miller from the accounting firm Miller Coffey Tate has been appointed to serve as trustee of the Chapter 7 proceedings of Tweeter Opco, LLC, and its affiliates. About Tweeter Home Based in Canton, Mass., Tweeter Home Entertainment Group Inc. -- http://www.tweeter.com/-- retails mid-to high-end audio and video consumer electronics products. Tweeter and seven of its affiliates filed for chapter 11 Protection on June 11, 2007 (Bankr. D. Del. Case Nos. 07-10787 through 07-10796). Gregg M. Galardi, Esq., Mark L. Desgrosseilliers, Esq., and Sarah E. Pierce, Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, represented the Debtors. Kurtzman Carson Consultants LLC acted as the Debtors' claims and noticing agent. Bruce Grohsgal, Esq., William P. Weintraub, Esq., and Rachel Lowy Werkheiser, Esq., at Pachulski Stang Ziehl & Jones LLP; and Scott L. Hazan, Esq., Lorenzo Marinuzzi, Esq., and Todd M. Goren, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C., represented the Official Committee of Unsecured Creditors. As of Dec. 21, 2006, Tweeter had total assets of $258,573,353 and total debts of $190,417,285. The Debtors' exclusive period to file a plan of reorganization expired on June 5, 2008. Bankruptcy Creditors' Service, Inc., publishes Tweeter Bankruptcy News. The newsletter tracks the bankruptcy proceedings of Tweeter Home Entertainment Group, Inc., and its affiliates, and the subsequent bankruptcy cases of its buyer, Tweeter Opco LLC. (http://bankrupt.com/newsstand/or 215/945-7000) TWEETER OPCO: Sec. 341 Meeting of Creditors Slated for Feb. 25 -------------------------------------------------------------- Roberta DeAngelis, the acting United States Trustee for Region 3, will convene a meeting of the creditors of Tweeter Opco, LLC, and its debtor affiliates in their Chapter 7 proceedings at 11:00 a.m., on February 25, 2009, at 844 King Street, Room 2112, in Wilmington, Delaware. This is the first meeting of creditors required under Section 341(a) of the Bankruptcy Code in the Debtors' bankruptcy cases. Attendance by the Debtors' creditors at the meeting is welcome, but not required. The Sec. 341(a) meeting offers the creditors a one-time opportunity to examine the Debtors' representative under oath about the Debtors' financial affairs and operations that would be of interest to the general body of creditors. About Tweeter Opco Tweeter Opco, LLC, was formed in July 2007 to acquire the business operations and assets of Tweeter Home Entertainment Group, Inc. Tweeter Opco filed for Chapter 11 protection on Nov. 5, 2008 (Bankr. D. Del. Case No. 08-12646). Chun I. Jang, Esq., and Cory D. Kandestin, Esq., at Richards, Layton & Finger, P.A., assisted the company in its restructuring effort. The company listed assets of $50 million to $100 million and debts of $50 million to $100 million. Judge Mary Walrath of the U.S. Bankruptcy Court for the District of Delaware converted the Opco Debtors' Chapter 11 cases to Chapter 7 liquidation proceedings effective as of December 5, 2008. George L. Miller from the accounting firm Miller Coffey Tate has been appointed to serve as trustee of the Chapter 7 proceedings of Tweeter Opco, LLC, and its affiliates. About Tweeter Home Based in Canton, Mass., Tweeter Home Entertainment Group Inc. -- http://www.tweeter.com/-- retails mid-to high-end audio and video consumer electronics products. Tweeter and seven of its affiliates filed for chapter 11 Protection on June 11, 2007 (Bankr. D. Del. Case Nos. 07-10787 through 07-10796). Gregg M. Galardi, Esq., Mark L. Desgrosseilliers, Esq., and Sarah E. Pierce, Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, represented the Debtors. Kurtzman Carson Consultants LLC acted as the Debtors' claims and noticing agent. Bruce Grohsgal, Esq., William P. Weintraub, Esq., and Rachel Lowy Werkheiser, Esq., at Pachulski Stang Ziehl & Jones LLP; and Scott L. Hazan, Esq., Lorenzo Marinuzzi, Esq., and Todd M. Goren, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C., represented the Official Committee of Unsecured Creditors. As of Dec. 21, 2006, Tweeter had total assets of $258,573,353 and total debts of $190,417,285. The Debtors' exclusive period to file a plan of reorganization expired on June 5, 2008. Bankruptcy Creditors' Service, Inc., publishes Tweeter Bankruptcy News. The newsletter tracks the bankruptcy proceedings of Tweeter Home Entertainment Group, Inc., and its affiliates, and the subsequent bankruptcy cases of its buyer, Tweeter Opco LLC. (http://bankrupt.com/newsstand/or 215/945-7000) UAL CORP: 8 US Airlines Post 2008 Losses Totaling $19.6 Billion --------------------------------------------------------------- Eight of the nine major U.S. airlines that have disclosed fourth quarter and full year 2008 results have posted losses aggregating $19.6 billion. Only Southwest Airlines posted a net profit. Net Profit Net Profit Full Year 2008 Full Year 2007 -------------- -------------- Delta Air Lines, Inc. ($8,900,000,000) $1,600,000,000 AMR Corp. (2,100,000,000) 504,000,000 Southwest Air Lines 178,000,000 645,000,000 UAL Corp. (5,348,000,000) 403,000,000 US Airways Group Inc. (2,210,000,000) 427,000,000 Continental Airlines Inc. (585,000,000) 459,000,000 Alaska Air Group Inc. (135,900,000) 124,300,000 Skywest Inc. -- -- JetBlue Airways Corp. (76,000,000) 41,000,000 AirTran Holdings, Inc. (273,829,000) 52,683,000 Skywest is expected to release its fourth quarter 2008 results on February 11. The figures provided by JetBlue were pre-tax profit (or losses). Net Profit Net Profit 4th Quarter '08 4th Quarter '07 --------------- --------------- Delta Air Lines, Inc. ($1,400,000,000) ($70,000,000) AMR Corp. (340,000,000) (69,000,000) UAL Corp. (1,303,000,000) (53,000,000) Southwest Airlines (56,000,000) 111,000,000 US Airways (541,000,000) (79,000,000) Continental Airlines (266,000,000) (32,000,000) Alaska Air Group Inc. (75,200,000) (7,400,000) Skywest Inc. -- -- Jetblue Airways Corp. (49,000,000) (3,000,000) AirTran Holdings, Inc. (118,391,000) (2,171,000) High Fuel Jet Prices The airlines said high fuel prices for most of 2008 have contributed to their losses. AMR, the parent of American Airlines, said that historically high and volatile jet fuel prices continued to challenge it in the fourth quarter of 2008. AMR paid $133 million and $2.7 billion more for fuel in the fourth quarter and for all of 2008, respectively, than it would have paid at prevailing prices from the corresponding prior-year periods. Delta faced over $2 billion in increased fuel costs in 2008. While fuel prices dropped in the fourth quarter 2008, Delta paid for high fuel prices due to its fuel hedging contracts. Delta would have reported a $167 million net profit excluding special items in the December 2008 quarter, if fuel had been purchased at market prices. UAL said the historic peak in prices and the impact on hedges driven by the rapid decline resulted in a $2.9 billion increase in cost compared to 2007 fuel prices. UAL recorded $370 million in cash losses on fuel hedges that settled in the quarter, as the recent fall in fuel prices drove losses on hedges put in place earlier in the year to mitigate the steep increase in prices that had occurred in the second and third quarters of 2008. In addition, the company also recorded non-cash, net mark-to-market losses on its fuel hedges of $566 million. US Airways Group Chairman and CEO Doug Parker stated, "Like other airlines that have reported before us, our financial results reflect the staggering increase in fuel prices that we faced throughout most of 2008. In fact, had our 2008 fuel price including realized gains and losses on fuel hedging instruments remained at 2007 levels, the company's fuel expense would have been approximately $1.4 billion lower. Lower Revenues Due to Recession Delta Air Lines, which completed its merger with Northwest Airlines in 2008, said that during the fourth quarter, on a combined basis, passenger revenue fell 1%, or $54 million, compared to the prior year period due to a 4% decline in capacity, partially offset by a 3% increase in unit revenue. These results reflect the weakening of the revenue environment during the quarter caused by the global economic recession. According to UAL, total passenger revenue for the quarter decreased 8.7% year-over- year as consolidated capacity declined 10.6% , consolidated yield increased 2.4% and load factor decreased 0.3 points. Continental Airlines, which have been mentioned in possible merger talks with other U.S. airlines in 2008, said weakening economic conditions and highly volatile fuel prices presented financial challenges for the airline in the fourth quarter 2008. Continental recorded a fourth quarter net loss of $266 million. Dave Barger, JetBlue's CEO, said that while he was appointed to report a loss, he has been satisfied with JetBlue's performance in 2008. "Against the backdrop of record fuel prices and unprecedented economic challenges, we effectively managed our capacity and strengthened our network. We also made significant progress in our efforts to further enhance the JetBlue experience for our customers. JetBlue's industry-leading unit revenue growth throughout the year reflects the outstanding work of our crewmembers. "2008 was an especially tough and challenging year," said Bob Fornaro, AirTran Airways' chairman, president and chief executive officer. "We thank our dedicated, hard-working Crew Members and our loyal customers for helping us overcome the many obstacles we faced in 2008. Our Crew Members continue to strive to provide exceptional customer service, and a high-quality product while offering value to the traveling public. Despite the industry challenge shifting from high oil costs to concerns regarding consumer demand, our 2008 initiatives have us well positioned to return to profitability in 2009." Liquidity, Bankruptcy Concerns Delta, UAL and AirTran said that they have strengthened their liquidity that would allow them to face the challenges of 2009. Michael Lowry, project manager for AVIATION WEEK's Top- Performing Companies report, said in September 2008 that USAirways, AMR, Northwest Airlines, AirTran and Continental would have high bankruptcy risk in 2009. The September report also said that USAir was a high risk to file for bankruptcy again in 2008 -- it had entered and exited bankruptcy protection twice -- but USAir has been able, so far, to survive the crisis. Only smaller airlines filed for bankruptcy in 2008. These included Frontier Airlines, Skybus Airlines Inc., Aloha Airgroup Inc. and ATA Airlines Inc., who made its second Chapter 11 filing. Northwest Airlines has completed its merger with Delta Air to form one of the world's largest airlines. Delta noted that as of Dec. 31, 2008, it had $6.1 billion in total liquidity and cash collateral posted with hedge counterparties. As of Dec. 31, 2007, Delta had $3.3 billion in cash, cash equivalents and short-term investments. UAL said it completed several transactions during the fourth quarter that helped strengthen its liquidity. It raised $215 million from aircraft financing transactions that closed during the quarter along with $66 million in proceeds from asset sales. The company also received net proceeds of $107 million through equity issuances during the quarter. AirTran noted that it ended the fourth quarter with $340.5 million in unrestricted cash and investments, its highest year-end balance since 2005. 2009 Outlook Most of the airlines expect weak revenues in 2008, but expect those revenues to be offset by lower fuel prices and savings from cost cutting measures. Some of the airlines have also disclosed capacity cuts for 2009. AMR has decided not to use MD-80s to backfill flying associated with the seven 737s that no longer will be delivered in 2009. Largely as a result of this decision, the company's 2009 mainline capacity will decline by more than one percentage point compared to previous guidance provided in October. "Our fourth quarter and full-year 2008 results reflect the difficulties all airlines faced last year, but we believe our steps to reduce capacity, bolster liquidity, and improve revenue helped us better manage the challenges of record fuel prices and a weak economy," said AMR Chairman and CEO Gerard Arpey. "While significant hurdles remain, I am guardedly optimistic we can regain momentum in 2009," Mr. Arpey said. "Despite the difficult economic environment, we expect to be solidly profitable in 2009 driven by lower fuel costs, capacity discipline, and merger synergies," said Richard Anderson, Delta's chief executive officer. "Delta people have a great track record for achieving their goals, and I am confident that 2009 will be another successful year." "Delta's proactive decision to reduce domestic capacity during 2008 mitigated the impact of the decline in demand we saw over the course of the fourth quarter. We expect the worldwide economy to be difficult throughout 2009; however, if fuel prices remain at current levels, we believe the benefit of lower fuel prices will more than offset the revenue decline." said Edward Bastian, Delta's president. "Delta has the tools required to manage through these tough economic times -- with the broadest, most diverse network in the industry; an estimated $2 billion in annual merger synergies to be obtained; best-in-class costs; a solid liquidity balance; unmatched fleet flexibility; and the discipline and drive of the new Delta team." Delta projects that consolidated passenger revenue in 2009 will be down 4% to $4.8 billion. Fuel price will be $2.15 per gallon. During the December 2008 quarter, Delta hedged 58% of its fuel consumption, resulting in an average fuel price of $2.90 per gallon -- included in the fuel price is $507 million in fuel hedge losses in the fourth quarter. In 2007, when Delta paid $2.21 a gallon, it noted that its operating results were significantly impacted by changes in the price and availability of aircraft fuel. In 2007, its average fuel price per gallon rose 5% to $2.21, as compared to an average price of $2.10 in 2006, which was 15% higher than our average price of $1.79 in 2005. UAL believes that for full year 2009 revenues will be down 8% to 7%. United said it is on track to complete the previously announced removal of 100 aircraft from its fleet by the end of 2009. United added it is taking additional steps in 2009 to reduce overhead costs. The company will further reduce the number of salaried and management employees by approximately 1,000 positions by the end of 2009. This is in addition to the 1,500 positions the company announced in the second quarter, and when completed, will bring the total reduction in its salaried and management staff to approximately 2,500, or nearly 30% , since the beginning of 2008. "Last year was by any measure a challenging year -- defined by unprecedented volatility and unpredictability, but for United it was also characterized by steady and durable improvements," said Glenn Tilton, United's chairman, president and CEO. "Our management team made timely decisions that resulted in fundamental improvements across our business, which will hold us in good stead in 2009." Alaska Air Group, which operates Alaska Air and Horizon Air, noted that excluding special items, it had net income of $16.4 million in the 4th quarter of 2008 compared to a $17.9 million net loss in the same period in 2007. "In a year of unprecedented volatility that included soaring fuel prices and an economic meltdown, we were pleased to eke out a small profit for 2008, excluding special items, and be one of only a few major airlines to do so," said Bill Ayer, Alaska Air Group's chairman and chief executive officer. "Our concerted efforts to control costs, improve our operation and tailor our schedule to better match customer demand have prepared us to face whatever hurdles the current year brings." According to Mr. Parker, USAir CEO, measures executed by the airlines before aimed at offsetting high fuel prices in 2008 have significantly softened the blow from the economic downturn that the airline industry now faces. "As we begin the new year, US Airways is well prepared for a difficult global macroeconomic environment. We are running a great operation, have restructured our business model through the introduction of new fees, reduced capacity and increased our liquidity. With the help of falling fuel prices, we believe we are well positioned for the challenges ahead," concluded Parker. Larry Kellner, Continental's chairman and chief executive officer, said, "While there are continuing hard times ahead, thanks to our team, we are well-positioned to maintain our place as an industry leader." Continental said it will inaugurate daily nonstop service between New York and Shanghai in March 2009. For the full year 2009, JetBlue expects to report an operating margin between 12 and 14% . Capacity, according to JetBlue, for the full year 2009 is expected to decrease between zero and 2% over 2008 and stage length is expected to decrease about 6% over full year 2008. Full Year 2008 Net Profit for Southwest The usually profitable Southwest Airlines also posted a fourth quarter loss -- $56,000,000 net loss. However, Southwest noted that excluding special charges and other items, its fourth quarter 2008 net income was $61 million, bringing it to its 71st consecutive quarter of profitability. Gary C. Kelly, CEO of Southwest, stated: "We are very proud to report another profitable year in one of the most difficult years in aviation's 100-year-plus history. We certainly had our challenges in 2008, but thanks to the extraordinary efforts and Warrior Spirit of our People, we persevered to report our 36th consecutive year of profitability." "We celebrated many operational successes throughout 2008 and enhanced our already exceptional Brand and Customer Experience. With one full year of our new boarding system and Business Select product offering, the Customer response has been overwhelmingly favorable. We've made significant advancements in our revenue management and network optimization capabilities. And, we've made great progress on the technology side to lay the foundation for improved Customer Service, a new southwest.com, a new Rapid Rewards program, and international codeshare agreements with WestJet to Canada and Volaris to Mexico. "Despite the difficult credit markets, we were able to boost our liquidity by $1.1 billion during fourth quarter 2008 through several financing transactions to end the year with $1.8 billion in unrestricted cash and short-term investments. After yearend, we raised an additional $173 million in cash upon the closing of the second tranche of our sale and leaseback transaction for an additional five of our 737-700 aircraft. "Due to the rapid collapse in energy prices during fourth quarter 2008, we substantially reduced our net fuel hedge position to approximately ten percent of our estimated fuel gallons in each year from 2009 through 2013. Based on this current 2009 portfolio and future market prices for energy (as of January 20, 2009), we estimate our economic fuel costs per gallon, including fuel taxes, to be approximately $1.80 and under $1.90, for first quarter and full year 2009, respectively. This current full year 2009 projection is more than $1 billion lower than we were projecting last summer for 2009. About AirTran Airways AirTran Airways, a subsidiary of AirTran Holdings, Inc. (NYSE: AAI), a Fortune 1000 company, is ranked number one in the 2008 Airline Quality Rating study. The airline offers coast-to-coast flights, North America's newest all-Boeing fleet, friendly service and Business Class and complimentary XM Satellite Radio on every flight. To book a flight, visit http://www.airtran.com. * * * The Troubled Company Reporter said on Aug. 29, 2008, that Standard & Poor's Ratings Services has lowered its ratings on AirTran Holdings Inc., including the corporate credit rating, which it lowered to 'CCC+' from 'B-'. At the same time, S&P removed the ratings from CreditWatch, where they had been placed with negative implications on May 22, 2008. The outlook is stable. About Delta Air Lines With its acquisition of Northwest Airlines, Atlanta, Georgia-based Delta Air Lines (NYSE: DAL) -- http://www.delta.com/or http://www.nwa.com/-- is now the world's largest airline. From its hubs in Atlanta, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-JFK, Salt Lake City and Tokyo-Narita, Delta, its Northwest subsidiary and Delta Connection carriers offer service to more than 376 destinations worldwide in 66 countries and serves more than 170 million passengers each year. Delta's marketing alliances allow customers to earn and redeem either SkyMiles or WorldPerks on more than 16,000 daily flights offered by SkyTeam and other partners. The merger closed on October 29, 2008. Prior to the merger, Delta was the world's second-largest airline in terms of passengers carried and Northwest was the world's fourth largest airline. Northwest and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington, represented the Northwest Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors retained Scott L. Hazan, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C. as its bankruptcy counsel. When the Northwest Debtors filed for bankruptcy, they listed $14.4 billion in total assets and $17.9 billion in total debts. On May 21, 2007, the Court confirmed the Northwest Debtors' amended plan. That amended plan took effect May 31, 2007. (Northwest Airlines Bankruptcy News Issue No. 114; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). Delta 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, represented the Delta Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provided the Delta Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provided 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, served as the Committee's financial advisors. On April 25, 2007, the Court confirmed the Delta 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; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). About United Airlines United Airlines (NASDAQ: UAUA) operates more than 3,000* flights a day on United and United Express to more than 200 U.S. domestic and international destinations from its hubs in Los Angeles, San Francisco, Denver, Chicago and Washington, D.C. With key global air rights in the Asia-Pacific region, Europe and Latin America, United is one of the largest international carriers based in the United States. United also is a founding member of Star Alliance, which provides connections for our customers to 912 destinations in 159 countries worldwide. United's 49,500 employees reside in every U.S. state and in many countries around the world. News releases and other information about United can be found at the company's Web site at united.com. * * * As reported in the Troubled Company Reporter on July 29, 2008, Standard & Poor's Ratings Services lowered its ratings on UAL Corp. and subsidiary United Air Lines Inc. (both rated B- /Negative/--), including lowering the long-term corporate credit ratings on both entities to 'B-' from 'B', and removed the ratings from CreditWatch, where they had been placed with negative implications May 22, 2008, as part of an industrywide review. The outlook is negative. About US Airways US Airways, along with US Airways Shuttle and US Airways Express, operates more than 3,100 flights per day and serves 200 communities in the U.S., Canada, Europe, the Caribbean and Latin America. The airline employs nearly 34,000 aviation professionals worldwide and is a member of the Star Alliance network, which offers our customers more than 16,500 daily flights to 912 destinations in 159 countries worldwide. Travel + Leisure Magazine named US Airways as one of the top-three airlines for 2008 in on- time performance for the year (based on Department of Transportation data for Sept. 1, 2007 through Aug. 31, 2008). And for the tenth consecutive year, the airline received a Diamond Award for maintenance training excellence from the Federal Aviation Administration (FAA) for its Charlotte, North Carolina hub line maintenance facility. For more company information, visit usairways.com. (LCCF) About JetBlue New York-based JetBlue Airways has created a new airline category based on value, service and style. Known for its award-winning service and free TV as much as its low fares, JetBlue is now pleased to offer customers Lots of Legroom and super-spacious Even More Legroom seats. JetBlue introduced complimentary in-flight e- mail and instant messaging services on aircraft "BetaBlue," a first among U.S. domestic airlines. JetBlue is also America's first and only airline to offer its own Customer Bill of Rights, with meaningful and specific compensation for customers inconvenienced by service disruptions within JetBlue's control. Visit www.jetblue.com/promise for details. JetBlue serves 52 cities with 600 daily flights. New service to San Jose, Costa Rica, begins in 2009. With JetBlue, all seats are assigned, all travel is ticketless, all fares are one-way, and an overnight stay is never required. For information or reservations call 1-800- JETBLUE (1-800-538-2583) or visit www.jetblue.com. About Continental Airlines Based in Houston, Texas, Continental Airlines Inc. (NYSE: CAL) -- http://continental.com/-- is the world's fifth largest airline. Continental, together with Continental Express and Continental Connection, has more than 3,000 daily departures throughout the Americas, Europe and Asia, serving 140 domestic and 139 international destinations. More than 550 additional points are served via SkyTeam alliance airlines. With more than 46,000 employees, Continental has hubs serving New York, Houston, Cleveland and Guam, and together with Continental Express, carries approximately 69 million passengers per year. * * * The Troubled Company Reporter said on Aug. 13, 2008, that Standard & Poor's Ratings Services took various actions on its ratings on Continental Airlines Inc. (B/Negative/B-3). S&P affirmed its 'B' long-term corporate credit rating, 'B-3' short-term corporate credit rating, all ratings on unsecured debt and on selected enhanced equipment trust certificates. S&P lowered S&P's ratings on other enhanced equipment trust certificates, particularly those secured by regional jets, and raised other ratings. All ratings were removed from CreditWatch, where they were placed with negative implications May 22, 2008, as part of an industrywide review. The rating outlook is negative. Continental Airlines, Inc. reported a working capital deficit of US$202 million, with current assets of US$4.713 billion and current liabilities of US$4.915 billion. At Dec. 31, 2007, the Company had a positive working capital of US$112 million, with US$4.561 billion in current assets and US$4.449 billion in current liabilities. As of Sept. 30, 2008, the Company had US$2.9 billion in unrestricted cash, cash equivalents and short-term investments, which is US$83 million higher than at Dec. 31, 2007. At Sept. 30, 2008, the Company also had US$164 million of restricted cash, cash equivalents and short-term investments, which is primarily collateral for estimated future workers' compensation claims, credit card processing contracts, letters of credit and performance bonds. Restricted cash, cash equivalents and short- term investments at Dec. 31, 2007, totaled US$179 million. Additionally, the Company held student loan-related auction rate securities reported as long-term investments at Sept. 30, 2008 with a par value of US$147 million and a fair value of US$130 million. US AIRWAYS: Posts $2.21 Billion Full Year 2008 Loss --------------------------------------------------- Eight of the nine major U.S. airlines that have disclosed fourth quarter and full year 2008 results have posted losses aggregating $19.6 billion. Only Southwest Airlines posted a net profit. Net Profit Net Profit Full Year 2008 Full Year 2007 -------------- -------------- Delta Air Lines, Inc. ($8,900,000,000) $1,600,000,000 AMR Corp. (2,100,000,000) 504,000,000 Southwest Air Lines 178,000,000 645,000,000 UAL Corp. (5,348,000,000) 403,000,000 US Airways Group Inc. (2,210,000,000) 427,000,000 Continental Airlines Inc. (585,000,000) 459,000,000 Alaska Air Group Inc. (135,900,000) 124,300,000 Skywest Inc. -- -- JetBlue Airways Corp. (76,000,000) 41,000,000 AirTran Holdings, Inc. (273,829,000) 52,683,000 Skywest is expected to release its fourth quarter 2008 results on February 11. The figures provided by JetBlue were pre-tax profit (or losses). Net Profit Net Profit 4th Quarter '08 4th Quarter '07 --------------- --------------- Delta Air Lines, Inc. ($1,400,000,000) ($70,000,000) AMR Corp. (340,000,000) (69,000,000) UAL Corp. (1,303,000,000) (53,000,000) Southwest Airlines (56,000,000) 111,000,000 US Airways (541,000,000) (79,000,000) Continental Airlines (266,000,000) (32,000,000) Alaska Air Group Inc. (75,200,000) (7,400,000) Skywest Inc. -- -- Jetblue Airways Corp. (49,000,000) (3,000,000) AirTran Holdings, Inc. (118,391,000) (2,171,000) High Fuel Jet Prices The airlines said high fuel prices for most of 2008 have contributed to their losses. AMR, the parent of American Airlines, said that historically high and volatile jet fuel prices continued to challenge it in the fourth quarter of 2008. AMR paid $133 million and $2.7 billion more for fuel in the fourth quarter and for all of 2008, respectively, than it would have paid at prevailing prices from the corresponding prior-year periods. Delta faced over $2 billion in increased fuel costs in 2008. While fuel prices dropped in the fourth quarter 2008, Delta paid for high fuel prices due to its fuel hedging contracts. Delta would have reported a $167 million net profit excluding special items in the December 2008 quarter, if fuel had been purchased at market prices. UAL said the historic peak in prices and the impact on hedges driven by the rapid decline resulted in a $2.9 billion increase in cost compared to 2007 fuel prices. UAL recorded $370 million in cash losses on fuel hedges that settled in the quarter, as the recent fall in fuel prices drove losses on hedges put in place earlier in the year to mitigate the steep increase in prices that had occurred in the second and third quarters of 2008. In addition, the company also recorded non-cash, net mark-to-market losses on its fuel hedges of $566 million. US Airways Group Chairman and CEO Doug Parker stated, "Like other airlines that have reported before us, our financial results reflect the staggering increase in fuel prices that we faced throughout most of 2008. In fact, had our 2008 fuel price including realized gains and losses on fuel hedging instruments remained at 2007 levels, the company's fuel expense would have been approximately $1.4 billion lower. Lower Revenues Due to Recession Delta Air Lines, which completed its merger with Northwest Airlines in 2008, said that during the fourth quarter, on a combined basis, passenger revenue fell 1%, or $54 million, compared to the prior year period due to a 4% decline in capacity, partially offset by a 3% increase in unit revenue. These results reflect the weakening of the revenue environment during the quarter caused by the global economic recession. According to UAL, total passenger revenue for the quarter decreased 8.7% year-over- year as consolidated capacity declined 10.6% , consolidated yield increased 2.4% and load factor decreased 0.3 points. Continental Airlines, which have been mentioned in possible merger talks with other U.S. airlines in 2008, said weakening economic conditions and highly volatile fuel prices presented financial challenges for the airline in the fourth quarter 2008. Continental recorded a fourth quarter net loss of $266 million. Dave Barger, JetBlue's CEO, said that while he was appointed to report a loss, he has been satisfied with JetBlue's performance in 2008. "Against the backdrop of record fuel prices and unprecedented economic challenges, we effectively managed our capacity and strengthened our network. We also made significant progress in our efforts to further enhance the JetBlue experience for our customers. JetBlue's industry-leading unit revenue growth throughout the year reflects the outstanding work of our crewmembers. "2008 was an especially tough and challenging year," said Bob Fornaro, AirTran Airways' chairman, president and chief executive officer. "We thank our dedicated, hard-working Crew Members and our loyal customers for helping us overcome the many obstacles we faced in 2008. Our Crew Members continue to strive to provide exceptional customer service, and a high-quality product while offering value to the traveling public. Despite the industry challenge shifting from high oil costs to concerns regarding consumer demand, our 2008 initiatives have us well positioned to return to profitability in 2009." Liquidity, Bankruptcy Concerns Delta, UAL and AirTran said that they have strengthened their liquidity that would allow them to face the challenges of 2009. Michael Lowry, project manager for AVIATION WEEK's Top- Performing Companies report, said in September 2008 that USAirways, AMR, Northwest Airlines, AirTran and Continental would have high bankruptcy risk in 2009. The September report also said that USAir was a high risk to file for bankruptcy again in 2008 -- it had entered and exited bankruptcy protection twice -- but USAir has been able, so far, to survive the crisis. Only smaller airlines filed for bankruptcy in 2008. These included Frontier Airlines, Skybus Airlines Inc., Aloha Airgroup Inc. and ATA Airlines Inc., who made its second Chapter 11 filing. Northwest Airlines has completed its merger with Delta Air to form one of the world's largest airlines. Delta noted that as of Dec. 31, 2008, it had $6.1 billion in total liquidity and cash collateral posted with hedge counterparties. As of Dec. 31, 2007, Delta had $3.3 billion in cash, cash equivalents and short-term investments. UAL said it completed several transactions during the fourth quarter that helped strengthen its liquidity. It raised $215 million from aircraft financing transactions that closed during the quarter along with $66 million in proceeds from asset sales. The company also received net proceeds of $107 million through equity issuances during the quarter. AirTran noted that it ended the fourth quarter with $340.5 million in unrestricted cash and investments, its highest year-end balance since 2005. 2009 Outlook Most of the airlines expect weak revenues in 2008, but expect those revenues to be offset by lower fuel prices and savings from cost cutting measures. Some of the airlines have also disclosed capacity cuts for 2009. AMR has decided not to use MD-80s to backfill flying associated with the seven 737s that no longer will be delivered in 2009. Largely as a result of this decision, the company's 2009 mainline capacity will decline by more than one percentage point compared to previous guidance provided in October. "Our fourth quarter and full-year 2008 results reflect the difficulties all airlines faced last year, but we believe our steps to reduce capacity, bolster liquidity, and improve revenue helped us better manage the challenges of record fuel prices and a weak economy," said AMR Chairman and CEO Gerard Arpey. "While significant hurdles remain, I am guardedly optimistic we can regain momentum in 2009," Mr. Arpey said. "Despite the difficult economic environment, we expect to be solidly profitable in 2009 driven by lower fuel costs, capacity discipline, and merger synergies," said Richard Anderson, Delta's chief executive officer. "Delta people have a great track record for achieving their goals, and I am confident that 2009 will be another successful year." "Delta's proactive decision to reduce domestic capacity during 2008 mitigated the impact of the decline in demand we saw over the course of the fourth quarter. We expect the worldwide economy to be difficult throughout 2009; however, if fuel prices remain at current levels, we believe the benefit of lower fuel prices will more than offset the revenue decline." said Edward Bastian, Delta's president. "Delta has the tools required to manage through these tough economic times -- with the broadest, most diverse network in the industry; an estimated $2 billion in annual merger synergies to be obtained; best-in-class costs; a solid liquidity balance; unmatched fleet flexibility; and the discipline and drive of the new Delta team." Delta projects that consolidated passenger revenue in 2009 will be down 4% to $4.8 billion. Fuel price will be $2.15 per gallon. During the December 2008 quarter, Delta hedged 58% of its fuel consumption, resulting in an average fuel price of $2.90 per gallon -- included in the fuel price is $507 million in fuel hedge losses in the fourth quarter. In 2007, when Delta paid $2.21 a gallon, it noted that its operating results were significantly impacted by changes in the price and availability of aircraft fuel. In 2007, its average fuel price per gallon rose 5% to $2.21, as compared to an average price of $2.10 in 2006, which was 15% higher than our average price of $1.79 in 2005. UAL believes that for full year 2009 revenues will be down 8% to 7%. United said it is on track to complete the previously announced removal of 100 aircraft from its fleet by the end of 2009. United added it is taking additional steps in 2009 to reduce overhead costs. The company will further reduce the number of salaried and management employees by approximately 1,000 positions by the end of 2009. This is in addition to the 1,500 positions the company announced in the second quarter, and when completed, will bring the total reduction in its salaried and management staff to approximately 2,500, or nearly 30% , since the beginning of 2008. "Last year was by any measure a challenging year -- defined by unprecedented volatility and unpredictability, but for United it was also characterized by steady and durable improvements," said Glenn Tilton, United's chairman, president and CEO. "Our management team made timely decisions that resulted in fundamental improvements across our business, which will hold us in good stead in 2009." Alaska Air Group, which operates Alaska Air and Horizon Air, noted that excluding special items, it had net income of $16.4 million in the 4th quarter of 2008 compared to a $17.9 million net loss in the same period in 2007. "In a year of unprecedented volatility that included soaring fuel prices and an economic meltdown, we were pleased to eke out a small profit for 2008, excluding special items, and be one of only a few major airlines to do so," said Bill Ayer, Alaska Air Group's chairman and chief executive officer. "Our concerted efforts to control costs, improve our operation and tailor our schedule to better match customer demand have prepared us to face whatever hurdles the current year brings." According to Mr. Parker, USAir CEO, measures executed by the airlines before aimed at offsetting high fuel prices in 2008 have significantly softened the blow from the economic downturn that the airline industry now faces. "As we begin the new year, US Airways is well prepared for a difficult global macroeconomic environment. We are running a great operation, have restructured our business model through the introduction of new fees, reduced capacity and increased our liquidity. With the help of falling fuel prices, we believe we are well positioned for the challenges ahead," concluded Parker. Larry Kellner, Continental's chairman and chief executive officer, said, "While there are continuing hard times ahead, thanks to our team, we are well-positioned to maintain our place as an industry leader." Continental said it will inaugurate daily nonstop service between New York and Shanghai in March 2009. For the full year 2009, JetBlue expects to report an operating margin between 12 and 14% . Capacity, according to JetBlue, for the full year 2009 is expected to decrease between zero and 2% over 2008 and stage length is expected to decrease about 6% over full year 2008. Full Year 2008 Net Profit for Southwest The usually profitable Southwest Airlines also posted a fourth quarter loss -- $56,000,000 net loss. However, Southwest noted that excluding special charges and other items, its fourth quarter 2008 net income was $61 million, bringing it to its 71st consecutive quarter of profitability. Gary C. Kelly, CEO of Southwest, stated: "We are very proud to report another profitable year in one of the most difficult years in aviation's 100-year-plus history. We certainly had our challenges in 2008, but thanks to the extraordinary efforts and Warrior Spirit of our People, we persevered to report our 36th consecutive year of profitability." "We celebrated many operational successes throughout 2008 and enhanced our already exceptional Brand and Customer Experience. With one full year of our new boarding system and Business Select product offering, the Customer response has been overwhelmingly favorable. We've made significant advancements in our revenue management and network optimization capabilities. And, we've made great progress on the technology side to lay the foundation for improved Customer Service, a new southwest.com, a new Rapid Rewards program, and international codeshare agreements with WestJet to Canada and Volaris to Mexico. "Despite the difficult credit markets, we were able to boost our liquidity by $1.1 billion during fourth quarter 2008 through several financing transactions to end the year with $1.8 billion in unrestricted cash and short-term investments. After yearend, we raised an additional $173 million in cash upon the closing of the second tranche of our sale and leaseback transaction for an additional five of our 737-700 aircraft. "Due to the rapid collapse in energy prices during fourth quarter 2008, we substantially reduced our net fuel hedge position to approximately ten percent of our estimated fuel gallons in each year from 2009 through 2013. Based on this current 2009 portfolio and future market prices for energy (as of January 20, 2009), we estimate our economic fuel costs per gallon, including fuel taxes, to be approximately $1.80 and under $1.90, for first quarter and full year 2009, respectively. This current full year 2009 projection is more than $1 billion lower than we were projecting last summer for 2009. About AirTran Airways AirTran Airways, a subsidiary of AirTran Holdings, Inc. (NYSE: AAI), a Fortune 1000 company, is ranked number one in the 2008 Airline Quality Rating study. The airline offers coast-to-coast flights, North America's newest all-Boeing fleet, friendly service and Business Class and complimentary XM Satellite Radio on every flight. To book a flight, visit http://www.airtran.com. * * * The Troubled Company Reporter said on Aug. 29, 2008, that Standard & Poor's Ratings Services has lowered its ratings on AirTran Holdings Inc., including the corporate credit rating, which it lowered to 'CCC+' from 'B-'. At the same time, S&P removed the ratings from CreditWatch, where they had been placed with negative implications on May 22, 2008. The outlook is stable. About Delta Air Lines With its acquisition of Northwest Airlines, Atlanta, Georgia-based Delta Air Lines (NYSE: DAL) -- http://www.delta.com/or http://www.nwa.com/-- is now the world's largest airline. From its hubs in Atlanta, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-JFK, Salt Lake City and Tokyo-Narita, Delta, its Northwest subsidiary and Delta Connection carriers offer service to more than 376 destinations worldwide in 66 countries and serves more than 170 million passengers each year. Delta's marketing alliances allow customers to earn and redeem either SkyMiles or WorldPerks on more than 16,000 daily flights offered by SkyTeam and other partners. The merger closed on October 29, 2008. Prior to the merger, Delta was the world's second-largest airline in terms of passengers carried and Northwest was the world's fourth largest airline. Northwest and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington, represented the Northwest Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors retained Scott L. Hazan, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C. as its bankruptcy counsel. When the Northwest Debtors filed for bankruptcy, they listed $14.4 billion in total assets and $17.9 billion in total debts. On May 21, 2007, the Court confirmed the Northwest Debtors' amended plan. That amended plan took effect May 31, 2007. (Northwest Airlines Bankruptcy News Issue No. 114; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). Delta 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, represented the Delta Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provided the Delta Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provided 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, served as the Committee's financial advisors. On April 25, 2007, the Court confirmed the Delta 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; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). About United Airlines United Airlines (NASDAQ: UAUA) operates more than 3,000* flights a day on United and United Express to more than 200 U.S. domestic and international destinations from its hubs in Los Angeles, San Francisco, Denver, Chicago and Washington, D.C. With key global air rights in the Asia-Pacific region, Europe and Latin America, United is one of the largest international carriers based in the United States. United also is a founding member of Star Alliance, which provides connections for our customers to 912 destinations in 159 countries worldwide. United's 49,500 employees reside in every U.S. state and in many countries around the world. News releases and other information about United can be found at the company's Web site at united.com. * * * As reported in the Troubled Company Reporter on July 29, 2008, Standard & Poor's Ratings Services lowered its ratings on UAL Corp. and subsidiary United Air Lines Inc. (both rated B- /Negative/--), including lowering the long-term corporate credit ratings on both entities to 'B-' from 'B', and removed the ratings from CreditWatch, where they had been placed with negative implications May 22, 2008, as part of an industrywide review. The outlook is negative. About US Airways US Airways, along with US Airways Shuttle and US Airways Express, operates more than 3,100 flights per day and serves 200 communities in the U.S., Canada, Europe, the Caribbean and Latin America. The airline employs nearly 34,000 aviation professionals worldwide and is a member of the Star Alliance network, which offers our customers more than 16,500 daily flights to 912 destinations in 159 countries worldwide. Travel + Leisure Magazine named US Airways as one of the top-three airlines for 2008 in on- time performance for the year (based on Department of Transportation data for Sept. 1, 2007 through Aug. 31, 2008). And for the tenth consecutive year, the airline received a Diamond Award for maintenance training excellence from the Federal Aviation Administration (FAA) for its Charlotte, North Carolina hub line maintenance facility. For more company information, visit usairways.com. (LCCF) About JetBlue New York-based JetBlue Airways has created a new airline category based on value, service and style. Known for its award-winning service and free TV as much as its low fares, JetBlue is now pleased to offer customers Lots of Legroom and super-spacious Even More Legroom seats. JetBlue introduced complimentary in-flight e- mail and instant messaging services on aircraft "BetaBlue," a first among U.S. domestic airlines. JetBlue is also America's first and only airline to offer its own Customer Bill of Rights, with meaningful and specific compensation for customers inconvenienced by service disruptions within JetBlue's control. Visit www.jetblue.com/promise for details. JetBlue serves 52 cities with 600 daily flights. New service to San Jose, Costa Rica, begins in 2009. With JetBlue, all seats are assigned, all travel is ticketless, all fares are one-way, and an overnight stay is never required. For information or reservations call 1-800- JETBLUE (1-800-538-2583) or visit www.jetblue.com. About Continental Airlines Based in Houston, Texas, Continental Airlines Inc. (NYSE: CAL) -- http://continental.com/-- is the world's fifth largest airline. Continental, together with Continental Express and Continental Connection, has more than 3,000 daily departures throughout the Americas, Europe and Asia, serving 140 domestic and 139 international destinations. More than 550 additional points are served via SkyTeam alliance airlines. With more than 46,000 employees, Continental has hubs serving New York, Houston, Cleveland and Guam, and together with Continental Express, carries approximately 69 million passengers per year. * * * The Troubled Company Reporter said on Aug. 13, 2008, that Standard & Poor's Ratings Services took various actions on its ratings on Continental Airlines Inc. (B/Negative/B-3). S&P affirmed its 'B' long-term corporate credit rating, 'B-3' short-term corporate credit rating, all ratings on unsecured debt and on selected enhanced equipment trust certificates. S&P lowered S&P's ratings on other enhanced equipment trust certificates, particularly those secured by regional jets, and raised other ratings. All ratings were removed from CreditWatch, where they were placed with negative implications May 22, 2008, as part of an industrywide review. The rating outlook is negative. Continental Airlines, Inc. reported a working capital deficit of US$202 million, with current assets of US$4.713 billion and current liabilities of US$4.915 billion. At Dec. 31, 2007, the Company had a positive working capital of US$112 million, with US$4.561 billion in current assets and US$4.449 billion in current liabilities. As of Sept. 30, 2008, the Company had US$2.9 billion in unrestricted cash, cash equivalents and short-term investments, which is US$83 million higher than at Dec. 31, 2007. At Sept. 30, 2008, the Company also had US$164 million of restricted cash, cash equivalents and short-term investments, which is primarily collateral for estimated future workers' compensation claims, credit card processing contracts, letters of credit and performance bonds. Restricted cash, cash equivalents and short- term investments at Dec. 31, 2007, totaled US$179 million. Additionally, the Company held student loan-related auction rate securities reported as long-term investments at Sept. 30, 2008 with a par value of US$147 million and a fair value of US$130 million. VANGENT INC: Moody's Changes Outlook to Negative; Keeps B2 Rating ----------------------------------------------------------------- Moody's Investors Service has changed the ratings outlook of Vangent, Inc., to negative from stable and affirmed the company's B2 corporate family and probability of default ratings, and the speculative grade liquidity rating of SGL-3. The change in outlook to negative reflects several factors: 1) concern regarding Vangent's unprofitability; 2) weaker interest coverage and free cash flow generation over the first 9 months of 2008; 3) dependence on key contracts- one of which expires in mid- 2009; 4) financial covenant ratio step downs over 2009-2010; 5) the presence of larger, better capitalized competitors. The affirmation of Vangent's B2 corporate family rating reflects the company's historically high contract win rate, a good total backlog level, an adequate liquidity profile, and the likelihood that continued outsourcing of federal IT processing work, particularly healthcare related, should provide steady demand for Vangent's service offerings. The affirmation of the SGL-3 speculative grade liquidity reflects Vangent's $18 million of cash on hand and nearly full availability under the $50 million, multi-year revolving credit line. Although internal cash flow generation over the first nine months of 2008 has been below $5 million, cash on hand and the committed revolver availability should cover anticipated 2009 growth requirements. As of September 2008, financial ratio covenant headroom cushion was adequate; test step downs could tighten headroom cushion should material earnings growth not be achieved. The negative rating outlook reflects concerns that weak leverage, coverage and cash flow generation metrics, which have proved to be persistent, may persist in 2009 and pressure the ratings. The ratings outlook could stabilize if the company begins generating sustained profits that convert into a steady mid-single digit free cash flow to debt ratio level. In addition, these ratings have been affirmed: -- $50 million senior secured revolver due 2012 Ba3, LGD 2 to 23% from 25% -- $240 million senior secured term loan due 2013 Ba3, LGD 2 to 23% from 25% -- $190 million 9 5/8% senior subordinated notes due 2015 Caa1, LGD 5, to 79% from 84% Moody's last rating action on Vangent occurred January 30, 2007 when the B2 corporate family rating was assigned. Vangent, Inc., with corporate headquarters in Arlington, Virginia, is a provider of information management and business process outsourcing services. Revenues for the last twelve months ended September 30, 2008, were $546 million. VCSP LLC: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------- Debtor: VCSP LLC 3400 Carillon Point Kirkland, WA 98033 Bankruptcy Case No.: 09-10625 Type of Business: Chapter 11 Petition Date: January 28, 2009 Court: Western District of Washington (Seattle) Judge: Philip H. Brandt Debtor's Counsel: Gayle E. Bush, Esq. Bush Strout & Kornfeld 601 Union St., Ste. 5000 Seattle, WA 98101 Tel: (206) 292-2110 gbush@bskd.com Estimated Assets: $10 million to $50 million Estimated Debts: $10 million to $50 million The Debtor's Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ LF Harris and Company, Inc. trade debt $414,488 6312 West Cheyenne Ave. Las Vegas, NV 89108 Tel: (702) 876-4246 Terra Contracting, Inc. trade debt $344,666 5980 W. Cougar Ave. Las Vegas, NV 89139 Tel: (702) 651-8100 Western Landscape trade debt $266,552 Construction 4670 S. Polaris Ave. Las Vegas, NV 89103 Tel: (702) 739-6201 Select Build Nevada, Inc trade debt $142,574 Clark County Treasurer trade debt $76,537 Carpenter Sellers Associates trade debt $48,060 Rafael Framers trade debt $40,165 Production Plumbing & A/C trade debt $33,651 HD Supply Waterworks Ltd. trade debt $33,500 Stantec Consulting Inc. trade debt $24,338 Play Space Designs Inc. trade debt $21,837 Johnson Electric Inc. trade debt $21,647 ThyssenKrupp Elevator trade debt $21,129 The Original Roofing Co. trade debt $20,056 The Masonry Group Nevada trade debt $19,717 The Painting Co. LLC trade debt $19,644 Alpine Steel trade debt $17,506 Constructors Bonding Inc. of trade debt $16,329 NV Riggio Brothers Construction trade debt $15,900 Diamond Patios, LLC trade debt $15,404 The petition was signed by Pau Bressan. VITRO SAB: Not Certain on $45MM Interest Payment Due Feb. 1 ----------------------------------------------------------- Vitro, S.A.B. de C.V, told bondholders to prepare for restructuring negotiations, Thomas Black of Bloomberg News reports, citing Carlos Legaspy, president of Precise Investment Management, an investment firm in San Diego, and James Harper, an analyst with BCP Securities in New York. According to Moody's Investors Service, Vitro has $45 million in interest due Feb. 1 on two issues of notes. Another $20 million of maturities is scheduled for the first quarter. Bloomberg relates that Blackstone Group LP, hired by Vitro in November to help restructure its liabilities, held the call with creditors on January 27, but declined to say on the call if Vitro will make the interest payment by the Feb. 1 due date. "They want the creditors to organize to start talks," President Legaspy told Bloomberg in a telephone interview. Bloomberg News notes Vitro's bonds due in 2012 and 2017, which both have Feb. 1 interest payments, have sunk to below 25 cents on the dollar as the company's profit has been eroded by slumping demand for glass and losses from derivatives on natural gas prices. "Vitro representatives as well as legal and financial advisors have been engaged in discussions with our bondholders and counterparties over the last several weeks in order to enhance the company's financial flexibility," Vitro said in an e-mailed statement in response to Bloomberg questions. "We continue to work with our bondholders to reach a solution that is in our mutual interest," the company said. Bloomberg notes that within the last week, Moody's lowered the corporate credit to Ca while the rating from Standard & Poor's is an essentially equivalent CC. Both noted that Vitro's cash is less than half its short term debt. About Vitro Headquartered in Monterrey, Mexico, Vitro, S.A.B. de C.V. (BMV: VITROA; NYSE: VTO), through its two subsidiaries, Vitro Envases Norteamerica, SA de C.V. and Vimexico, S.A. de C.V., is a global glass producer, serving the construction and automotive glass markets and glass containers needs of the food, beverage, wine, liquor, cosmetics and pharmaceutical industries. * * * As reported by the Troubled Company Reporter-Latin America on January 28, 2009, Moody's Investors Service downgraded Vitro, S.A.B. de C.V.'s senior unsecured debt and corporate family ratings to Ca from Caa1. The ratings outlook is negative. Fitch Ratings also downgraded these ratings for Vitro, S.A.B. de C.V.: -- Long-term Issuer Default Rating to 'CC' from 'B-'; -- Long-term local currency IDR to 'CC' from 'B-'; -- US$300 million senior notes due 2012 to 'CC/RR4' from 'B- /RR4'; -- US$225 million senior notes due 2013 to 'CC/RR4' from 'B- /RR4'; -- US$700 million senior notes due 2017 to 'CC/RR4' from 'B- /RR4'. WESTAFF INC: Auber Investments Et Al. Disclose 8.98% Equity Stake ----------------------------------------------------------------- Auber Investments Ltd., Prince Resources LDC, Prince Capital Partners LLC and David Mayer disclosed that each may be deemed to beneficially own 1,500,000 shares of Westaff, Inc.'s common stock or 8.98% of the total shares outstanding. Auber Investments Ltd. is indirectly wholly owned by Prince Resources LDC. Prince Capital Partners LLC is the investment manager with respect to the shares. Mr. Mayer is a managing member of Prince Capital Partners LLC, the investment manager with respect to the shares held by Auber Investments Ltd. Based in Walnut Creek, California, Westaff Inc. (Nasdaq: WSTF) -- http://www.westaff.com/-- provides staffing services and employment opportunities for businesses in global markets. Westaff annually employs in excess of 125,000 people and services more than 20,000 client accounts from more than 177 offices located throughout the United States, Australia and New Zealand. * * * The company has incurred operating losses and negative operating cash flow since the second quarter of fiscal 2007, offset by slight operating income in the fourth quarter of fiscal 2007. The company says it expects to incur additional losses in the future, particularly because of current soft economic conditions. In addition, the company is currently in default under the primary credit facility that it uses to finance its operations. If the company is unable to obtain a waiver or continued forbearance from the U.S. Bank National Association on acceptable terms, the company may be unable to access the funds necessary for its liquidity requirements or may be unable to obtain letters of credit under the facility needed for the company to obtain workers' compensation insurance. In that case, its business and operating results would be adversely affected. The Troubled Company Reporter reported on Dec. 22, 2008, that Westaff (USA), Inc., a subsidiary of Westaff, Inc., entered into a Second Amendment to Second Amended and Restated Forbearance Agreement, with the company, as parent guarantor, certain lenders party thereto and U.S. Bank National Association, as agent for the Lenders. The parties to the Second Amendment to Second Amended and Restated Forbearance Agreement are parties to a Financing Agreement, dated as of Feb. 14, 2008. Pursuant to the terms of the Second Amendment to Second Amended and Restated Forbearance Agreement, the Agent and the Lenders have agreed to continue to forbear from exercising any of their default rights and remedies through Dec. 19, 2008, with regard to the Existing Events of Default so long as no additional Events of Default occur through Dec. 19, 2008. WESTAFF INC: Negotiating With Koosharem on Acquisition Proposal --------------------------------------------------------------- On December 29, 2008, Westaff, Inc., received a proposal from Koosharem Corporation under which Select Staffing would acquire all of the outstanding shares of Westaff common stock not owned by DelStaff, LLC for $1.25 per share in cash and all of the shares owned by DelStaff, LLC -- which shares represent approximately 49.3% of the outstanding shares of Westaff common stock -- for first lien debt issued by Select Staffing having a value roughly equivalent to $1.25 per share. On January 15, 2009, Westaff, Inc., agreed to extend through January 26, 2009, the exclusive period of negotiation with Koosharem Corporation in connection with Select Staffing's previously announced proposal to acquire all of the outstanding shares of Westaff common stock not owned by DelStaff, LLC for $1.25 per share in cash and all of the shares owned by DelStaff, LLC, for first lien debt to be issued by Select Staffing. $500,000 Loan On January 9, 2009, Westaff, Inc., Westaff (USA), Inc., which is a wholly owned subsidiary of the company, Westaff Support, Inc. and MediaWorld International, which are wholly-owned subsidiaries of Westaff (USA), were advanced a loan in an aggregate principal amount of $500,000 from DelStaff, LLC under the previously- announced loan agreement, dated as of August 25, 2008, among DelStaff, LLC, and the Borrowers. Stephen J. Russo was named President of Westaff and its subsidiaries, in addition to his position as Chief Operating Officer, effective January 1, 2009. Michael T. Willis will remain as Chief Executive Officer and Chairman of the Board. About Westaff Based in Walnut Creek, California, Westaff Inc. (Nasdaq: WSTF) -- http://www.westaff.com/-- provides staffing services and employment opportunities for businesses in global markets. Westaff annually employs in excess of 125,000 people and services more than 20,000 client accounts from more than 177 offices located throughout the United States, Australia and New Zealand. * * * The company has incurred operating losses and negative operating cash flow since the second quarter of fiscal 2007, offset by slight operating income in the fourth quarter of fiscal 2007. The company says it expects to incur additional losses in the future, particularly because of current soft economic conditions. In addition, the company is currently in default under the primary credit facility that it uses to finance its operations. If the company is unable to obtain a waiver or continued forbearance from the U.S. Bank National Association on acceptable terms, the company may be unable to access the funds necessary for its liquidity requirements or may be unable to obtain letters of credit under the facility needed for the company to obtain workers' compensation insurance. In that case, its business and operating results would be adversely affected. The Troubled Company Reporter reported on Dec. 22, 2008, that Westaff (USA), Inc., a subsidiary of Westaff, Inc., entered into a Second Amendment to Second Amended and Restated Forbearance Agreement, with the company, as parent guarantor, certain lenders party thereto and U.S. Bank National Association, as agent for the Lenders. The parties to the Second Amendment to Second Amended and Restated Forbearance Agreement are parties to a Financing Agreement, dated as of Feb. 14, 2008. Pursuant to the terms of the Second Amendment to Second Amended and Restated Forbearance Agreement, the Agent and the Lenders have agreed to continue to forbear from exercising any of their default rights and remedies through Dec. 19, 2008, with regard to the Existing Events of Default so long as no additional Events of Default occur through Dec. 19, 2008. WHOLE FOODS: FTC Halts AntiTrust Suit to 2007 Wild Oats Buy ----------------------------------------------------------- Brent Kendall at The Wall Street Journal reports that the Federal Trade Commission has temporarily halted its antitrust challenge to Whole Foods Market Inc.'s $565 million acquisition of Wild Oats Markets Inc. in 2007. Citing FTC chief competition enforcer David Wales, WSJ relates that Whole Foods has sent the commission a settlement proposal. "We're going to roll up our sleeves and take a look at what they're offering. We're hopeful that a settlement can be reached," the report quoted him as saying. Whole Foods, WSJ relates, said on Thursday that it welcomes the opportunity to hold "constructive discussions" with the FTC. According to WSJ, the FTC has claimed that the Whole Foods-Wild Oats merger will lessen competition in the market for natural and organic foods. The merger is pro-consumer and good for competition, the report says, citing Whole Foods. The report states that the Whole Foods-Wild Oats merger has been completed, but the FTC is seeking to undo the deal. As reported by the Troubled Company Reporter on Aug. 1, 2008, the United States Court of Appeals for the District of Columbia Circuit held that Whole Foods' $565 million purchase of Wild Oats must be re-examined to determine whether it violated antitrust rules and would hurt consumers. The appeals court rejected last week Whole Foods' counter-suit against the FTC that sought to block a coming administrative trial on its merger's legality. About Whole Foods Market Founded in 1980 in Austin, Texas, Whole Foods Market Inc. (NASDAQ: WFMI) -- http://www.wholefoodsmarket.com/-- is a natural and organic foods supermarket. Whole Foods Market employs more than 50,000 Team Members. * * * As reported by the Troubled Company Reporter on Nov. 12, 2008, Moody's Investors Service lowered Whole Foods Market, Inc.'s ratings following the company's announcement of lower reported earnings for most recent quarter. Whole Foods' Corporate family rating, Probability of default, and senior secured bank loan ratings were lowered to Ba3 from Ba2. The ratings remain on review for further possible downgrade. According to the TCR on Nov. 11, 2008, Standard & Poor's Ratings Services lowered the corporate credit rating to 'BB-' from 'BB' on Austin, Texas based-Whole Foods Markets Inc. S&P said that the outlook is stable. WIRELESS AGE: Challenge of Subsidiary Receivership Dismissed ------------------------------------------------------------ The Court of Queen's Bench for Saskatchewan, Canada, dismissed the challenge by Wireless Age Communications, Inc., of the Interim Receivership Order obtained by Saskatchewan Telecommunications. Early this month, SaskTel served Wireless Age subsidiaries Wireless Age Communications Ltd. and Wireless Source Distribution Ltd. with a Notice of Intention to Enforce Security under the Bankruptcy and Insolvency Act, and also obtained a Court Order to immediately appoint an interim receiver. Wireless Age challenged the Court Order in a hearing on January 22, 2009. On January 27, 2009, the judge presiding over the matter dismissed Wireless Age's challenge. The result is that the assets of Wireless Ltd. and Wireless Source remain under the control of the receiver. John Simmonds, Chairman and CEO of Wireless Age Communications, Inc., will be hosting an investor conference all on February 3, 2009, at 4:15 p.m. EST. Conference Call Access: Local participant: (416) 644-3418 Toll free participant: (800) 731-5774 Replay Access (available for one week): (416) 640-1917 or (877) 289-8525 Pass Code: 21296787# About Wireless Age Based in Toronto, Ontario, Wireless Age Communications, through its 99.7% owned subsidiary, Wireless Age Communications Ltd., is in the business of operating retail cellular and telecommunications outlets in cities in western Canada. Through its other wholly owned subsidiary, Wireless Source Distribution Ltd., the company distributes two-way radio products, prepaid phone cards, wireless accessories and various battery and ancillary electronics products in Canada. YELLOWSTONE MOUNTAIN: Pre-Bankruptcy Lenders Want Sale of Assets ---------------------------------------------------------------- The pre-petition lenders of Yellowstone Mountain Club LLC, ask the U.S. Bankruptcy Court for the District of Montana to direct the Debtor to promptly commence a marketing and sale process for its assets. According to Bloomberg's Bill Rochelle, the lenders allege that private-equity investor CrossHarbor Capital Partners LLC, using its power as the postbankruptcy lender, is precluding the initiation of a marketing and sale process by threatening to default the financing. Bloomberg relates that CrossHarbor's loan has deadlines requiring a confirmed plan by March 31 where it will buy the project or, alternatively, a sale by April 30. Bloomberg adds that a court filing by the Rancho Mirage says Yellowstone's 13,600-acre property was appraised in June for $778 million, not including the value of unsold club memberships. Yellowstone Mountain Club previously sought permission to increase the debtor-in-possession financing funded by CrossHarbor Capital Partners LLC from $19.75 million to $22.6 million. The CrossHarbor loan, according to the report, requires having a confirmed plan of reorganization by March 31 or the immediate commencement of a process for selling the project. About Yellowstone Club Yellowstone Club -- http://www.theyellowstoneclub.com/-- is a private golf and ski community with more than 350 members, including Bill Gates and Dan Quayle. It is located near Big Sky, Montana. It was founded in 1999. As reported in the Troubled Company Reporter on Nov. 13, 2008, Yellowstone Club filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Montana. In its bankruptcy petition, it listed debts of more than $360 million. * SEC Charges ProTrust With TARP Purported Investments Fraud ------------------------------------------------------------ The U.S. Securities and Exchange Commission has taken emergency action to charge Nashville, Tenn.-based investment advisor Gordon B. Grigg and his firm ProTrust Management, Inc., with securities fraud, and obtained a court order freezing their assets. The SEC alleges that Mr. Grigg and ProTrust defrauded clients out of at least $6.5 million and misrepresented that their money was invested in the federal government's Troubled Asset Relief Program (TARP) and other securities that, in reality, do not exist. According to the SEC's complaint, Mr. Grigg is a self-purported financial planner and investment advisor, but neither he nor his firm is registered with the SEC or a state regulator. The SEC alleges that Mr. Grigg obtained control over funds of at least 27 clients since 2007 and falsely claimed to have invested their money in securities described as "Private Placements." Mr. Grigg created fraudulent account statements reflecting his clients' ownership of these non-existent securities. The SEC further alleges that Mr. Grigg began falsely claiming in December that ProTrust had the ability to invest client funds in government- guaranteed commercial paper and bank debt as part of the TARP program. Mr. Grigg also falsely claimed to have partnerships and other business relationships with several of the nation's top investment firms. "As alleged in our complaint, Grigg and ProTrust preyed upon investors' desire for safety by claiming associations with reputable investment firms and the government's TARP program," said Katherine Addleman, Regional Director of the SEC's Atlanta Regional Office. "Investors should carefully check any purported affiliations. In this case, not only were such claims false, but there is in fact no program in which investors can buy debt guaranteed by the TARP program." According to the SEC's complaint, filed in the U.S. District Court for the Middle District of Tennessee, Nashville Division, the defendants have violated the antifraud provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b- 5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. As relief, the SEC's complaint seeks: (i) a temporary restraining order, preliminary and permanent injunctions; (ii) an asset freeze; (iii) an accounting of all funds raised; (iv) an order expediting discovery and preventing the destruction of documents; (v) disgorgement of ill-gotten gains plus prejudgment interest thereon; and (vi) the imposition of financial penalties. After the SEC's complaint was filed, Grigg and ProTrust consented to the emergency relief sought by the SEC, and the Honorable Judge William J. Haynes, Jr., U.S. District Judge for the Middle District of Tennessee, Nashville Division, issued a temporary restraining order to prevent the defendants from further violations and freezing their assets. The Commission acknowledges the assistance of the Special Inspector General of the TARP program and looks forward to continued coordination in this and other matters. * S&P Updates Its Ratings Criteria On Exchange Offers ----------------------------------------------------- Standard & Poor's Ratings Services published an update to its criteria concerning the ratings impact of distressed exchanges and other restructurings. The article says that entities in distress often restructure their obligations, offering less than the original promise. The alternative of a general default, in which the investor or counterparty stands to fare even worse, motivates (at least partially) their acceptance of such an offer. S&P treat such offers analytically as equivalent to a default on the part of the issuer. Therefore, upon completion of an exchange that S&P view as distressed, Standard & Poor's rates the affected issues 'D', and the issuer credit rating is usually reduced to 'SD' (selective default), assuming the issuer continues to honor its other obligations. This is the case even though the investors, technically, may accept the offer voluntarily and no legal default occurs. S&P's approach to such transactions pertains equally to the restructuring of any financial obligation of the entity -- debt security, loan, or derivatives contract. The restructuring may take the form of an exchange offer or renegotiation. The article updates and supersedes. The methodology explained in this report is substantially similar; however, S&P has widened the scope to include: -- Methodology for considering whether the renegotiation of a derivative contract is equivalent to a distressed exchange and, therefore, tantamount to default for the issuer rating and, if the derivative is a rated obligation, a default for the issue-level rating; -- Specific discussion on how S&P applies the methodology to equity hybrid instruments, such as preferred stock; -- Specific discussion on how S&P apply the methodology to structured finance transactions; and -- Additional discussion on when S&P considers an exchange or tender offer as "distressed," including reference to the current rating of the issuer and/or instrument. S&P expects a limited number of rating downgrades following the release of this criteria update as a result of S&P's now more explicit explanation that a distressed renegotiation of a derivative contract will be considered a default at the issuer rating level. * Auto Dealers Fear Industry Might Collapse ------------------------------------------- Richard Gibson at The Wall Street Journal reports that auto dealers are bracing for the biggest shakeout in U.S. franchising history, with thousands of dealer-franchisees at risk of losing their businesses in the coming months. According to WSJ, franchisees are hurt by dropping sales and uncertainty over the future of auto makers General Motors Corp., Ford Motor Co., and Chrysler LLC, and their many brands. Citing auditing firm Thornton LLP, WSJ states that about 3,800 of the 20,000 dealerships in the U.S. would need to close to maintain sales per dealer at the 2008 level. The report says that GM expects to cut at least 1,700, or about a fourth, of its dealers by 2012 as part of its planned restructuring. WSJ relates that the dealers' attorneys are urging customers to review their franchise contracts to better understand what options they might have in case their franchiser-manufacturer decide to cut a brand, merge with another firm, or go out of business. WSJ says that big dealership chains have been writing off the value of their Detroit-brand franchises. According to the report, Jim Moors -- National Automobile Dealers Association's franchising and state laws director -- said that his trade organization is "working very hard to keep dealers in existence. They didn't create the financial situation hampering these companies." * Gov't Tries to Rescue Financial Institutions & Homebuyers ----------------------------------------------------------- Mark Maremont at The Wall Street Journal reports that federal regulators, to prevent financial upheaval at America's credit unions, have guaranteed tens of billions of dollars in uninsured deposits at the powerful financial institutions that service them. According to WSJ, this government effort isn't aimed at "retail" credit unions, but rather at wholesale or "corporate" credit unions that provide financing, check-clearing, and other vital tasks for the retail institutions. WSJ quoted regulator National Credit Union Administration chairperson Michael E. Fryzel as saying, "We are trying to institute confidence in the system, and we think this will do so." Regulators, according to WSJ, injected about $1 billion of new capital into U.S. Central Federal Credit Union of Lenexa -- the largest wholesale credit union -- after that company's unexpected 2008 loss of $1.1 billion. National Credit will employ investment-management company Pimco to evaluate the investment portfolios of the wholesale credit unions, WSJ states, citing Mr. Fryzel. The report says that the regulator wants to measure the depth of the industry's losses on mortgage- backed securities and other investments. WSJ relates that National Credit, to further boost confidence, issued a blanket guaranty of uninsured deposits in the corporate network. Citing Mr. Fryzel, WSJ says that some retail credit unions had been withdrawing funds from the corporate system. Mr. Fryzel said that the guaranty would keep that trend from accelerating in light of U.S. Central's losses, according to the report. The initial guaranty would last through February 2009, WSJ states, citing National Credit. WSJ relates that each corporate credit union would then be included on a voluntary basis for a new guaranty program that would last to Dec. 31, 2010. Gov't to Create Bad Bank for Toxic Assets Michael R. Crittenden at WSJ reports that the Obama administration will create a "bad bank" to buy up toxic assets. The report quoted House Financial Services Chairperson Barney Frank as saying, "It has to be done quickly. There are a variety of ideas, and this is something they should focus on." The government could create an entity to buy the assets from financial institutions, while raising money by selling government- backed securities, WSJ relates. According to WSJ, Treasury Secretary Timothy Geithner, said that he hopes to disclose a comprehensive plan to stabilize the financial sector "relatively soon." Mr. Geithner sought to reassure the financial markets about the possible nationalization of certain U.S. banks, WSJ states. WSJ states that lawmakers reportedly planned to dedicate some portion of the $350 billion remaining from the TARP to bying up troubled assets. Mr. Frak, according to WSJ, said that one benefit of creating an entity to purchase the assets would be that the government could be more aggressive in dealing with foreclosures. House Passes Stimulus Bill According to Corey Boles at WSJ, the House approved on Wednesday an $819 billion stimulus bill filled with new spending and tax cuts. The House has sent the bill to the Senate, the report says. WSJ states that President Barack Obama thanked the House for passing the massive package and promised to "continue to strengthen" the plan as it works its way through congressional approval. Democratic leaders, WSJ relates, have pledged to have legislation ready for President Obama's signature by the middle of February. WSJ reports that Republican senators have been less than enthusiastic about the Democratic stimulus legislation and are working on their own series of proposals they will try to add to the recovery package. The federal government, under the recovery package, would guarantee loans for homebuyers at a discounted rate of 4%, and the loan would be available to first-time buyers and homeowners seeking to refinance their mortgages, WSJ says. The rates, WSJ states, would be effectively subsidized by the federal government, and borrowers could lock in the rate for 30 years, subject to certain conditions. WSJ reports that the plan would also include an increased home tax credit -- worth $10,000, or 15% of the value of the home, whichever is less -- for buyers. The credit, says the report, would be available until year-end and wouldn't have to be repaid. Under the plan, the government may work with third parties to either lengthen the term of the loan or reduce the principle owed, for those people who are struggling with their mortgages, WSJ relates. Senators are also proposing that the government allow U.S. multinationals to bring profits derived from their foreign operations onshore at a reduced tax rate, according to WSJ. * Investors' Buying Into Junk Bond Deals Eases Funding Concerns --------------------------------------------------------------- Kate Haywood at The Wall Street Journal reports tat the investors' willingness to buy into new junk bond deals has helped ease funding concerns for companies at the top end of the speculative- grade ratings spectrum. According to WSJ, about $1.4 billion in junk bonds are available on Wednesday, as speculative-grade firms continue to capitalize on renewed interest in riskier assets to secure financing. Citing data provider Dealogic, WSJ relates that speculative-grade borrowers were able to sell over $3 billion of bonds so far this month, making it the busiest month for high-yield issuance since July 2008 when firms raised more than $3.8 billion in the market. Eagle Asset Management managing director and portfolio manager James C. Camp, according to WSJ, said that there is incredible demand for more stable, high-yield names. The report quoted him as saying, "The names that are coveted in the new issue market are getting oversubscribed five, six, even seven times." WSJ states that most of the new junk bond sales this year have seen reserve enquiry from investors. Most of the order books were filled by the time the deals were disclosed, WSJ says. New bond sales have priced at significant discounts to par value this year, indicating that that new bond deals have traded above their issue prices in the secondary market, according to WSJ. * Rental Car Companies Seek Financial Assistance From Gov't ----------------------------------------------------------- Paulo Prada at The Wall Street Journal reports that Avis Budget Group Inc., Hertz Global Holdings Inc., Enterprise Rent-A-Car Co., and other rental car companies are asking the Congress to let them use Troubled Asset Relief Program funds to finance new auto purchases. WSJ relates that stagnant credit markets, declining demand for travel, and the automobile industry's hardships have made it hard for rental car companies to find buyers for their used automobiles and secure financing to purchase new ones to replace them. According to WSJ, the House of Representatives included a clause in a TARP reform bill that it passed to the Senate last week to give the government the authority to back loans to rental car companies and other fleet purchasers. WSJ states that the rental car industry is the U.S. auto industry's biggest customer, buying as many as 1.8 million new vehicles per year. The report quoted Steven Adamske -- a spokesperson for House Financial Services Committee chairperson Barney Frank -- as saying, "If our desire is to get car buying and credit flowing again, enabling people who buy hundreds of cars at a time is a good way to do it." * Eight of 9 US Airlines Post 2008 Losses Totaling $19.6 Billion ---------------------------------------------------------------- Eight of the nine major U.S. airlines that have disclosed fourth quarter and full year 2008 results have posted losses aggregating $19.6 billion. Only Southwest Airlines posted a net profit. Net Profit Net Profit Full Year 2008 Full Year 2007 -------------- -------------- Delta Air Lines, Inc. ($8,900,000,000) $1,600,000,000 AMR Corp. (2,100,000,000) 504,000,000 Southwest Air Lines 178,000,000 645,000,000 UAL Corp. (5,348,000,000) 403,000,000 US Airways Group Inc. (2,210,000,000) 427,000,000 Continental Airlines Inc. (585,000,000) 459,000,000 Alaska Air Group Inc. (135,900,000) 124,300,000 Skywest Inc. -- -- JetBlue Airways Corp. (76,000,000) 41,000,000 AirTran Holdings, Inc. (273,829,000) 52,683,000 Skywest is expected to release its fourth quarter 2008 results on February 11. The figures provided by JetBlue were pre-tax profit (or losses). Net Profit Net Profit 4th Quarter '08 4th Quarter '07 --------------- --------------- Delta Air Lines, Inc. ($1,400,000,000) ($70,000,000) AMR Corp. (340,000,000) (69,000,000) UAL Corp. (1,303,000,000) (53,000,000) Southwest Airlines (56,000,000) 111,000,000 US Airways (541,000,000) (79,000,000) Continental Airlines (266,000,000) (32,000,000) Alaska Air Group Inc. (75,200,000) (7,400,000) Skywest Inc. -- -- Jetblue Airways Corp. (49,000,000) (3,000,000) AirTran Holdings, Inc. (118,391,000) (2,171,000) High Fuel Jet Prices The airlines said high fuel prices for most of 2008 have contributed to their losses. AMR, the parent of American Airlines, said that historically high and volatile jet fuel prices continued to challenge it in the fourth quarter of 2008. AMR paid $133 million and $2.7 billion more for fuel in the fourth quarter and for all of 2008, respectively, than it would have paid at prevailing prices from the corresponding prior-year periods. Delta faced over $2 billion in increased fuel costs in 2008. While fuel prices dropped in the fourth quarter 2008, Delta paid for high fuel prices due to its fuel hedging contracts. Delta would have reported a $167 million net profit excluding special items in the December 2008 quarter, if fuel had been purchased at market prices. UAL said the historic peak in prices and the impact on hedges driven by the rapid decline resulted in a $2.9 billion increase in cost compared to 2007 fuel prices. UAL recorded $370 million in cash losses on fuel hedges that settled in the quarter, as the recent fall in fuel prices drove losses on hedges put in place earlier in the year to mitigate the steep increase in prices that had occurred in the second and third quarters of 2008. In addition, the company also recorded non-cash, net mark-to-market losses on its fuel hedges of $566 million. US Airways Group Chairman and CEO Doug Parker stated, "Like other airlines that have reported before us, our financial results reflect the staggering increase in fuel prices that we faced throughout most of 2008. In fact, had our 2008 fuel price including realized gains and losses on fuel hedging instruments remained at 2007 levels, the company's fuel expense would have been approximately $1.4 billion lower. Lower Revenues Due to Recession Delta Air Lines, which completed its merger with Northwest Airlines in 2008, said that during the fourth quarter, on a combined basis, passenger revenue fell 1%, or $54 million, compared to the prior year period due to a 4% decline in capacity, partially offset by a 3% increase in unit revenue. These results reflect the weakening of the revenue environment during the quarter caused by the global economic recession. According to UAL, total passenger revenue for the quarter decreased 8.7% year-over- year as consolidated capacity declined 10.6% , consolidated yield increased 2.4% and load factor decreased 0.3 points. Continental Airlines, which have been mentioned in possible merger talks with other U.S. airlines in 2008, said weakening economic conditions and highly volatile fuel prices presented financial challenges for the airline in the fourth quarter 2008. Continental recorded a fourth quarter net loss of $266 million. Dave Barger, JetBlue's CEO, said that while he was appointed to report a loss, he has been satisfied with JetBlue's performance in 2008. "Against the backdrop of record fuel prices and unprecedented economic challenges, we effectively managed our capacity and strengthened our network. We also made significant progress in our efforts to further enhance the JetBlue experience for our customers. JetBlue's industry-leading unit revenue growth throughout the year reflects the outstanding work of our crewmembers. "2008 was an especially tough and challenging year," said Bob Fornaro, AirTran Airways' chairman, president and chief executive officer. "We thank our dedicated, hard-working Crew Members and our loyal customers for helping us overcome the many obstacles we faced in 2008. Our Crew Members continue to strive to provide exceptional customer service, and a high-quality product while offering value to the traveling public. Despite the industry challenge shifting from high oil costs to concerns regarding consumer demand, our 2008 initiatives have us well positioned to return to profitability in 2009." Liquidity, Bankruptcy Concerns Delta, UAL and AirTran said that they have strengthened their liquidity that would allow them to face the challenges of 2009. Michael Lowry, project manager for AVIATION WEEK's Top- Performing Companies report, said in September 2008 that USAirways, AMR, Northwest Airlines, AirTran and Continental would have high bankruptcy risk in 2009. The September report also said that USAir was a high risk to file for bankruptcy again in 2008 -- it had entered and exited bankruptcy protection twice -- but USAir has been able, so far, to survive the crisis. Only smaller airlines filed for bankruptcy in 2008. These included Frontier Airlines, Skybus Airlines Inc., Aloha Airgroup Inc. and ATA Airlines Inc., who made its second Chapter 11 filing. Northwest Airlines has completed its merger with Delta Air to form one of the world's largest airlines. Delta noted that as of Dec. 31, 2008, it had $6.1 billion in total liquidity and cash collateral posted with hedge counterparties. As of Dec. 31, 2007, Delta had $3.3 billion in cash, cash equivalents and short-term investments. UAL said it completed several transactions during the fourth quarter that helped strengthen its liquidity. It raised $215 million from aircraft financing transactions that closed during the quarter along with $66 million in proceeds from asset sales. The company also received net proceeds of $107 million through equity issuances during the quarter. AirTran noted that it ended the fourth quarter with $340.5 million in unrestricted cash and investments, its highest year-end balance since 2005. 2009 Outlook Most of the airlines expect weak revenues in 2008, but expect those revenues to be offset by lower fuel prices and savings from cost cutting measures. Some of the airlines have also disclosed capacity cuts for 2009. AMR has decided not to use MD-80s to backfill flying associated with the seven 737s that no longer will be delivered in 2009. Largely as a result of this decision, the company's 2009 mainline capacity will decline by more than one percentage point compared to previous guidance provided in October. "Our fourth quarter and full-year 2008 results reflect the difficulties all airlines faced last year, but we believe our steps to reduce capacity, bolster liquidity, and improve revenue helped us better manage the challenges of record fuel prices and a weak economy," said AMR Chairman and CEO Gerard Arpey. "While significant hurdles remain, I am guardedly optimistic we can regain momentum in 2009," Mr. Arpey said. "Despite the difficult economic environment, we expect to be solidly profitable in 2009 driven by lower fuel costs, capacity discipline, and merger synergies," said Richard Anderson, Delta's chief executive officer. "Delta people have a great track record for achieving their goals, and I am confident that 2009 will be another successful year." "Delta's proactive decision to reduce domestic capacity during 2008 mitigated the impact of the decline in demand we saw over the course of the fourth quarter. We expect the worldwide economy to be difficult throughout 2009; however, if fuel prices remain at current levels, we believe the benefit of lower fuel prices will more than offset the revenue decline." said Edward Bastian, Delta's president. "Delta has the tools required to manage through these tough economic times -- with the broadest, most diverse network in the industry; an estimated $2 billion in annual merger synergies to be obtained; best-in-class costs; a solid liquidity balance; unmatched fleet flexibility; and the discipline and drive of the new Delta team." Delta projects that consolidated passenger revenue in 2009 will be down 4% to $4.8 billion. Fuel price will be $2.15 per gallon. During the December 2008 quarter, Delta hedged 58% of its fuel consumption, resulting in an average fuel price of $2.90 per gallon -- included in the fuel price is $507 million in fuel hedge losses in the fourth quarter. In 2007, when Delta paid $2.21 a gallon, it noted that its operating results were significantly impacted by changes in the price and availability of aircraft fuel. In 2007, its average fuel price per gallon rose 5% to $2.21, as compared to an average price of $2.10 in 2006, which was 15% higher than our average price of $1.79 in 2005. UAL believes that for full year 2009 revenues will be down 8% to 7%. United said it is on track to complete the previously announced removal of 100 aircraft from its fleet by the end of 2009. United added it is taking additional steps in 2009 to reduce overhead costs. The company will further reduce the number of salaried and management employees by approximately 1,000 positions by the end of 2009. This is in addition to the 1,500 positions the company announced in the second quarter, and when completed, will bring the total reduction in its salaried and management staff to approximately 2,500, or nearly 30% , since the beginning of 2008. "Last year was by any measure a challenging year -- defined by unprecedented volatility and unpredictability, but for United it was also characterized by steady and durable improvements," said Glenn Tilton, United's chairman, president and CEO. "Our management team made timely decisions that resulted in fundamental improvements across our business, which will hold us in good stead in 2009." Alaska Air Group, which operates Alaska Air and Horizon Air, noted that excluding special items, it had net income of $16.4 million in the 4th quarter of 2008 compared to a $17.9 million net loss in the same period in 2007. "In a year of unprecedented volatility that included soaring fuel prices and an economic meltdown, we were pleased to eke out a small profit for 2008, excluding special items, and be one of only a few major airlines to do so," said Bill Ayer, Alaska Air Group's chairman and chief executive officer. "Our concerted efforts to control costs, improve our operation and tailor our schedule to better match customer demand have prepared us to face whatever hurdles the current year brings." According to Mr. Parker, USAir CEO, measures executed by the airlines before aimed at offsetting high fuel prices in 2008 have significantly softened the blow from the economic downturn that the airline industry now faces. "As we begin the new year, US Airways is well prepared for a difficult global macroeconomic environment. We are running a great operation, have restructured our business model through the introduction of new fees, reduced capacity and increased our liquidity. With the help of falling fuel prices, we believe we are well positioned for the challenges ahead," concluded Parker. Larry Kellner, Continental's chairman and chief executive officer, said, "While there are continuing hard times ahead, thanks to our team, we are well-positioned to maintain our place as an industry leader." Continental said it will inaugurate daily nonstop service between New York and Shanghai in March 2009. For the full year 2009, JetBlue expects to report an operating margin between 12 and 14% . Capacity, according to JetBlue, for the full year 2009 is expected to decrease between zero and 2% over 2008 and stage length is expected to decrease about 6% over full year 2008. Full Year 2008 Net Profit for Southwest The usually profitable Southwest Airlines also posted a fourth quarter loss -- $56,000,000 net loss. However, Southwest noted that excluding special charges and other items, its fourth quarter 2008 net income was $61 million, bringing it to its 71st consecutive quarter of profitability. Gary C. Kelly, CEO of Southwest, stated: "We are very proud to report another profitable year in one of the most difficult years in aviation's 100-year-plus history. We certainly had our challenges in 2008, but thanks to the extraordinary efforts and Warrior Spirit of our People, we persevered to report our 36th consecutive year of profitability." "We celebrated many operational successes throughout 2008 and enhanced our already exceptional Brand and Customer Experience. With one full year of our new boarding system and Business Select product offering, the Customer response has been overwhelmingly favorable. We've made significant advancements in our revenue management and network optimization capabilities. And, we've made great progress on the technology side to lay the foundation for improved Customer Service, a new southwest.com, a new Rapid Rewards program, and international codeshare agreements with WestJet to Canada and Volaris to Mexico. "Despite the difficult credit markets, we were able to boost our liquidity by $1.1 billion during fourth quarter 2008 through several financing transactions to end the year with $1.8 billion in unrestricted cash and short-term investments. After yearend, we raised an additional $173 million in cash upon the closing of the second tranche of our sale and leaseback transaction for an additional five of our 737-700 aircraft. "Due to the rapid collapse in energy prices during fourth quarter 2008, we substantially reduced our net fuel hedge position to approximately ten percent of our estimated fuel gallons in each year from 2009 through 2013. Based on this current 2009 portfolio and future market prices for energy (as of January 20, 2009), we estimate our economic fuel costs per gallon, including fuel taxes, to be approximately $1.80 and under $1.90, for first quarter and full year 2009, respectively. This current full year 2009 projection is more than $1 billion lower than we were projecting last summer for 2009. About AirTran Airways AirTran Airways, a subsidiary of AirTran Holdings, Inc. (NYSE: AAI), a Fortune 1000 company, is ranked number one in the 2008 Airline Quality Rating study. The airline offers coast-to-coast flights, North America's newest all-Boeing fleet, friendly service and Business Class and complimentary XM Satellite Radio on every flight. To book a flight, visit http://www.airtran.com. * * * The Troubled Company Reporter said on Aug. 29, 2008, that Standard & Poor's Ratings Services has lowered its ratings on AirTran Holdings Inc., including the corporate credit rating, which it lowered to 'CCC+' from 'B-'. At the same time, S&P removed the ratings from CreditWatch, where they had been placed with negative implications on May 22, 2008. The outlook is stable. About Delta Air Lines With its acquisition of Northwest Airlines, Atlanta, Georgia-based Delta Air Lines (NYSE: DAL) -- http://www.delta.com/or http://www.nwa.com/-- is now the world's largest airline. From its hubs in Atlanta, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-JFK, Salt Lake City and Tokyo-Narita, Delta, its Northwest subsidiary and Delta Connection carriers offer service to more than 376 destinations worldwide in 66 countries and serves more than 170 million passengers each year. Delta's marketing alliances allow customers to earn and redeem either SkyMiles or WorldPerks on more than 16,000 daily flights offered by SkyTeam and other partners. The merger closed on October 29, 2008. Prior to the merger, Delta was the world's second-largest airline in terms of passengers carried and Northwest was the world's fourth largest airline. Northwest and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington, represented the Northwest Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors retained Scott L. Hazan, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C. as its bankruptcy counsel. When the Northwest Debtors filed for bankruptcy, they listed $14.4 billion in total assets and $17.9 billion in total debts. On May 21, 2007, the Court confirmed the Northwest Debtors' amended plan. That amended plan took effect May 31, 2007. (Northwest Airlines Bankruptcy News Issue No. 114; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). Delta 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, represented the Delta Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provided the Delta Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provided 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, served as the Committee's financial advisors. On April 25, 2007, the Court confirmed the Delta 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; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). About United Airlines United Airlines (NASDAQ: UAUA) operates more than 3,000* flights a day on United and United Express to more than 200 U.S. domestic and international destinations from its hubs in Los Angeles, San Francisco, Denver, Chicago and Washington, D.C. With key global air rights in the Asia-Pacific region, Europe and Latin America, United is one of the largest international carriers based in the United States. United also is a founding member of Star Alliance, which provides connections for our customers to 912 destinations in 159 countries worldwide. United's 49,500 employees reside in every U.S. state and in many countries around the world. News releases and other information about United can be found at the company's Web site at united.com. * * * As reported in the Troubled Company Reporter on July 29, 2008, Standard & Poor's Ratings Services lowered its ratings on UAL Corp. and subsidiary United Air Lines Inc. (both rated B- /Negative/--), including lowering the long-term corporate credit ratings on both entities to 'B-' from 'B', and removed the ratings from CreditWatch, where they had been placed with negative implications May 22, 2008, as part of an industrywide review. The outlook is negative. About US Airways US Airways, along with US Airways Shuttle and US Airways Express, operates more than 3,100 flights per day and serves 200 communities in the U.S., Canada, Europe, the Caribbean and Latin America. The airline employs nearly 34,000 aviation professionals worldwide and is a member of the Star Alliance network, which offers our customers more than 16,500 daily flights to 912 destinations in 159 countries worldwide. Travel + Leisure Magazine named US Airways as one of the top-three airlines for 2008 in on- time performance for the year (based on Department of Transportation data for Sept. 1, 2007 through Aug. 31, 2008). And for the tenth consecutive year, the airline received a Diamond Award for maintenance training excellence from the Federal Aviation Administration (FAA) for its Charlotte, North Carolina hub line maintenance facility. For more company information, visit usairways.com. (LCCF) About JetBlue New York-based JetBlue Airways has created a new airline category based on value, service and style. Known for its award-winning service and free TV as much as its low fares, JetBlue is now pleased to offer customers Lots of Legroom and super-spacious Even More Legroom seats. JetBlue introduced complimentary in-flight e- mail and instant messaging services on aircraft "BetaBlue," a first among U.S. domestic airlines. JetBlue is also America's first and only airline to offer its own Customer Bill of Rights, with meaningful and specific compensation for customers inconvenienced by service disruptions within JetBlue's control. Visit www.jetblue.com/promise for details. JetBlue serves 52 cities with 600 daily flights. New service to San Jose, Costa Rica, begins in 2009. With JetBlue, all seats are assigned, all travel is ticketless, all fares are one-way, and an overnight stay is never required. For information or reservations call 1-800- JETBLUE (1-800-538-2583) or visit www.jetblue.com. About Continental Airlines Based in Houston, Texas, Continental Airlines Inc. (NYSE: CAL) -- http://continental.com/-- is the world's fifth largest airline. Continental, together with Continental Express and Continental Connection, has more than 3,000 daily departures throughout the Americas, Europe and Asia, serving 140 domestic and 139 international destinations. More than 550 additional points are served via SkyTeam alliance airlines. With more than 46,000 employees, Continental has hubs serving New York, Houston, Cleveland and Guam, and together with Continental Express, carries approximately 69 million passengers per year. * * * The Troubled Company Reporter said on Aug. 13, 2008, that Standard & Poor's Ratings Services took various actions on its ratings on Continental Airlines Inc. (B/Negative/B-3). S&P affirmed its 'B' long-term corporate credit rating, 'B-3' short-term corporate credit rating, all ratings on unsecured debt and on selected enhanced equipment trust certificates. S&P lowered S&P's ratings on other enhanced equipment trust certificates, particularly those secured by regional jets, and raised other ratings. All ratings were removed from CreditWatch, where they were placed with negative implications May 22, 2008, as part of an industrywide review. The rating outlook is negative. Continental Airlines, Inc. reported a working capital deficit of US$202 million, with current assets of US$4.713 billion and current liabilities of US$4.915 billion. At Dec. 31, 2007, the Company had a positive working capital of US$112 million, with US$4.561 billion in current assets and US$4.449 billion in current liabilities. As of Sept. 30, 2008, the Company had US$2.9 billion in unrestricted cash, cash equivalents and short-term investments, which is US$83 million higher than at Dec. 31, 2007. At Sept. 30, 2008, the Company also had US$164 million of restricted cash, cash equivalents and short-term investments, which is primarily collateral for estimated future workers' compensation claims, credit card processing contracts, letters of credit and performance bonds. Restricted cash, cash equivalents and short- term investments at Dec. 31, 2007, totaled US$179 million. Additionally, the Company held student loan-related auction rate securities reported as long-term investments at Sept. 30, 2008 with a par value of US$147 million and a fair value of US$130 million. * BOOK REVIEW: Beyond the Quick Fix: Managing Five Tracks To Organizational Success ------------------------------------------------------------- Author: Ralph H. Kilmann Publisher: Beard Books Hardcover: 320 pages Listprice: $34.95 Review by Henry Berry Every few years, a new approach is offered for unleashing the full potential of organized efforts. These are the quick fixes to which the title of this book refers. The jargon of the quick fix is familiar to any businessperson: decentralization, human resources, restructuring, mission statement, corporate strategy, corporate culture, and so on. These terms are all limited in scope or objective, and some are even irrelevant or misconceived with regard to the overall well-being and purpose of a corporation. With his extensive experience as a corporate consultant, author of numerous articles, and professor in business studies, Kilmann recognizes that each new idea for optimum performance and results is germane to some area of a corporation. However, he also recognizes that each new idea inevitably falls short in bringing positive change - that is, a change that is spread throughout the corporation and is lasting. At best, when a corporation relies on an alluring, and sometimes little more than fashionable, idea, it is a wasteful distraction. At worst, it can skew a corporate organization and its operations, thereby allowing the corporation's true problems or weaknesses to grow until they become ruinous. As the author puts it, "Essentially, it is not the single approach of culture, strategy, or restructuring that is inherently ineffective. Rather, each is ineffective only if it is applied by itself - as a 'quick fix'." Kilmann tells corporate leaders how to break the cycle of embracing a quick fix, discarding it after it proves ineffective, and then turning to a newer and ostensibly better quick fix that soon proves to be equally ineffective. For a corporation to break this self-defeating cycle, the author offers a five-track program. The five tracks, or elements, of this program are corporate culture, management skills, team-building, strategy-structure, and reward system. These elements are interrelated. The virtue of Kilmann's multidimensional five-track program is that it addresses a corporation in its entirety, not simply parts of it. Kilmann's five tracks offer structural and operational aspects of a corporation that executives and managers will find familiar in their day-to-day leadership and strategic thinking. Thus, the author does not introduce any unfamiliar or radical perspectives or ideas, but rather advises readers on how to get all parts of a corporation involved in productive change by integrating the five tracks into "a carefully designed sequence of action: one by one, each track sets the stage for the next track." Kilmann does more, though, than bring all significant features of a modern corporation together in a five-track program and demonstrate the interrelation of its elements. His singularly pertinent and useful contribution is providing a sequence of steps to be implemented with respect to each track so that a corporation progresses toward its goals in an integrated way. Beyond the Quick Fix is a manual for implementing and evaluating the progress of a five-track program for corporate success. The book should be read by any corporate leader desiring to bring change to his or her organization. Ralph H. Kilmann has been connected with the University of Pittsburgh for 30 years. For a time, he was its George H. Love Professor of Organization and Management at its Katz Graduate School of Business. Additionally, he is president of a firm specializing in quantum transformations. ********* 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. The Sunday TCR delivers securitization rating news from the week then-ending. 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. Ronald C. Sy, Joel Anthony G. Lopez, Cecil R. Villacampa, Luke Caballos, Sheryl Joy P. Olano, Carlo Fernandez, Christopher G. Patalinghug, and Peter A. Chapman, Editors. Copyright 2009. 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 ***