/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/130426.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, April 26, 2013, Vol. 17, No. 114 Headlines 06-009 RANCO: Voluntary Chapter 11 Case Summary 935-945 DIVISION: Voluntary Chapter 11 Case Summary ADAIR PROPERTIES: Voluntary Chapter 11 Case Summary ADEPT TECHNOLOGIES: PNC Objections to Plan Outline Hearing May 6 ADEPT TECHNOLOGIES: Exclusivity Period Extended Until May 29 AIR CANADA: Fitch Assigns 'B' Issuer Default Rating AMERICAN AIRLINES: Parties Differ on Stand in Make-Whole Issue ANDERSON NEWS: Time Fails in Sanctions Bid Over Disputed Meeting AMERICAN AIRLINES: Antitrust Deals With Orbitz, Travelport OK'd AMERICAN ASSET: Settles Loan Dispute with Bank of America APEX DIGITAL: Effective Date of Plan Occurred on April 17 APEX DIGITAL: Committee Identifies Members of Plan Committee APPLEILLINOIS LLC: Case Summary & 20 Largest Unsecured Creditors ARTE SENIOR LIVING: Plan Confirmation Hearings Begin ATARI INC: In Talks to Sell Off Assets ATLANTIC COAST: Amends Merger Agreement with Bond Street AVIS BUDGET: Fitch Hikes LT Issuer Default Rating to 'BB-' BRIER CREEK: Bank of America Drops Objection to Plan BROOKLYN NAVY: S&P Corrects Rating on Revenue Bonds to 'CCC' CAESARS ENTERTAINMENT: To Form New Growth-Oriented Venture CATERPILLAR INC: Fitch Says Weak Mining Spending Still a Challenge CHINA TELETECH: Reports $53,500 Net Income in 2012 CHRIST HOSPITAL: Files Settlement-Based Chapter 11 Plan COMPREHENSIVE CARE: Bernard Sherman Held 19.7% Stake at March 15 COMPUCOM SYSTEMS: Moody's Rates $580MM Debt B1 & $250MM Debt Caa1 COMPUCOM SYSTEMS: S&P Lowers Corp. Credit Rating to 'B' DETROIT, MI: Moody's Says Bankruptcy Could Mean Further Downgrades CORUS BANKSHARES: District Court Narrows Suit Against CEO, Others DEWEY & LEBOEUF: Ex-Chairman Agrees to Settle Claims DEX ONE: Has Final OK of Equity Trading Restrictions DEX ONE: Gets Final OK to Continue Current Investment Practices EAGLE RECYCLING: Meeting to Form Creditors' Panel on May 6 EDISON MISSION: ELPC Has Green Light to Pursue Regulatory Action ELITE PHARMACEUTICALS: Gets $10MM Commitment From Lincoln Park FUNCTIONAL TECHNOLOGIES: Files Bankruptcy Proposal Notice GMX RESOURCES: Creditors Object to $2 Million Banker's Fee GSC GROUP: Kaye Scholer Deal Withdrawn HANDY HARDWARE: Looking for New Chief Executive, President HOSTESS BRANDS: Buyer to Re-Launch Emporia Bakery HOWREY LLP: Avoids Suits as Deal with Holland, Fenwick Okayed HOWREY LLP: Former Partners Settle 'Jewel' Claims Cheaply INSPIRATION BIOPHARMA: Seeks Extension of Plan Filing Deadline INSPIRATION BIOPHARMA: Has Authority to Employ McGladrey INDYMAC BANCORP: $80MM Ruling for Insurers Too Broad INTELSAT INVESTMENTS: Refinancing Prompts Moody's to Up CFR to B3 IOWA FINANCE: Fitch to Assigns 'BB-' Rating to $1.19-Bil. Bonds JEFFERSON COUNTY, AL: Hires New Top Attorney J.C. PENNEY: Soros Fund Acquires 7.91% Stake KAHN FAMILY: Voluntary Chapter 11 Case Summary KIT DIGITAL: Files for Chapter 11 in Manhattan LEARNING CARE: Moody's Assigns 'Ba3' Rating to New Senior Debt LEHMAN BROTHERS: Wins OK to Hire Bonn Steichen LEHMAN BROTHERS: SMBC Allowed $13.7MM Unsecured Claim vs. LBI LEHMAN BROTHERS: Trustee Signs Deals to Settle Avoidance Claims LEHMAN BROTHERS: Wins Greenlight for Settlement with Swiss Unit LIBERTY MEDICAL: Wants Bankruptcy Cloak Extended to Medco Health MERISEL INC: Saints Capital Swaps Conv. Notes with 17.5MM Shares METALS USA: S&P Raises Corporate Credit Rating From 'B+' METROPCS WIRELESS: Moody's Lifts CFR to 'Ba3', Stable Outlook MOOD MEDIA: S&P Lowers Corp. Credit Rating to 'B-'; Outlook Stable NAVISTAR INTERNATIONAL: Names Jack Allen Chief Offering Officer NAVISTAR INTERNATIONAL: Inks Employment Agreement with CEO NETFLIX INC: Moody's Says Notes Conversion is Credit Positive NORTEL NETWORKS: Units Spar on Discovery in $7B Liquidation Row ORLANDO, FL: Fitch Affirms 'BB+' Rating on TDT Revenue Bonds OTELCO INC: Schedules Filing Deadline Extended Through May 23 PALM COURT: Case Summary & 11 Unsecured Creditors PATRIOT COAL: Reaches Accord on Nonunion Worker Benefits PATRIOT COAL: Judge Denies Trustee, Equity Committee PHOENIX CORPORATION: Case Summary & 20 Largest Unsecured Creditors POWER BUYER: S&P Assigns Preliminary 'B' Corp. Credit Rating POWERWAVE TECHNOLOGIES: Loan Approved, Auction Set for May 13 PREMIERWEST BANCORP: Deregisters Common Stock with SEC PREMIUM PROTEIN: MatlinPatterson Can't Slip WARN Suit QUALTEQ INC: Full-Payment Plan Confirmed in Chicago QUEBECOR WORLD: Bankr. Court Sides With Trustee in Clawback Suits RED MOUNTAIN: Incurs $3-Mil. Net Loss in Q3 Ended February 28 REGENCY ENERGY: Fitch Assigns 'BB' Rating to $600MM Senior Notes REGENCY ENERGY: Moody's Rates New Sr. Unsec. Notes Due 2023 'B1' REGENCY ENERGY: S&P Rates $600MM Senior Unsecured Notes 'BB' RESIDENTIAL CAPITAL: Clawback Oral Motion Denied RESOLUTE FOREST: New $600MM Senior Notes Get Moody's 'Ba3' Rating RESOLUTE FOREST: S&P Affirms 'BB-' Corp. Credit Rating ROTECH HEALTHCARE: Hires Proskauer, et al., as Lead Professionals ROTECH HEALTHCARE: Wants to Establish June 24 as Claims Bar Date ROTECH HEALTHCARE: Seeks Extension of Schedules Filing Deadline ROTHSTEIN ROSENFELDT: TD Bank Loses Bid to Keep Suit in Bankr. Ct. RHYTHM & HUES: Hit With Wage Suit SCHOOL SPECIALTY: Disclosure Statement Gets Prelim. Court Okay SCHOOL SPECIALTY: Judge Rules Make-Whole Premium Enforceable SEALY CORP: S&P Withdraws 'B' Corporate Credit Rating SMART ONLINE: Sells Additional $200,000 Convertible Note SMART TECHNOLOGIES: S&P Affirms 'B' CCR; Outlook Stable SOUTH LAKES: Agrees to Pay Admin. And 503(b)(9) Claims SOUTH LAKES: Amends Schedules of Assets and Liabilities SPENCER SPIRIT: Moody's Rates Proposed PIK Toggle Notes 'Caa1' STAFFORD RHODES: Can Use Cash Pursuant to 3rd Updated Budgets STOCKTON, CA: Says Debt Talks Will Be Restarted STONE ROSE: Section 341(a) Meeting Scheduled on May 29 STRADELLA INVESTMENTS: Trustee Seeks to Tap Bankruptcy Counsel STRATEGIC CAPITAL: MBS Suit Ruled Time-Barred SUPERMEDIA INC: Gets Final OK on Procedures to Limit Secs. Trading SUPERMEDIA INC: Has Final OK to Continue Investment Practices SYNAGRO TECHNOLOGIES: Proposes EQT-Led Auction on June 10 SYNAGRO TECHNOLOGIES: Proposes $30MM of DIP Financing SYNAGRO TECHNOLOGIES: Taps KCC as Claims and Noticing Agent TOREE DEL GRECO: Court Rules on Chapter 11 Trustee's Fees TROPIC RANCH: Case Summary & 4 Unsecured Creditors WACO TOWN SQUARE: Court Rules on Collateral Estoppel Issue WSP HOLDINGS: Posts $84.2MM 2012 Net Loss; Units in Loan Default * Capital One Accused of Understating Loan Losses * Report: IRS Paid Billions in Improper Refunds * Hazy Future for Thriving SEC Whistle-Blower Effort * Fitch Says U.S. High Yield Default Rate Slips to 1.6% in March * Moody's Notes Continued Rise of Dividend Payouts in Tech Sector * Moody's Says Sequestration's Impact on Local Gov'ts. Limited * Regulators to Restrict Big Banks' Payday Lending * Too-Big-to-Fail Bill Seen as Fix for Dodd-Frank Act's Flaws * Watchdog: Banks Are Still Too Intertwined * K&L Gates Adds 2 Partners From Jackson Walker, Haynes * LPS March-End Data Shows Continued Delinquency Rate Decline * BOOK REVIEW: George Eastman: Founder of Kodak and the Photography Business ********* 06-009 RANCO: Voluntary Chapter 11 Case Summary ----------------------------------------------- Debtor: 06-009 Ranco Coachella Business Trust 6767 W. Tropicana Avenue, Suite 206 Las Vegas, NV 89103 Bankruptcy Case No.: 13-13423 Chapter 11 Petition Date: April 22, 2013 Court: United States Bankruptcy Court District of Nevada (Las Vegas) Judge: Bruce T. Beesley Debtor's Counsel: Timothy P. Thomas, Esq. LAW OFFICES OF TIMOTHY P. THOMAS, LLC 8670 W. Cheyenne Ave. #120 Las Vegas, NV 89129 Tel: (702) 227-0011 Fax: (702) 227-0015 E-mail: tthomas@tthomaslaw.com Scheduled Assets: $1,353,297 Scheduled Liabilities: $1,029,252 The Debtor did not file a list of its largest unsecured creditors together with its petition. The petition was signed by Peter Becker, attorney-in-fact for Trustee. Affiliates that filed separate Chapter 11 petitions: Petition Debtor Case No. Date ------ -------- ---- 05-023 Carmencita Business Trust 13-11150 02/15/13 05-023 Redding Business Trust 13-11151 02/15/13 935-945 DIVISION: Voluntary Chapter 11 Case Summary --------------------------------------------------- Debtor: 935-945 Division Community Development, LLC 4020 Southern Avenue, SE Washington, DC 20019 Bankruptcy Case No.: 13-00243 Chapter 11 Petition Date: April 22, 2013 Court: United States Bankruptcy Court District of Columbia (Washington, D.C.) Judge: S. Martin Teel, Jr. Debtor's Counsel: Richard H. Gins, Esq. THE LAW OFFICE OF RICHARD H. GINS LLC 3 Bethesda Metro Center, Suite 430 Bethesda, MD 20814 Tel: (301) 718-1078 Fax: (301) 718-8659 E-mail: Richard@ginslaw.com Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $1,000,001 to $10,000,000 The Debtor did not file a list of its largest unsecured creditors together with its petition. The petition was signed by Khalid Babiker Mohamed ElTayeb, managing member. ADAIR PROPERTIES: Voluntary Chapter 11 Case Summary --------------------------------------------------- Debtor: Adair Properties, LLC Post Office Box 1636 Woodville, MS 39669 Bankruptcy Case No.: 13-01343 Chapter 11 Petition Date: April 22, 2013 Court: United States Bankruptcy Court Southern District of Mississippi (Jackson Divisional Office) Judge: Neil P. Olack Debtor's Counsel: Glenn H. Williams, Esq. GLENN H. WILLIAMS, PA 201 N. Pearman Avenue Cleveland, MS 38732 Tel: (662) 843-3797 Fax: (662) 843-3799 E-mail: gwmslaw@cableone.net Estimated Assets: $500,001 to $1,000,000 Estimated Debts: $1,000,001 to $10,000,000 The Debtor did not file a list of its largest unsecured creditors together with its petition. The petition was signed by Bryan Adair, member. ADEPT TECHNOLOGIES: PNC Objections to Plan Outline Hearing May 6 ---------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Alabama has continued the hearing on the PNC Bank National Association's objection to ADEPT Technologies Disclosure Statement and Plan to May 6, 2013, at 9:00 a.m. According to papers filed with the Court, PNC Bank objects to the adequacy of the Disclosure Statement and Plan filed on Feb. 28, 2013, because: (i) the Disclosure Statement fails to provide PNC and other similarly situated claimholders adequate information so that they are able to make an informed judgment about the Debtor's Plan; and (ii) the Plan accompanying the Disclosure Statement is facially unconfirmable pursuant to 11 U.S.C. Section 1129, thereby violating the statutory disclosure requirements of 11 U.S.C. Section 1125. As grounds for its objections, PNC states that approval of the Disclosure Statement should be denied on these grounds: a. It describes a proof of claim deadline as Feb. 13, 2013; however, the proof of claim deadline is in fact May 10, 2013, pursuant to an Order entered by this Court on March 18, 2013 (Doc. 84); b. The liquidation analysis, such as it is, is woefully deficient and fails to describe the methodology supporting its analysis; c. The Plan as currently written violates the absolute priority rule; d. The treatment of general unsecured creditors is unclear in that the Disclosure Statement and Plan provide for payment of "ten percent (100%)" of such creditors' claims; e. The Disclosure Statement fails to adequately describe the modification, or lack of modification, of payment and non-payment related terms under existing agreements with creditors; f. There are no cash flow projections or projections of future business operations demonstrating an ability to consummate the Plan or even showing how the Plan will be implemented; g. No sufficient explanation of events leading to the bankruptcy filing, and how similar events or occurrences will be avoided post-confirmation have been provided; and h. There's no meaningful analysis of potential avoidance actions or possible use of recovered proceeds. The Chapter 11 Plan As reported in the TCR on March 27, 2013, the Debtor delivered to the Bankruptcy Court a plan of reorganization and accompanying disclosure statement proposing a 10% recovery for allowed general unsecured claims. Secured creditors will be paid according to the following terms: * First Volunteer Bank will retain its lien on the collateral securing the Debtor's $129,536 prepetition loan until the time the debt is paid in full. FVB's secured claim will be paid through monthly payments of $943 per month until the balance is paid in full. * PNC Bank's $6.2 million secured claim will be paid through the execution of a new promissory note to be secured by the same collateral upon which PNC had a lien prepetition according to its same priority. * The Debtor will restructure its $2.2 million and $135,078 secured debt with Southern Development Council, Inc., and will assume the debt according to the terms and conditions of the existing finance agreements in place. SDC will retain its lien on the collateral securing the debt until the time the debt is paid in full. Brad Fielder, who owns 51% of the outstanding membership interests in the Debtor, and Chad Fielder, who owns the remaining 49% of the Debtor's outstanding stock, will retain their equity although they won't be paid until administrative, priority and unsecured claimants have been paid. A full-text copy of the Disclosure Statement dated Feb. 28, 2013, is available for free at http://bankrupt.com/misc/ADEPTds0228.pdf About ADEPT Technologies ADEPT Technologies, LLC, filed a Chapter 11 petition (Bankr. N.D. Ala. Case No. 12-83490) on Oct. 31, 2012, in Decatur, Alabama. The Debtor, which has principal assets located in Huntsville, Alabama, estimated assets of $10 million to $50 million and liabilities of up to $10 million. Judge Jack Caddell presides over the case. Kevin D. Heard, Esq., at Heard Ary, LLC, represents the Debtor as counsel. The petition was signed by Brad Fielder, managing member. ADEPT TECHNOLOGIES: Exclusivity Period Extended Until May 29 ------------------------------------------------------------ United States Bankruptcy Judge Jack Caddell has granted the motion of ADEPT Technologies, LLC, to extend the Debtor's exclusivity period to May 29, 2013. About ADEPT Technologies ADEPT Technologies, LLC, filed a Chapter 11 petition (Bankr. N.D. Ala. Case No. 12-83490) on Oct. 31, 2012, in Decatur, Alabama. The Debtor, which has principal assets located in Huntsville, Alabama, estimated assets of $10 million to $50 million and liabilities of up to $10 million. Judge Jack Caddell presides over the case. Kevin D. Heard, Esq., at Heard Ary, LLC, represents the Debtor as counsel. The petition was signed by Brad Fielder, managing member. AIR CANADA: Fitch Assigns 'B' Issuer Default Rating --------------------------------------------------- Fitch Ratings has assigned an initial Issuer Default Rating (IDR) of 'B' to Air Canada (AC). The ratings apply to $1.1 billion of outstanding debt. A full list of ratings actions follows at the end of the release. The Rating Outlook is Positive. AC's IDR reflects the company's leveraged balance sheet, adequate liquidity position and high, but improving cost structure mitigated by AC's extensive global network and dominant market positions across all segments. With C$12.1 billion in revenues, a fleet of 351 aircraft (in conjunction with its regional partners), AC ranks as the 15th largest airline in the world, carrying 35 million passengers to 178 destinations across Canada, U.S.A. and around the world. AC has exclusive route rights to several international markets as Canada's flag carrier and benefits from limited proliferation of Gulf carriers at its primary hubs Toronto, Montreal and Vancouver, which represent strong international gateways to Canada as well as the U.S. via sixth- freedom traffic. AC is one of the five founding members of Star Alliance, currently the largest global alliance which further expands its international network. Fitch's rating also takes into consideration AC's dominant market positions in its domestic (55% market share) and U.S. transborder (35% market share) segments, as well as mounting competitive pressures in those markets. Fitch views the duopoly construct of the Canadian airline industry as a positive ratings factor for AC but also acknowledges that the company faces a formidable rival in WestJet (WJET), one of the strongest operators in North America. KEY RATING DRIVERS After a challenging year, AC entered 2013 with a renewed business and financial strategy. Although AC commands a revenue premium relative to peers, it also has the highest cost structure amongst North American carriers, making it difficult to compete with low- cost carrier WJET on the domestic and transborder markets. However, management has made significant strides in addressing the issues that typically plague a legacy carrier, including new labor agreements and extension of pension relief. AC's entry into the EETC market is also expected to shore up liquidity as the company enters a heavy fleet investment period. The stage has been set for major transformation at Canada's largest airline, but much work remains to propel AC to stable and sustainable profitability levels, which will be the primary driver of further ratings momentum. New Pilot Contract Provides Much Needed Flexibility and Improved Cost Structure AC has been addressing its legacy cost structure since the credit- crisis, exceeding its C$530 million target in annual run-rate savings from its 2009 cost reduction program by year-end 2011. However, it was the arbitrated collective bargaining agreement with its pilot union in July 2012 that finally gave AC the operational flexibility it needs to structurally lower its cost base. The new five-year contract includes compensation, benefits and profit-sharing in-line with North American industry standards, but also provides a reduction in pension benefits (amounting to C$1.1 billion when combined with other unions and non-unionized employees and management) and significant fleet flexibility. AC now has the ability to transfer smaller, uneconomical aircraft from its mainline to regional partners, such as the fifteen EMB 175s being assigned to Sky Regional (with three transferred to- date). Importantly, the new pilot contract enables AC to form rouge, a new low-cost subsidiary targeted for leisure markets. Rouge will enable AC to optimize fleet costs with its mainline operations, use a lower cost model to serve the leisure segment and overall leverage opportunities to transform AC into a more cost-competitive carrier. AC is also implementing several other initiatives to improve operating efficiency including improving aircraft productivity and fuel consumption (turnaround times, use of ground power etc.) and lower operating expenses related to call centers and maintenance. The March 2012 liquidation of Aveos, which was AC's sole maintenance provider, gave AC an opportunity to sign new agreements on a cost competitive basis with new maintenance system providers. Reduction in Pension Benefit and Extension of Pension Relief AC's new labor contracts with all five major unions and the recent agreement with the government on the extension are expected to alleviate the company's pension burden. Although defined- benefit (DB) plans are frozen to new hires that enroll in defined- contribution or hybrid pension plans, the company's past funding obligations remain substantial with an underfunded deficit of C$4.2 billion reflecting a funded status of 72.5% as of Jan. 1, 2012. The next required valuation later this year is expected to reduce the deficit amount to approximately C$3.7 billion as the 14% return on plan assets in 2012 offsets the increase from lower discount rates. Furthermore, once AC receives regulatory approval of the C$1.1 billion benefit reduction from new labor contracts, AC's the pension liability is expected to further decline to C$2.6 billion. In March 2013, the government also agreed to an extension of the 2009 pension relief which was set to expire next year. This extension continues to cap AC's current deficit funding for an additional seven years (until January 2021). The agreement with the government still requires AC to fund its DB plans but the minimum cash contribution of C$150 million (capped at C$200 million) is more manageable as AC enters a heavy fleet investment period over the next couple of years. Without this extension Fitch estimates AC's annual cash contribution would have increased to about C$500 million even with the expected reduction in pension deficit. Like most underfunded DB plans, AC's pension obligations are highly sensitive to interest rates. For perspective, a 1% increase in the discount rate results in a C$1.8 billion decrease in liability, while a 1% decrease results in a C$2.3 billion increase, based on the most recent valuation. Mounting Competitive Pressure in Domestic/Transborder Markets AC's overall traffic performance has been healthy evidenced in the steady increase in load factors, currently in the low-80% range, similar to U.S. peers, as well as yields. AC's industry leading premium product and level of service have also supported AC's unit revenue gains in the premium category. On the international front, AC continues to benefit from its extensive route structure which supports travel to and from Canada as well sixth-freedom traffic. As a result, AC has demonstrated consistent revenue growth across all segments over the last five years. DOMESTIC AND U.S. TRANSBORDER: Year-to-date traffic stats still point to a healthy operating environment for AC. However, Fitch anticipates AC to be challenged in defending its dominant positions in its core domestic and U.S. transborder markets as competition intensifies with WestJet later this year. WJET plans to expand into AC's turf with the launch of its new regional airline 'Encore' for express service in Canada and the U.S. in the second-half, and is also growing in the eastern triangle with expanded service and cabins reconfigured with premium economy to attract AC's corporate travelers. In response, AC is also enhancing its domestic schedule especially to Western Canada and realigning fleet for gauge optimization, to better compete with WJET in core markets. Still, Fitch expects the new capacity coming online in the second- half to pressure AC's domestic and U.S. transborder segments later this year. Fitch's base case forecast assumes a decline in the transborder revenues this year reflecting continued pressure on yields against a backdrop of relatively low load factors (in the high-70%). Fitch expects the impact on domestic yields to be less acute as the planned 2.6% increase in ASMs, based on capacity guidance from AC and WestJet could still be supportive of a healthy operating environment as long as demand remains stable. Outlook For International Solid Despite Execution Risk The outlook for the international segment remains solid underpinned by AC's extensive network including Star Alliance partners and exclusive route rights to several destinations and continued growth in sixth-freedom traffic up 20% in 2012 and 150% since 2009. AC is focused on expanding its share of international markets with several initiatives for its mainline operations and is also planning to launch rouge, a new low-cost subsidiary targeted for leisure markets. MAINLINE: For its mainline, AC is enhancing its service offerings by revamping its widebody fleet and expanding in Asia. The company plans to add five new 777-300ERs by February next year, and induct the 787s starting next year to replace older 767s which are being transferred to rouge. In addition to the fuel and operating efficiency, AC's new widebody fleet will feature a new cabin configuration with industry leading on-board products that are also expected to enhance the revenue potential of these ships. The new aircraft will feature three classes of service including Executive First, a new Premium Economy cabin and Economy in 36/24/298 layout for a total of 458 seats, which is 109 more than the standard configuration, or about 40% more seats than what other full-service carriers typically offer. Premium economy typically generates 1.5x more revenues than standard economy without utilizing too much space. AC also has made significant investments to improve the on-board product including full lie- flat beds in First Class, in-seat audio/video, and power ports in all cabins. Other investments include an enhancements to its frequent-flier program (Altitude), Maple Leaf lounges and mobile- friendly booking and check-in process. ROUGE: AC expects to commence service with rouge in July 2013 with two 767-300ERs and two A319s that are being transferred from mainline with reconfigured all economy cabins. With rouge management's strategy envisions servicing leisure destinations in Europe and the Caribbean sun markets, that are either currently underserved, or do not generate adequate profitability with AC's existing cost structure. Rouge will be formed as a separate company with its own operating certificate, labor contracts and dedicated management team as part of AC's integrated leisure group including AC's tour operator business. Fitch is somewhat concerned about this initiative as the concept of starting an airline within an airline has failed for North American carriers, including AC (Tango in 2001 and Zip in 2002). However, with rouge, AC management is looking to replicate Qantas and Jetstar, which are part of a successful two-brand strategy with Qantas competing in the premium business market and Jetstar focusing on leisure markets in Australia. Like AC, Qantas is a large airline burdened with legacy costs, residing in a home market that is vast in territory but light in population. Australia also resembles Canada in that both are high-income economies rich in natural resources, home to many immigrants and influenced by a stable currency. The execution risk is mitigated by rouge's experienced leadership at the helm, and the business plan which includes several of the key factors that made Qantas successful in launching Jetstar. Specifically, similar to JetStar/Qantas, rouge/AC will be an independent operation but with a holistic approach, and feature different brands targeting different customers which limits mainline traffic cannibalization. Importantly rouge will have separate pilot and crew agreements which enables AC to serve popular leisure destinations at a much lower cost, which was the key ingredient missing in previous efforts by AC and U.S. carriers. With a fleet of 10 aircraft by year-end 2013, rouge will provide immediate international growth opportunities at a higher margin while AC awaits the arrival of its 787s in 2014 which is expected to further enhance AC's international growth plans for its mainline operations, along with its 777 fleet. Over time, depending on demand, Rouge may operate up to 20 767-300ERs and 30 A319s, for a total of 50 aircraft. Overall, Fitch views AC's strategic focus on international routes as a positive ratings factor as they offer higher revenue potential and play to the carrier's strength given its extensive route structure, as long as management can execute on rouge as planned. Operating Earnings Expected to Improve AC is moving in the right direction with regards to lowering its legacy costs, but the competitive and demand environment will ultimately dictate whether AC can leverage a lower cost base to drive higher profitability. WJET has clear intentions on competing with price, but if the demand environment remains strong, the impact on yields would not be as severe as Fitch's base case projections. Fitch also expects the unit cost differential between AC and WJET, which used to be substantial at roughly 50%, to continue to narrow from 29% currently to the high-teens going forward. While this cost-convergence (Fitch's fourth 'C') is encouraging for AC's profitability outlook, it still lags the convergence between LCCs and legacy carriers in the U.S. in recent years, and still reflects one of the highest cost structures for North American carriers. The outlook for international remains promising but could have some operational risk with rouge. Taken together, Fitch expects modest increase in operating earnings and profitability this year, but could grow substantially next year if AC is able to successfully execute on its plan, with operating margins approaching mid-single digits. Adequate Liquidity and Limited Financial Flexibility AC's total liquidity position has improved since the credit crisis with unrestricted cash maintained at or above 17% (as a percentage of revenues) over the last three years. FCF has also been positive during this period but more reflective of the significant pullback in the capital expenditures. Fitch expects AC's liquidity to remain adequate at or above management's 15% threshold over the next two years but also assumes a heavy reliance on external sources of capital as FCF is expected to turn negative due to higher capex. In addition to cash pension contributions, AC also faces looming maturities in 2015-2016 when C$1.1 billion of its high-yield come due. However, the company may look to address its upcoming debt towers later this year when the call premium of its high-yield notes steps down, well ahead of scheduled maturity. AC's entrance into the EETC market is expected to diversify the company's aircraft financing that have historically been provided by the bank and ECA markets. Fitch expects AC to successfully execute its debut EETC issuance now that Canada has adopted Cape Town Convention with all the qualifying declarations that provides credit protection similar to Section 1110, and the inclusion of high-quality Tier 1 collateral, which should set the stage for subsequent issuance for its remaining order book. AC also has backstop financing from Boeing for its 31 of its 37 787 deliveries, and access to Ex-Im bank financing. Fitch also expects AC to explore replacement for its narrowbody fleet, especially for the A319s that are earmarked for rouge. Similar to most leveraged peers, AC has very few unencumbered assets limiting the carrier's financial flexibility in a potential downturn. Furthermore, AC has already monetized several parts of its business including Jazz, its regional subsidiary, Aveos, its maintenance unit and most importantly Altitude (formerly called Aeroplan), its frequent-flier program recognition (FFP). While the asset sales helped AC shore up liquidity and fund capex, it leaves little value in the company other than its mainline fleet. As noted in Fitch's Airline Sector Credit Factors report, an airline's FFP is considered a storehouse of value for an airline company. Although initiated to encourage travel and inspire loyalty, FFPs have now become a lucrative source of revenues (selling miles is more profitable than selling tickets). They also anchor strategic partnerships with strong financial institutions, which could become a potential source of liquidity as evidenced in the forward mile sales for all the U.S. network carriers during the depths of the credit crisis in 2008. AC does not have this option anymore but maintains strong strategic ties with Aimia, the company that currently owns AC's FFP. Debt Levels Remain Elevated but Leverage Expected to Improve AC has been steadily reducing balance sheet debt since the credit crisis, with total balance sheet debt declining to C$4 billion by year-end 2012 from C$5.3 billion at the end of 2008. AC's leverage, measured as lease adjusted debt/EBITDAR, has also meaningfully improved from 10.3x at the peak of the crisis to 5.2x at year-end 2012, reflecting both debt reduction and improved earnings. Although management intends to pay down scheduled maturities, the potential refinancing of its high-yield bonds and entrance into the EETC market is expected to keep debt levels elevated in coming years. Fitch estimates lease-adjusted leverage at approximately 5.5x by year-end but could improve by a turn next year with earnings growth. Notably, leverage remains below 8x in Fitch's stress case scenario which assumes a draconian downturn with $100 crude which is high for the ratings, but below peak leverage during the credit crisis, reflecting the company's improved business and financial profile. RATING SENSITIVITIES The Rating Outlook is Positive reflecting Fitch's expectations AC to grow into sustainable profitability during a period of significant capital expenditure, and higher debt levels as it enters the EETC market. A positive rating action could result if: -- Domestic and U.S. Transborder segments perform better than Fitch's expectations, curbing potential share losses to WJET. -- Higher earnings and profitability leads to positive FCF despite higher capex and/or lower leverage in the 4.0-4.5x range. A negative rating action could result if: -- Domestic and U.S. Transborder segments perform worse than Fitch's expectations leading to significant earnings and margin erosion. -- FCF and leverage is worse than Fitch's expectations due to weak earnings. Fitch has assigned the following ratings to Air Canada: -- Long-term IDR 'B'; -- Senior secured first-lien debt 'BB/RR1''; -- Senior secured second-lien debt 'BB-/RR2'. The Rating Outlook is Positive. AMERICAN AIRLINES: Parties Differ on Stand in Make-Whole Issue -------------------------------------------------------------- Bill Rochelle, the bankruptcy columnist for Bloomberg News, reports that AMR Corp. and holders of $1.32 billion in aircraft bonds take different approaches to what's important in a quickly- evolving appeal about the bondholders' right to a make-whole premium on early debt repayment. The report recounts that bondholders are appealing because the bankruptcy court ruled in January that the debt could be repaid without the make-whole. AMR intends to refinance the debt at today's lower interest rates and save $200 million by selling a new issue of $1.5 billion in enhanced equipment trust certificates. The loans being paid early call for interest at rates between 8.6 percent and 13 percent. AMR said the new debt will bear interest comparable to the 4 percent to 4.75 percent rates other major airlines recently negotiated. According to the report, in papers filed last week with the U.S. Court of Appeals in Manhattan, the bondholders pointed to Section 1110 of the U.S. Bankruptcy Code, which required the parent of American Airlines Inc. to perform "all obligations" under the loan documents as a condition to retaining the aircraft. The bondholders interpret those words to mean the airline must abide by provisions requiring payment of the make-whole premium. In its brief filed this week, AMR relies most heavily on the loan documents themselves, which say there is no make-whole owing when there is a default resulting from bankruptcy. Where the bondholders contend Section 1110 in effect reinstates the make- whole, AMR argues that the section "does not negate bankruptcy defaults" and doesn't "deaccelerate a prior acceleration of the loan." The bondholders, represented by indenture trustee US Bank NA, will file their last papers next week. The appeals court will hear arguments during the week of June 17. About American Airlines AMR Corp. and its subsidiaries including American Airlines, the third largest airline in the United States, filed for bankruptcy protection (Bankr. S.D.N.Y. Lead Case No. 11-15463) in Manhattan on Nov. 29, 2011, after failing to secure cost-cutting labor agreements. AMR, previously the world's largest airline prior to mergers by other airlines, is the last of the so-called U.S. legacy airlines to seek court protection from creditors. Weil, Gotshal & Manges LLP serves as bankruptcy counsel to the Debtors. Paul Hastings LLP and Debevoise & Plimpton LLP Groom Law Group, Chartered, are on board as special counsel. Rothschild Inc., is the financial advisor. Garden City Group Inc. is the claims and notice agent. Jack Butler, Esq., John Lyons, Esq., Felecia Perlman, Esq., and Jay Goffman, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP serve as counsel to the Official Committee of Unsecured Creditors in AMR's chapter 11 proceedings. Togut, Segal & Segal LLP is the co-counsel for conflicts and other matters; Moelis & Company LLC is the investment banker, and Mesirow Financial Consulting, LLC, is the financial advisor. AMR and US Airways Group, Inc., on Feb. 14, 2013 announced a definitive merger agreement under which the companies will combine to create a premier global carrier, which will have an implied combined equity value of approximately $11 billion. The deal is subject to clearance by U.S. and foreign regulators and by the bankruptcy judge overseeing AMR's bankruptcy case. Bankruptcy Creditors' Service, Inc., publishes AMERICAN AIRLINES BANKRUPTCY NEWS. The newsletter tracks the Chapter 11 proceeding undertaken by AMR Corp. and its affiliates. (http://bankrupt.com/newsstand/or 215/945-7000). ANDERSON NEWS: Time Fails in Sanctions Bid Over Disputed Meeting ---------------------------------------------------------------- Maria Chutchian of BankruptcyLaw360 reported that a New York federal judge on Tuesday refused to award sanctions against Anderson News LLC despite allegations from Time Inc. and others accused of sinking the defunct magazine wholesaler that Anderson fabricated the occurrence of a conspiratorial meeting in a court filing. According to the report, U.S. District Judge Paul A. Crotty said even if the allegations surrounding that meeting prove to be false, they are not, at this point in the case, objectively unreasonable and therefore are allowed to stand. About Anderson News Anderson News LLC was a sales and marketing company for books and magazines. Anderson News ceased doing business in February 2009, and was the subject of an involuntary Chapter 7 petition filed by certain of its creditors (Bankr. D. Del. Case No. 09-10695) on March 2, 2009. The publishing companies claimed that Anderson News owes them a combined $37.5 million. An order for relief was entered on Dec. 30, 2009, and the bankruptcy case was converted from one under Chapter 7 to one under Chapter 11 on the same day. AMERICAN AIRLINES: Antitrust Deals With Orbitz, Travelport OK'd --------------------------------------------------------------- Maria Chutchian of BankruptcyLaw360 reported that a New York bankruptcy judge on Tuesday approved AMR Corp.'s antitrust settlements with Orbitz Worldwide Inc. and airfare distributor Travelport Ltd., ending the companies' two-year battle over online travel pricing and booking. According to the report, at a court hearing Tuesday, U.S. Bankruptcy Judge Sean H. Lane gave his go-ahead for the deals, which include financial terms that were not made public. Both agreements resolve litigation between American Airlines and the travel agencies, which the airline accused of monopolizing how fares and flights are distributed to travel agents. The litigation is pending in a federal court in Texas. Under the agreement with Travelport, American Airlines will receive cash payments from the travel agency. The deal also resolves the litigation filed by the agency against the airline in the Circuit Court for Cook County, Illinois. As part of the settlement, American Airlines will take over some existing agreements with Travelport, which have been revised recently to improve the distribution of the airline's products. The settlement agreements are available without charge at: http://bankrupt.com/misc/AMR_TravelportSettlement031213.pdf http://bankrupt.com/misc/AMR_OrbitzSettlement032913.pdf About American Airlines AMR Corp. and its subsidiaries including American Airlines, the third largest airline in the United States, filed for bankruptcy protection (Bankr. S.D.N.Y. Lead Case No. 11-15463) in Manhattan on Nov. 29, 2011, after failing to secure cost-cutting labor agreements. AMR, previously the world's largest airline prior to mergers by other airlines, is the last of the so-called U.S. legacy airlines to seek court protection from creditors. Weil, Gotshal & Manges LLP serves as bankruptcy counsel to the Debtors. Paul Hastings LLP and Debevoise & Plimpton LLP Groom Law Group, Chartered, are on board as special counsel. Rothschild Inc., is the financial advisor. Garden City Group Inc. is the claims and notice agent. Jack Butler, Esq., John Lyons, Esq., Felecia Perlman, Esq., and Jay Goffman, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP serve as counsel to the Official Committee of Unsecured Creditors in AMR's chapter 11 proceedings. Togut, Segal & Segal LLP is the co-counsel for conflicts and other matters; Moelis & Company LLC is the investment banker, and Mesirow Financial Consulting, LLC, is the financial advisor. AMR and US Airways Group, Inc., on Feb. 14, 2013 announced a definitive merger agreement under which the companies will combine to create a premier global carrier, which will have an implied combined equity value of approximately $11 billion. The deal is subject to clearance by U.S. and foreign regulators and by the bankruptcy judge overseeing AMR's bankruptcy case. Bankruptcy Creditors' Service, Inc., publishes AMERICAN AIRLINES BANKRUPTCY NEWS. The newsletter tracks the Chapter 11 proceeding undertaken by AMR Corp. and its affiliates. (http://bankrupt.com/newsstand/or 215/945-7000). AMERICAN ASSET: Settles Loan Dispute with Bank of America --------------------------------------------------------- American Asset Corporation has amicably settled a long-running dispute with lender Bank of America over 10 loans on properties represented and managed by AAC. These disputed loans concerned 15% of the diversified commercial real estate portfolio managed and controlled by AAC. The agreement between the parties ended the litigation between the bank and the various borrowers, and resulted in the bank's issuance of new, five-year non-recourse single asset loans on market-based terms for the 10 properties involved in the dispute. The dispute began in 2008 over approximately $130 million in short-term construction loans and their maturity. On Tuesday, April 23, AAC and Bank of America requested that the U.S. bankruptcy court approve a consensual plan for a five-year extension and re-issue of these loans. This plan was approved by the court the same date. The plan essentially resulted in the restructuring of the existing loans into new five-year loans at market rates. With the restructuring agreed to and the plan approved by the U.S. bankruptcy court, AAC ended chapter 11 for these properties as well as the litigation against the bank. The loans on the 10 properties in question have continued to perform well as AAC leased an additional 220,000 square feet during the past two years. "The consensual extension settlement with the bank at par proves the values of the underlying assets and confirms AAC as the leading private development company in the Carolinas," said Count Arco, CEO of AAC. "We're pleased that this has been brought to a positive conclusion and we have returned these 10 properties to a normal operating environment," said AAC President Paul Herndon. "The regional economy in the Carolinas continues to improve and more companies are moving into the area, creating new jobs and demand for space in our office and retail developments." Founded in 1986 by Riprand Graf Arco, AAC is a major commercial real estate firm operating in the southeastern U.S. APEX DIGITAL: Effective Date of Plan Occurred on April 17 --------------------------------------------------------- Reorganized Debtor Apex Digital, Inc., informs the U.S. Bankruptcy Court for the Central District of California that all conditions to the effectiveness of the Debtor's Amended Chapter 11 Plan (Dated Feb. 1, 2013), as confirmed by the Bankruptcy Court on March 28, 2013, has been satisfied or waived, and the Effective Date of the Plan occurred on April 17, 2013. According to the Order confirming the Plan, as set forth in the Ballot Report, Class 1 (Avision Secured Claim) accepted the Plan. With respect to Class 3 (General Unsecured Claims), a total of 13 Holders of Class 3 Claims voted on the Plan, and of these holders, 11 of them, asserting a total amount of $31,322,654.76 (99.998% of total received), voted in favor of the Plan. Two such holders, asserting a total of $681.68 (0.002% of total received), voted to reject the Plan. Pursuant to Section 1126(c) of the Bankruptcy Code, Class 3 has accepted the Plan. All holders of equity interests voted to accept the Plan. The Plan, therefore, satisfies Section 1129(a)(8) of the Bankruptcy Code as to Classes 1, 3 and 4. The Disclosure Statement Order was entered on Feb. 5, 2013. According to the Disclosure Statement, Avision Technology Co. Limited will receive monthly payments of $5,000 for 48 full calendar months following the Effective Date. The principal balance of Avision's allowed secured claim, and any accrued but unpaid interest, will be fully due and payable on the first day of the fiftieth (50th) full calendar month following the Effective Date. In full settlement and satisfaction of all Class 3 allowed claims, General Unsecured Creditors will be paid on a pro rata basis from cash of the Creditors Trust remaining after payment of administrative and priority claims, and post-confirmation fees and expenses payable from the Creditors' Trust. The equity interests in the Debtor will be cancelled to the extent not held by David Ji. Following the Effective Date 100% of the equity interests will be held by David Ji. A copy of the Confirming Order is available at: http://bankrupt.com/misc/apexdigital.doc412.pdf A copy of the Amended Disclosure Statement is available at: http://bankrupt.com/misc/apexdigital.doc361.pdf About Apex Digital Walnut, California-based Apex Digital, Inc., was a leading producer and seller of consumer electronic products, including high-definition LCD televisions, home entertainment media devices, digital set top boxes and lighting products (e.g., solar powered lights), which are carried and sold in hundreds of retail outlets nationwide. Apex Digital filed for Chapter 11 protection (Bankr. C.D. Calif. Case No. 10-44406) on Aug. 17, 2010. Juliet Y. Oh, Esq., and Philip A. Gasteier, Esq., at Levene, Neale, Bender, Rankin & Brill LLP, in Los Angeles, California, represent the Debtor. In its schedules, the Debtor disclosed $12.8 million in assets and $27.1 million in liabilities, as of the Petition Date. Ira D. Kharasch, Esq., and Robert M. Saunders, Esq., at Pachulski Stang Ziehl & Jones LLP, in Los Angeles, California, represent the Official Committee of Creditors Holding Unsecured Claims. APEX DIGITAL: Committee Identifies Members of Plan Committee ------------------------------------------------------------ The Official Committee of Creditors Holding Unsecured Claims appointed in Chapter 11 case of Apex Digital, Inc., informs the Court of its selection of the following initial members of the Plan Committee under section I.D.2(e)(i) of the Amended Chapter 11 Plan of Reorganization, as of the Effective Date of the Plan: 1. Jiangsu Hongtu High Tech Co., Ltd. 2. MPEG, LA, L.L.C. 3. Wi-Lan, Inc. About Apex Digital Walnut, California-based Apex Digital, Inc., was a leading producer and seller of consumer electronic products, including high-definition LCD televisions, home entertainment media devices, digital set top boxes and lighting products (e.g., solar powered lights), which are carried and sold in hundreds of retail outlets nationwide. Apex Digital filed for Chapter 11 protection (Bankr. C.D. Calif. Case No. 10-44406) on Aug. 17, 2010. Juliet Y. Oh, Esq., and Philip A. Gasteier, Esq., at Levene, Neale, Bender, Rankin & Brill LLP, in Los Angeles, California, represent the Debtor. In its schedules, the Debtor disclosed $12.8 million in assets and $27.1 million in liabilities, as of the Petition Date. Ira D. Kharasch, Esq., and Robert M. Saunders, Esq., at Pachulski Stang Ziehl & Jones LLP, in Los Angeles, California, represent the Official Committee of Creditors Holding Unsecured Claims. APPLEILLINOIS LLC: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: AppleILLINOIS, LLC 741 Centre View Blvd Crestview Hills, KY 41017 Bankruptcy Case No.: 13-20723 Chapter 11 Petition Date: April 22, 2013 Court: United States Bankruptcy Court Eastern District of Kentucky (Covington) Debtor's Counsel: Ellen Arvin Kennedy, Esq. DINSMORE & SHOHL 250 West Main Street, Suite 1400 Lexington, KY 40507 Tel: (859) 425-1020 E-mail: dsbankruptcy@dinslaw.com Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $1,000,001 to $10,000,000 A copy of the Company's list of its 20 largest unsecured creditors, filed together with the petition, is available for free at http://bankrupt.com/misc/kyeb13-20723.pdf The petition was signed by W. Curtis Smith, managing member. ARTE SENIOR LIVING: Plan Confirmation Hearings Begin ---------------------------------------------------- The U.S. Bankruptcy Court for the District of Arizona has ordered that Arte Senior Living L.L.C.'s First Amended Plan of Reorganization dated Dec. 11, 2012, as modified by certain non- adverse modifications on Feb. 25, 2013, is the Debtor's operative plan of reorganization. The confirmation of the Debtor's Modified Plan was set for trial April 25, and today, April 26. As reported in the TCR on March 19, 2013, the Debtor's First Amended Plan of Reorganization, dated Dec. 11, 2012, as modified on Feb. 25, 2013, impairs allowed unsecured claims. The Allowed Unsecured Claims in this Class will share, pro rata among themselves and with SMA Portfolio Owner, L.L.C.'s Allowed Unsecured Claim in Class 3-A, in a distribution of the sum of $100,000. SMA, the secured lender, will also have an allowed secured claim, in the approximate amount of $34,262,661, to be paid in full with interest. SMA will retain its existing lien on the property known as the Arte resort retirement community located at 11415 North 114th Street, in Scottsdale, Arizona. A full-text copy of the Debtor's Feb. 25 version of the Plan is available for free at: http://bankrupt.com/misc/ARTESENIOR_plan0225.pdf About Arte Senior Living Arte Senior Living L.L.C. owns and operates an independent and assisted living facility, known generally as the Arte Resort retirement community, located at 11415 North 114th Street, in Scottsdale, Arizona. The Property consists of 128,514 square feet of rentable living space. The Property is managed by Encore Senior Living. Arte Senior Living filed a Chapter 11 petition (Bankr. D. Ariz. Case No. 12-14993) in Phoenix on July 5, 2012. The Debtor estimated assets and liabilities of $10 million to $50 million. Judge George B. Nielsen Jr. oversees the case. John J. Hebert, Esq., at Polsinelli Shughart, P.C., serves as counsel to the Debtor. Syble Oliver appointed as patient care ombudsman. SMA Portfolio Owner L.L.C. is represented by lawyers at Greenberg Traurig, LLP. The Debtor disclosed $52,317,766 in assets and $34,411,296 in liabilities as of the Chapter 11 filing. ATARI INC: In Talks to Sell Off Assets -------------------------------------- Maria Chutchian of BankruptcyLaw360 reported that the bankrupt U.S.-based branch of French video game company Atari SA on Wednesday said it is in talks with potential buyers and anticipates that an offer will be made to purchase its assets in the coming weeks. According to the report, Atari Inc. and its subsidiaries, Atari Interactive Inc., Humongous Inc. and California US Holdings Inc., entered Chapter 11 bankruptcy in New York in January, saying at the time that they expected to either sell or restructure all or most of their assets in the next three to four months. About Atari Atari -- http://www.atari.com-- is a multi-platform, global interactive entertainment and licensing company. Atari owns and/or manages a portfolio of more than 200 games and franchises, including world renowned brands like Asteroids(R), Centipede(R), Missile Command(R), Pong(R), Test Drive(R), Backyard Sports(R), and Rollercoaster Tycoon(R). Atari Inc. and its U.S. affiliates filed for Chapter 11 bankruptcy (Bankr. S.D.N.Y. Lead Case No. 13-10176) on Jan. 21, 2013, to break away from their unprofitable French parent company and secure independent capital. A day after its American unit filed for Chapter 11 bankruptcy protection, Paris-based Atari S.A. took a similar measure under Book 6 of that country's commercial code. Atari S.A. said it was filing for legal protection because its longtime backer BlueBay has sought to sell its 29% stake and demanded repayment by March 31 on a credit line of $28 million that it cut off in December. Peter S. Partee, Sr. and Michael P. Richman of Hunton & Williams LLP are proposed to serve as lead counsel for the U.S. companies in their Chapter 11 cases. BMC Group is the claims and notice agent. Protiviti Inc. is the financial advisor. The Official Committee of Unsecured Creditors is seeking Court permission to retain Duff & Phelps Securities LLC as its financial advisor. The Committee sought and obtained authority to retain Cooley LLP as its counsel. ATLANTIC COAST: Amends Merger Agreement with Bond Street -------------------------------------------------------- Atlantic Coast Financial Corporation said that the definitive merger agreement with Bond Street Holdings Inc., dated Feb. 25, 2013, has been amended to eliminate the transaction's $2.00 per share contingency consideration. Accordingly, the Company's stockholders will receive upon closing of the transaction the entire $5.00 per share in cash for each share owned. The amended merger agreement was approved by the respective Boards of Directors of both the Company and Bond Street, a community- oriented bank holding company with $3.2 billion in total assets that operates 41 community banking branches along both Florida coasts and in the Orlando area. The transaction is expected to close by the end of the second quarter of 2013, subject to customary closing conditions, including regulatory approvals and the approval of Company stockholders. Upon completion of the merger transaction, Atlantic Coast Bank will merge into Florida Community Bank, N.A., Bond Street's banking subsidiary. Under the previously announced merger agreement, the Company's stockholders were to receive $5.00 per share in cash for each common share owned. Of that amount, $2.00 of the total per share consideration was to be held in an escrow account and available to cover losses from stockholder claims for one year or until the final resolution of those claims, if later. Under the terms of the amended agreement, that contingency has been lifted. Thomas Frankland, president and chief executive officer of the Company, said, "This amended merger agreement provides our stockholders with cash payment in full at the time the transaction closes, eliminating any and all uncertainty about the value stockholders will receive and the timing of that payment. It enables our stockholders to capitalize immediately upon closing on the compelling value the transaction provides relative to our stock's recent historical and present trading values and mitigate their investment's potential exposure given the regulatory environment in which the Company is now operating. Simply put, it provides a transaction for stockholders, our organization and customers with minimal execution risks compared with the other strategic alternatives that the Board considered. It simplifies the transaction's structure for stockholders and at the same time addresses the concerns about the transaction raised by certain dissenting stockholders. With the escrow requirement now eliminated in favor of a straightforward cash transaction, we are confident we are on track to finalize the transaction as planned, and we look forward to joining with Florida Community Bank to build an even stronger and more competitive community banking organization." Kent Ellert, president and chief executive officer of Florida Community Bank, said, "We have continued to carefully review all aspects of the proposed merger with Atlantic Coast Financial Corporation, and we have become confident that we do not need a contingency reserve for this transaction. The proposed transaction value of this merger transaction - $5.00 all cash per share payable in full at closing - is $13.1 million. As announced on Feb. 26, 2013, the $5.00 per share merger consideration to be realized by stockholders represents a premium of approximately 49% to the Company's average stock price of $3.36 over the 10-day period ended February 25, 2013, and continues to be a premium to the stock price since that date. The transaction, in our view, is win-win for all parties - the stockholders of Atlantic Coast Financial Corporation, the banking organizations of both Atlantic Coast Bank and Florida Community Bank, and the customers and communities we serve. We look forward to the transaction's successful completion." Upon completion of the transaction, Atlantic Coast Bank will merge into Florida Community Bank, making Florida Community Bank the fourth largest bank headquartered in Florida, with almost $4 billion in assets and 53 locations along both Florida coasts and in Southeast Georgia. About Atlantic Coast Jacksonville, Florida-based Atlantic Coast Financial Corporation is the holding company for Atlantic Coast Bank, a federally chartered and insured stock savings bank. It is a community- oriented financial institution serving northeastern Florida and southeastern Georgia markets through 12 locations, with a focus on the Jacksonville metropolitan area. Atlantic Coast disclosed a net loss of $6.66 million in 2012, as compared with a net loss of $10.28 million in 2011. The Company's balance sheet at Dec. 31, 2012, showed $772.61 million in total assets, $732.35 million in total liabilities and $40.26 million in total stockholders' equity. McGladrey LLP, in Jacksonville, Florida, issued a "going concern" qualification on the consolidated financial statements for the year ended Dec. 31, 2012. The independent auditors noted that the Company has suffered recurring losses from operations that have adversely impacted capital at Atlantic Coast Bank. The failure to comply with the regulatory consent order may result in Atlantic Coast Bank being deemed undercapitalized for purposes of the consent order and additional corrective actions being imposed that could adversely impact the Company's operations. This raises substantial doubt about the Company's ability to continue as a going concern. AVIS BUDGET: Fitch Hikes LT Issuer Default Rating to 'BB-' ---------------------------------------------------------- Fitch Ratings has upgraded the Issuer Default Rating (IDR), senior secured, and senior unsecured ratings of Avis Budget Group, Inc. (ABG) and its various Fitch-rated subsidiaries following the completion of its auto rental and fleet leasing peer review. The Rating Outlook is Stable. RATING ACTION RATIONALE The upgrades to the IDR are supported by the strength of ABG's dual brand strategy, its leading position in the on-airport rental market and record operating results in 2012. ABG's liquidity profile is strong given increased EBITDA and operating cash generation, as well as improved access to the capital markets. Fitch believes ABG currently has a more flexible business model than before the last downturn due to its improvements in revenue and supplier diversity, operating leverage, liquidity and funding. As a result of the upgrade, Fitch no longer deems it necessary to assign specific Recovery Ratings to the senior secured and unsecured debt, as the relative notching of the ratings to the IDR is reflective of its potential default risk for these classes of debt. Rating constraints include cyclicality of the business and its susceptibility to potential slowdowns in travel volumes, and reliance on predominantly secured funding. While ABG remains susceptible to pricing pressures and passenger volumes in air travel, Fitch believes the company is better equipped to manage cyclical downturns and maintain positive earnings, barring extreme disruptions in vehicle prices and suppliers, which would raise fleet costs beyond levels that cannot be passed on to renters. The Stable Outlook reflects Fitch's expectation for continued access to the capital markets through various market cycles, strong liquidity, consistent operating cash flow generation, and continued earnings growth in 2013 supported by incremental EBITDA generation and improved operating leverage. KEY RATING DRIVERS Operating Performance ABG achieved record operating performance in 2012 as net income grew 25% to $7.4 billion due to substantial growth in the international segment resulting from the Avis Europe acquisition in 2011. Adjusted EBITDA for the full year 2012 improved 33% to $802 million compared to $605 million in 2011 on higher revenues and lower fleet costs. Fitch expects operating performance will continue to improve as ABG further benefits from improved operating leverage resulting from integration of Avis Europe as well as its recent acquisition of Zipcar, Inc. (ZIP) in March 2013 for $500 million. ABG expects pro forma adjusted EBITDA to be $917 million, assuming $60 million of synergies, $17 million of adjusted EBITDA from ZIP, and last 12-month ABG adjusted EBITDA of $840 million. Excluding expected synergies, Fitch expects pro forma consolidated adjusted EBITDA to range between $742 million and $842 million based on the company's guidance for standalone adjusted EBITDA for 2013. Given strong residual values, cost reduction efforts, improved supplier diversity and expansion of ancillary revenue products, Fitch believes ABG's earnings forecasts are achievable. Liquidity and Funding Fitch believes ABG's liquidity profile is strong given increased EBITDA, operating cash generation, and improved capital markets access. At year-end 2012, the company had $606 million of unrestricted cash, and nearly $3.4 billion of availability under its various financing arrangements. During the first quarter of 2013, ABG raised approximately $685 million of corporate debt in aggregate and increased its European securitization by approximately $195 million to fund the ZIP acquisition, refinance existing debt at more attractive terms, and to fund peak seasonal vehicle purchases. The company's funding profile is predominantly secured and ABG remains primarily reliant on secured corporate debt and securitizations. On a pro forma basis as of Dec. 31, 2012, vehicle-backed debt of $7.0 billion and secured corporate debt of $949 million together represent approximately 75% of total long- term debt. Fitch would view an increase of unsecured debt in ABG's funding mix positively, as it would add additional flexibility to the company's overall funding profile. Capitalization and Leverage As a function of cash flow leverage, total debt to EBITDA improved to 3.77x in 2012 compared to 3.83x in 2011. Excluding vehicle debt and related interest expense as well as noncash vehicle depreciation, corporate debt to adjusted EBITDA declined to 3.62x in 2012 compared to 5.30x one-year prior. The improvement in corporate leverage was driven by a combination of incremental earnings and lower corporate debt balances through deleveraging. Balance sheet leverage, as measured by total debt to equity, improved significantly to 12.83x at year-end 2012 from 21.28x in 2011 due to increased retained earnings during the period. Given the additional $685 million of corporate debt raises to fund the ZIP acquisition and refinance existing debt, pro forma consolidated leverage would range between 4.26x and 4.84x on a corporate debt to adjusted EBITDA basis. This incorporates Fitch's expectation for ABG's pro forma adjusted EBITDA projected for 2013, assuming no benefit of expected $60 million of midpoint synergies. ABG manages its leverage from a corporate leverage standpoint, net of balance sheet cash. Pro forma consolidated leverage, net of cash, would range between 3.37x and 3.82x, which remains consistent with the company's articulated target of between 3x and 4x. Fitch believes the incremental leverage ABG undertook to acquire ZIP was reasonable and is neutral to the company's overall credit profile. SUBSIDIARY AND AFFILIATED COMPANY RATING DRIVERS AND SENSITIVITIES Avis Budget Finance PLC and Avis Budget Car Rental LLC are wholly- owned subsidiaries of ABG. The ratings are aligned with that of ABG because of the unconditional guarantee provided by ABG and its various subsidiaries. Therefore, the ratings are sensitive to the same factors that might drive a change in ABG's IDR. RATING SENSITIVITIES - IDRS, SENIOR DEBT Fitch believes that positive ratings momentum is limited in the near term, although over the longer term, ratings may be positively influenced by sustained improvements in leverage and liquidity, maintaining appropriate capitalization, and economic access to the capital markets. Additionally, ABG's ability to realize operating synergies from its recent ZIP acquisition and successfully leverage the brand into stronger earnings performance over time would also be viewed positively by Fitch. Conversely, negative rating actions would be driven by material deterioration in revenue and cash flow generation resulting from a decline in passenger volumes, rental rates and used car values, which would impair ABG's access to funding, liquidity, and/or capitalization. Leverage remaining at materially higher levels, reduced commitment by management to reduce leverage, or an inability to generate incremental revenues from ZIP could also yield negative rating actions. Fitch has upgraded the following ratings: Avis Budget Group, Inc. -- Long-term IDR to 'BB-' from 'B+'. Avis Budget Car Rental, LLC -- Long-term IDR to 'BB-' from 'B+'; -- Senior secured debt to 'BBB-' from 'BB+/RR1'; -- Senior unsecured debt to 'BB-' from 'B+/RR4'. Avis Budget Finance PLC -- Long-term IDR to 'BB-' from 'B+'; -- Senior unsecured debt to 'BB-' from 'B+/RR4'. The Rating Outlook is revised to Stable from Positive. BRIER CREEK: Bank of America Drops Objection to Plan ---------------------------------------------------- Brier Creek Corporate Center Associates Limited Partnership filed with the U.S. Bankruptcy Court for the Eastern District of North Carolina a First Amended and Restated Joint Plan of Reorganization dated April 22, 2013. Bank of America, N.A., filed an objection to the original version of the Plan, which was filed Jan. 21, 2013, and the explanatory disclosure statement, and voted to reject the Plan with respect to its secured and unsecured claims. According to papers filed with the Court, no other objections were filed with respect to the Disclosure Statement or to the Initial Plan, and no other creditors or equity interest holders voted to reject the Initial Plan. Modifications to Initial Plan as it Pertains to BOA Subject to the conditions set forth in the Restated Plan, Bank of America has agreed to withdraw the BOA Objection, change its ballots from rejection of the Initial Plan to acceptance of the Plan, and support confirmation of the Plan. The changes made in the Plan affect only the secured and unsecured claims of BOA, do not materially or adversely affect the claims of other creditors or equity interest holders, and do not require an amendment to the Disclosure Statement or re-balloting by creditors or equity interest holders to accept or reject the Plan. Under the First Amended and Restated Joint Plan, the Allowed Secured Claim of BOA in each Case will be paid in accordance with the following terms: Term: Five years from Effective Date. Effective Date: May 1, 2013, if the Court confirms the Plan on April 23, 2013, but in no event later than June 1, 2013, if the Court confirms the Plan on May 20, 2013. Rate: Bank's Daily LIBOR plus 425 basis points, with a floor of 4.25% and a cap of 5.00%. Payments, Other Loan Terms: For the first two years after the Effective Date, payments will be of interest only, payable monthly in arrears and commencing 30 days after the Effective Date. For the following three years, payments will be made on a 30-year amortization schedule. All outstanding principal and accrued interest will be due and payable in full on or before the end of the Term, together with any outstanding amounts owed for fees or expenses permitted in the Loan Documents. The complete details pertaining to the modified treatment of the BOA Loan Documents are found on pages 26 through 30 of the First Amended and Restated Joint Plan, a copy of which is available at: http://bankrupt.com/misc/briercreek.doc424.pdf About Brier Creek Corporate Brier Creek Corporate Center Associates Limited and eight other related entities affiliates filed for Chapter 11 protection (Bankr. E.D.N.C. Lead Case No. 12-01855) on March 9, 2012. The Debtors own real property located in Wake County, North Carolina and Mecklenburg County, North Carolina. In most instances, the real property owned by the Debtors consists of land upon which is constructed commercial or industrial buildings consisting of office, service or retail space. The other debtors are Brier Creek Office #4, LLC; Brier Creek Office #6, LLC; Service Retail at Brier Creek, LLC; Service Retail at Whitehall II Limited Partnership; Shopton Ridge 30-C, LLC; Whitehall Corporate Center #4, LLC; Whitehall Corporate Center #5, LLC; and Whitehall Corporate Center #6, LLC. Brier Creek is a 106-acre development that is to have 2.8 million square feet of commercial space. Whitehall has 146 acres and will have 4 million square feet on completion. Brier Creek Corporate scheduled assets of $19,713,147 and liabilities of $18,086,183. Judge Stephani W. Humrickhouse oversees the case. Northen Blue, LLP, serves as counsel to the Debtors. C. Richard Rayburn, Jr. and the firm Rayburn Cooper & Durham, P.A., serve as special counsel. Grant Thornton LLP is the accountant. Bidencope & Associates was hired as appraiser. The petitions were signed by Terry Bradshaw, vice president. Brier Creek's other affiliated entities are Cary Creek Limited Partnership; Shopton Ridge Business Park Limited Partnership; AAC Retail Property Development and Acquisition Fund, LLC; American Asset Corporation Companies Limited; and American Asset Corporation. Cary Creek Limited Partnership filed a voluntary petition on Jan. 3, 2013. By order entered Jan. 10, 2013, the bankruptcy case of Cary Creek Limited Partnership was consolidated with the other debtors' cases and all of the cases are now being jointly administered for procedural purposes only. BROOKLYN NAVY: S&P Corrects Rating on Revenue Bonds to 'CCC' ------------------------------------------------------------ Standard & Poor's Ratings Services corrected its issue rating on US$307 million secured industrial development revenue bonds (IDRBs) due 2036 by lowering it to 'CCC' and revising its recovery rating to '4'. The bonds are issued by the New York City Industrial Development Agency. The bonds are on CreditWatch with developing implications. Brooklyn Navy Yard Cogeneration Partners L.P. is the obligor of the IDRBs. On Dec. 6, 2012, S&P lowered the rating on Brooklyn Navy's senior secured debt rating to 'CCC' and revised the recovery rating to '4' due to liquidity and operational issues. The secured IDRBs are also obligations of Brooklyn Navy Yard Cogeneration L.P. and should have also been lowered at that time. RATING LIST Downgraded, Recovery Revised To From Brooklyn Navy Yard Cogeneration Partners L.P. Senior secured IDRB CCC/Watch Developing B/Watch Negative Recovery rating 4 3 CAESARS ENTERTAINMENT: To Form New Growth-Oriented Venture ---------------------------------------------------------- Caesars Entertainment Corporation's Board of Directors has approved the material terms of a strategic transaction intended to improve the company's capital structure and provide support for new projects. As part of the transaction, Caesars will form a new growth-oriented entity, Caesars Growth Partners, LLC, to be owned by Caesars and participating Caesars stockholders. The transaction is intended to provide capital to allow Caesars to continue to fund growth opportunities in a less levered and more flexible vehicle than its existing operating subsidiaries. In addition, the transaction will result in a cash infusion into Caesars Entertainment Operating Company, Inc., from the sale of certain assets to Growth Partners, while also freeing CEOC from funding future equity contributions required for certain projects under development. "The transaction is an important step in our ongoing efforts to improve the company's balance sheet and position ourselves to make strategic investments," said Gary W. Loveman, chairman, president and chief executive officer of Caesars Entertainment. "Caesars Growth Partners and its simple and flexible capital structure provide us with a vehicle to pursue growth opportunities while retaining a significant portion of the financial upside associated with these assets and projects. The transaction enables us to raise equity capital at attractive valuations without diluting stockholders of Caesars and provides Caesars additional cash liquidity without incurring new debt. I am pleased that our Sponsors, TPG and Apollo, have chosen to express their confidence in our current position and future opportunities through their new investment." The operating assets contributed or sold by Caesars will be held by Growth Partners. Participating Caesars stockholders, including the Sponsors, will own their interests in Growth Partners through Caesars Acquisition Company, a company created to facilitate this transaction. In connection with the transactions, Caesars intends to distribute subscription rights at no charge to Caesars' stockholders on a pro rata basis. Funds affiliated with Apollo Management, L.P. and TPG Capital L.P. have advised Caesars that they each intend to invest $250 million in CAC, though they have not entered into any agreement to do so. The consummation of the transaction will be contingent on that investment from the Sponsors. The subscription rights will afford each stockholder of Caesars the right to acquire for cash at least the same pro rata ownership interest in CAC as such stockholder holds in Caesars. The subscription rights are expected to be transferable by Caesars stockholders. CAC could receive approximately $1.2 billion if all subscription rights are exercised in full. All stockholders who elect to invest in CAC, including the Sponsors, will do so on the same terms. CAC will use the proceeds from its sale of shares to acquire all of the voting interests in Growth Partners. Caesars and its subsidiaries will contribute to Growth Partners their shares of Caesars Interactive Entertainment, Inc., and approximately $1.1 billion face value of senior notes issued by CEOC that are held by a subsidiary of Caesars in exchange for non-voting membership interests. Additionally, Growth Partners intends to use proceeds received from CAC to purchase from a Caesars subsidiary the Planet Hollywood Resort & Casino in Las Vegas, Caesars' joint venture interests in a casino under development in Baltimore (Horseshoe Baltimore) and a financial stake in the management fee stream for both of those properties. Caesars and its affiliated companies will continue to manage Planet Hollywood and Horseshoe Baltimore, allowing these properties to be part of the Total Rewards network and benefit from Caesars' shared services operating model. Caesars and Growth Partners will have the opportunity to work together to develop future projects. Caesars Entertainment's management and development teams will continue to identify and advance new growth opportunities. Caesars will then have the option to pursue these projects itself or decline the project for itself, after which Growth Partners may elect or decline to pursue the project. The relative ownership percentages of each of CAC and Caesars in Growth Partners will be determined by the amount of cash proceeds received by CAC, and contributed to Growth Partners, upon the sale of its shares to holders of the subscription rights. Caesars is expected to own at least 57 percent of Growth Partners' economic interests at closing, and as much as 77 percent, depending on the amount of proceeds raised by CAC through its sale of shares, and will receive a call option that allows it to repurchase all of the economic interest and control of the assets in the future, subject to certain limitations. The voting units and non-voting units of Growth Partners will participate ratably in distributions and will be identical economically, other than for certain call and liquidation rights. The values of the assets to be contributed or sold were evaluated on Caesars' behalf by a valuation committee comprised of three of Caesars' independent directors. The valuation committee received financial advice from Evercore Partners and legal advice from Morrison & Foerster LLP. Mitch Garber, CEO of Caesars Interactive Entertainment, Inc., will serve as CEO of CAC and continue in his role as CEO of CIE. The closing of the transactions will be subject to certain conditions, including entry into definitive documentation, the receipt of required approvals from applicable gaming and other regulatory authorities and the receipt of certain bring-down opinions, and there can be no assurance that such conditions will be satisfied. A registration statement under the Securities Act of 1933 relating to the common shares of CAC has not yet been filed with the Securities and Exchange Commission. The subscription rights and CAC shares may not be sold nor may offers to buy the subscription rights and CAC shares be accepted prior to the time a registration statement relating to such rights and shares is filed and becomes effective. Additional information can be obtained for free at: http://is.gd/ad6sqE About Caesars Entertainment Caesars Entertainment Corp., formerly Harrah's Entertainment Inc. -- http://www.caesars.com/-- is one of the world's largest casino companies, with annual revenue of $4.2 billion, 20 properties on three continents, more than 25,000 hotel rooms, two million square feet of casino space and 50,000 employees. Caesars casino resorts operate under the Caesars, Bally's, Flamingo, Grand Casinos, Hilton and Paris brand names. The Company has its corporate headquarters in Las Vegas. Harrah's announced its re-branding to Caesar's on mid-November 2010. The Company incurred a net loss of $1.49 billion on $8.58 billion of net revenues for the year ended Dec. 31, 2012, as compared with a net loss of $666.70 million on $8.57 billion of net revenues during the prior year. The Company incurred a $823.30 million net loss in 2010. The Company's balance sheet at Dec. 31, 2012, showed $27.99 billion in total assets, $28.32 billion in total liabilities and a $331.6 million total deficit. * * * Caesars Entertainment carries a 'CCC' long-term issuer default rating, with negative outlook, from Fitch and a 'Caa1' corporate family rating with negative outlook from Moody's Investors Service. As reported in the TCR on Feb. 5, 2013, Moody's Investors Service lowered the Speculative Grade Liquidity rating of Caesars Entertainment Corporation to SGL-3 from SGL-2, reflecting declining revolver availability and Moody's concerns that Caesars' earnings and cash flow will remain under pressure causing the company's negative cash flow to worsen. CATERPILLAR INC: Fitch Says Weak Mining Spending Still a Challenge ------------------------------------------------------------------ Reduced global demand for mining equipment put a damper on Caterpillar Inc.'s 1Q13 earnings as the company continues to deal with weak spending in mining, slowing demand and an inventory correction, according to Fitch Ratings. Economic uncertainty, including slower growth in China and ongoing challenges in Europe, will likely pressure CAT's revenue and margins in the near term. "We think capital spending by mining companies could be down well into 2014 as the mining cycle tends to be long, averaging about 7 years," Fitch says. Other credit concerns include cyclical end markets, excess industry capacity, competitive pressure in emerging regions, and CAT's sizable net pension obligation. Free cash flow (FCF) was negative in 2012, but we estimate FCF will improve in 2013 and could exceed $2 billion, partly due to inventory reductions and a possible decline in pension contributions from a high level in 2012. Fitch believes the company will be able to fund its planned $1 billion of share repurchases while controlling debt levels. Current ratings incorporate CAT's liquidity, financial flexibility, strong operating capabilities and low leverage. With that said, credit could be negatively affected if financial results are substantially impaired by weak demand in CAT's machinery end markets; if there is a material decline in the company's market share in key product lines or geographic regions; or if aggressive cash deployment results in higher leverage. CAT reported 1Q revenue of $13.21 billion versus $15.98 billion recorded during 1Q12. Mining equipment fell 23% and construction equipment sales declined 17%. The company also cut its 2013 sales forecast from a range of $60 billion - $68 billion to a range of $58 billion - $61 billion, citing lower demand for mining equipment. CHINA TELETECH: Reports $53,500 Net Income in 2012 -------------------------------------------------- China Teletech Holding, Inc., filed with the U.S. Securities and Exchange Commission its annual report on Form 10-K disclosing net income of US$53,542 on US$26.62 million of sales for the year ended Dec. 31, 2012, as compared with a net loss of US$348,124 on US$18.84 million of sales for the year ended Dec. 31, 2011. The Company's balance sheet at Dec. 31, 2012, showed US$2.16 million in total assets, US$1.96 million in total liabilities and US$197,475 in total stockholders' equity. WWC, P.C., in San Mateo, California, issued a "going concern" qualification on the consolidated financial statements for the year ended Dec. 31, 2012. The independent auditors noted that the Company has incurred substantial losses which raise substantial doubt about its ability to continue as a going concern. A copy of the Form 10-K is available for free at: http://is.gd/Mf2ZjT About China Teletech Tallahassee, Fla.-based China Teletech Holding, Inc., is a national distributor of prepaid calling cards and integrated mobile phone handsets and a provider of mobile handset value-added services. The Company is an independent qualified corporation that serves as one of the principal distributors of China Telecom, China Unicom, and China Mobile products in Guangzhou City. On June 30, 2012, the Company strategically sold its wholly-owned subsidiary, Guangzhou Global Telecommunication Company Limited ("GGT"), to a third party. GGT was engaged in the trading and distribution of cellular phones and accessories, prepaid calling cards, and rechargeable store-value cards. CHRIST HOSPITAL: Files Settlement-Based Chapter 11 Plan ------------------------------------------------------- Christ Hospital and the Official Committee of Unsecured Creditors of the Debtor filed with the U.S. Bankruptcy Court on April 22, 2013, a Disclosure Statement for the Plan Proponents' Joint Plan of orderly liquidation dated April 22, 2013. According to the Disclosure Statement, the Plan is premised upon a settlement reached by the Debtor, the Committee and PBGC which was negotiated subsequent to the Petition Date (the "PBGC Settlement"). Based upon the PBGC Settlement, the Plan provides that the proceeds from the liquidation of the Debtor's Assets will be distributed to Creditors in accordance with the distributive provisions and priority scheme of the Bankruptcy Code. The Plan will be implemented by establishing a Liquidating Trust that will be administered by the Liquidating Trustee. On the Effective Date, the PBGC will be paid $4 million and the Debtor's Assets will be transferred to the Liquidating Trust for the benefit of Creditors. Thereafter, the Liquidating Trustee will be responsible for liquidating the Assets and making distributions to Creditors in accordance with the terms of the Plan. Holders of allowed general unsecured claims will receive, in full and final satisfaction of its Allowed Class 4 Claim, a Pro Rata share of the monies to be distributed from the GUC Account on account of Allowed Class 4 Claims by the Liquidating Trust (subject to appropriate reserves described in the Plan). A copy of the Disclosure Statement dated April 22, 2013 is available at http://bankrupt.com/misc/christhospital.doc1165.pdf Purchaser's Objection Hudson Hospital Propco, LLC, and Hudson Hospital Opco, LLC (collectively, the "Purchaser"), objected to the Disclosure Statement for the Plan Proponents' Joint Plan of Orderly Liquidation (Docket No. 1110) filed March 15, 2013. The Purchaser said that portions of the Plan conflict with the Sale Order, Purchase Agreement and other orders entered by this Bankruptcy Court, which makes the Plan not confirmable on its face and therefore the Disclosure Statement cannot be approved. In addition, the Purchaser said the Plan is not confirmable as a matter of law. A copy of the Purchaser's objection to the Disclosure Statement for the Plan Proponents' Joint Plan of Orderly Liquidation filed March 15, 2013, is available at: http://bankrupt.com/misc/christhospital.doc1164.pdf About Christ Hospital Christ Hospital filed for Chapter 11 bankruptcy (Bankr. D.N.J. Case No. 12-12906) on Feb. 6, 2012. Christ Hospital, founded in 1872 by an Episcopalian priest, is a 367-bed acute care hospital located in Jersey City, New Jersey at 176 Palisade Avenue, serving the community of Hudson County. The Debtor is well-known for its broad range of services from primary angioplasty for cardiac patients to intensity modulated radiation therapy for those battling cancer. Christ Hospital is the only facility in Hudson County to offer IMRT therapy, which is the most significant breakthrough in cancer treatment in recent years. Christ Hospital filed for Chapter 11 after an attempt to sell the assets fell through. Judge Morris Stern presides over the case. Lawyers at Porzio, Bromberg & Newman, P.C., serve as the Debtor's counsel. Alvarez & Marsal North America LLC serves as financial advisor. Logan & Company Inc. serves as the Debtor's claim and noticing agent. The Health Professional and Allied Employees AFT/AFI-CIO is represented in the case by Mitchell Malzberg, Esq., at Mitnick & Malzberg P.C. Attorneys at Sills, Cummis & Gross, P.C., represent the Official Committee of Unsecured Creditors. On March 27, 202, Judge Stern approved the sale of the Hospital's assets to Hudson Hospital Holdo, LLC. Hudson bid $45,271,000 for the Hospital's assets. The sale of the Debtor's assets to Hudson closed on July 13, 2012. COMPREHENSIVE CARE: Bernard Sherman Held 19.7% Stake at March 15 ---------------------------------------------------------------- In an amended Schedule 13G filing with the U.S. Securities and Exchange Commission, Bernard C. Sherman and his affiliates disclosed that, as of March 15, 2013, they beneficially owned 14,712,500 shares of common stock of Comprehensive Care Corporation representing 19.75% of the shares outstanding. Mr. Sherman previously reported beneficial ownership of 9,112,500 common shares or a 13.33% equity stake as of Nov. 14, 2011. A copy of the amended regulatory filing is available at: http://is.gd/WwhY1J About Comprehensive Care Tampa, Fla.-based Comprehensive Care Corporation provides managed care services in the behavioral health, substance abuse, and psychotropic pharmacy management fields. Comprehensive Care disclosed a net loss attributable to common stockholders of $6.99 million in 2012, as compared with a net loss attributable to common stockholders of $14.08 million in 2011. The Company's balance sheet at Dec. 31, 2012, showed $6.12 million in total assets, $29.06 million in total liabilities and a $22.94 million total stockholders' deficiency. Mayer Hoffman McCann P.C., in Clearwater, Florida, issued a "going concern" qualification on the consolidated financial statements for the year ended Dec. 31, 2012. The independent auditors noted that the Company has suffered recurring losses from operations and has not generated sufficient cash flows from operations to fund its working capital requirements. This raises substantial doubt about the Company's ability to continue as a going concern. COMPUCOM SYSTEMS: Moody's Rates $580MM Debt B1 & $250MM Debt Caa1 ----------------------------------------------------------------- Moody's Investors Service assigned to CompuCom Systems, Inc. a B2 Corporate Family Rating (CFR), a B2-PD Probability of Default Rating, and B1 and Caa1 ratings to the company's proposed $580 million of first lien term loans and $250 million of senior unsecured notes, respectively. The new debt is being raised in connection with the acquisition of CompuCom by funds affiliated with Thomas H. Lee Partners (THL) for a total purchase price of approximately $1.1 billion. THL will contribute $325 million of new equity and use the net proceeds from the debt offerings to repay CompuCom's existing credit facilities and finance the acquisition of CompuCom. The ratings outlook is stable. Moody's will withdraw the ratings for CompuCom's existing credit facilities upon full repayment of debt. The assigned ratings are subject to review of the final documents. Ratings Rationale: CompuCom's B2 CFR reflects its high financial leverage, intensely competitive markets, and small scale relative to some of the larger and financially stronger competitors. CompuCom derives a substantial portion of its revenue from mature segments of the IT management market which are also intensely competitive and subject to varying degrees of pricing pressure. The B2 rating is supported by CompuCom's good market position as a Tier 2 IT outsourcing services provider and the company's well- regarded execution capabilities in its core end-user computing and help desk outsourcing services market in North America. CompuCom's credit profile benefits from its long-standing relationships with its key blue-chip customers, good revenue retention rates, especially after the recession, and good near-term visibility provided by recurring revenues under multi-year service contracts. The B2 rating is further supported by Moody's expectations that CompuCom should generate free cash flow of about 4% to 5% of total debt in the next 12 to 24 months and that total debt-to-EBITDA leverage should decline over this period toward 5.0x, from the high 5x level (Moody's adjusted) at the close of the proposed transaction. The B2 rating incorporates Moody's expectations that CompuCom's EBITDA and free cash flow will increase driven by organic revenue growth and $20 million of annual cost savings targeted by the management through year-end 2014. CompuCom's liquidity is considered adequate reflecting Moody's expectation for positive free cash flow over the next year and access to funds under a 5-year $150 million receivables securitization facility. The stable outlook is based on expectations that CompuCom's EBITDA should increase year-over-year and the company should produce free cash flow of about 4% to 5% of total debt in the next 12 to 24 months. Moody's could downgrade CompuCom's ratings if liquidity becomes weak, profitability deteriorates, or free cash flow falls to the low single digit percentages of total debt for a protracted period of time. The ratings could also be downgraded if CompuCom's total debt/EBITDA ratio does not decline toward 5.0x or anticipated cost savings are not realized in a timely manner resulting in a slower- than-expected deleveraging. A ratings upgrade is unlikely in the near-to-intermediate term given CompuCom's high leverage and Moody's expectations that CompuCom's financial policies will remain aggressive under its financial sponsors. Over time, Moody's could raise CompuCom's ratings if the company maintains organic revenue growth rates, improves profitability, and if Moody's believes that the company could sustain total debt-to-EBITDA of less than 4.0x and free cash flow in the high single digit percentages of its total debt. Moody's has assigned the following ratings: Issuer: CompuCom Systems, Inc. (New) Corporate Family Rating -- B2 Probability of Default Rating -- B2-PD $580 million First Lien Senior Secured Term Loan due May 2020 -- Assigned, B1, LGD3 (32%) $250 million Senior Unsecured Notes due 2021 -- Assigned, Caa1, LGD5 (81%) Outlook -- Stable The following ratings will be withdrawn: Issuer: CompuCom Systems, Inc. (Old) Corporate Family Rating -- B2 Probability of Default Rating -- B2-PD $470 million First Lien Senior Secured Term Loan due 2018 -- B1, LGD3 (33%) $165 million Second Lien Senior Secured Term Loan due 2019 -- B3, LGD5 (77%) The principal methodology used in rating CompuCom was the Global Business & Consumer Service Industry Methodology published in October 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Headquartered in Dallas, Texas, CompuCom Systems, Inc. provides IT product procurement and outsourcing services to enterprise customers. CompuCom reported $1.4 billion in revenue in 2012. COMPUCOM SYSTEMS: S&P Lowers Corp. Credit Rating to 'B' ------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Dallas-based CompuCom Systems Inc. to 'B' from 'B+'. The outlook is stable. At the same time, S&P assigned its 'B' issue-level rating and '3' recovery rating to the company's proposed $580 million senior secured term loan maturing in 2020. The '3' recovery rating indicates S&P's expectations for meaningful (50% to 70%) recovery for lenders in the event of a payment default. S&P also assigned its 'CCC+' issue-level rating and '6' recovery rating to the company's proposed $250 million senior unsecured notes maturing in 2021. The '6' recovery rating indicates S&P's expectations for negligible (0% to 10%) recovery for lenders in the event of a payment default. The company intends to use the new debt proceeds, along with T.H. Lee and management equity contributions, to refinance its existing debt and to pay approximately $465 million to selling shareholders. S&P will withdraw the ratings on the existing debt once the proposed transaction funds and closes. "The downgrade reflects our view that CompuCom will have a 'highly leveraged' financial profile following the proposed transactions, with adjusted debt to EBITDA of about 6x," said Standard & Poor's credit analyst Martha Toll-Reed. The ratings on CompuCom reflect Standard & Poor's Ratings Services' view that the company now has a "highly leveraged" financial profile, a revision from "aggressive," and a "weak" business profile. Nevertheless, S&P expects the current rating will be supported by moderate revenue growth and an improving business mix of higher margin services. CompuCom helps companies plan, implement, and manage multivendor, industry-standard computing environments. Services include deployment of hardware and software, end-user support, network monitoring, and consulting services. CompuCom's weak business profile reflects its smaller scale and preponderance of lower- margin services compared with larger competitors, limited geographic diversity, and exposure to potential economic weakness. A significant base of contractually recurring revenues and ongoing expansion into higher margin services partially offsets those factors. The outlook is stable, reflecting S&P's expectation that growth in service revenues will support consistent profitability and modest leverage reduction in the next year. Rating upside is currently limited by the company's highly leveraged financial profile. However if sustained revenue and EBITDA growth lead to leverage levels below 5x, S&P could raise the rating. Although not currently expected, if competitive pressure or lack of management execution leads to a decline in EBITDA, with leverage in excess of 7x, S&P could lower the rating. DETROIT, MI: Moody's Says Bankruptcy Could Mean Further Downgrades ------------------------------------------------------------------ Reuters reported that Detroit's already low credit ratings could sink further if the city is allowed to file for bankruptcy, Moody's Investors Service said on Wednesday. According to the Reuters report, the credit rating agency said a decision by the city's state-appointed emergency manager and Michigan's governor to authorize a Chapter 9 municipal bankruptcy filing would lead to a restructuring of Detroit's debt that could reduce or delay payments on its outstanding bonds. Reuters related that Moody's, which rates Detroit's general obligation debt deep in the junk category at Caa1 with a negative outlook, also said Detroit could be pushed into bankruptcy if interest rate swap agreements are terminated. While the termination of those agreements has already been triggered, negotiations are ongoing with the swap providers. A termination could cost the city as much as $440 million, or about 22 percent of its annual operating budget. Legal challenges to a 2012 Michigan law governing fiscally stressed local governments and the emergency managers that run them could derail attempts to improve Detroit's sagging finances, Moody's said, Reuters cited. That law also provides a path to federal bankruptcy court if the move is recommended by the emergency manager and authorized by the governor. "Any delays or reductions to the financial restructuring plan could further weaken overall credit quality and may also accelerate a potential bankruptcy filing or default on debt obligations by the city," Moody's said in a report, Reuters quoted. Kevyn Orr, a bankruptcy attorney who took over Detroit as its emergency manager on March 25, is required to present a financial and operating plan to the Michigan Treasurer next month, Reuters also related. "Any potential rating action will weigh the details of the plan and its effectiveness upon implementation," Moody's said, Reuters further quoted. Both Orr and Governor Rick Snyder have said talks with creditors, including bondholders, were needed to help solve Detroit's fiscal mess, which mushroomed as the city's population dropped along with its revenue, the report said. The city council last week approved a contract with Orr's former law firm, Jones Day, as restructuring counsel. Detroit, Reuters noted, has about $2.4 billion of outstanding GO debt, $6 billion of water and sewer revenue bonds, and unfunded liabilities of $6 billion for retiree healthcare and $650 million for pensions, according to a March report from the mayor's office. Moody's said the city has sufficient cash to make a $31.6 million debt service payment on its general obligation debt due May 1 and a $39.7 million payment on its pension debt on June 15, Reuters said. But the city must craft a new budget for fiscal 2014, which begins July 1, and it faces subsequent debt payments in October, November and December totaling $43.2 million, according to the rating agency. CORUS BANKSHARES: District Court Narrows Suit Against CEO, Others ----------------------------------------------------------------- Salvatore Barbatano, the Litigation Trustee in the Chapter 11 bankruptcy of Corus Bankshares, Inc., brought a six-count complaint in bankruptcy court alleging that Robert Glickman, the CEO and a director of CBI, and Tim Taylor, CBI's chief financial officer, breached various fiduciary duties they owed to CBI and violated the National Bank Act, 12 U.S.C. Sec. 21 et seq.; the complaint also asserts a claim against Mr. Glickman for money had and received. The Defendants filed a motion to withdraw the reference, which the District Court granted. The Defendants now move to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6). On Tuesday, District Judge Gary Feinerman granted the Defendants' motion. Counts I, III, V, and VI of the complaint are dismissed with prejudice, while Counts II and IV are dismissed without prejudice and with leave to replead. Judge Feinerman gave the Trustee until May 15, 2013, to file an amended complaint; if an amended complaint is filed, the Defendants will have until June 5, 2013 to answer or otherwise plead. The case is, Court's SALVATORE A. BARBATANO, not individually but as Litigation Trustee, Plaintiff, v. ROBERT GLICKMAN and TIM TAYLOR, Defendants, No. 12 C 9639 (N.D. Ill.). A copy of the Court's April 23, 2013 Memorandum Opinion and Order is available at http://is.gd/gpm5Nlfrom Leagle.com. About Corus Bankshares Chicago, Illinois-based Corus Bankshares, Inc., is a bank holding company. Its lone operating unit, Corus Bank, N.A., was closed on Sept. 11, 2009, by regulators, and the Federal Deposit Insurance Corporation was named receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Chicago-based MB Financial Bank, National Association, to assume all of the deposits of Corus Bank. Corus Bankshares sought Chapter 11 protection (Bankr. N.D. Ill. Case No. 10-26881) on June 15, 2010, disclosing $314,145,828 in assets and $532,938,418 in liabilities as of the Chapter 11 filing. Kirkland & Ellis LLP's James H.M. Sprayregen, Esq., David R. Seligman, Esq., and Jeffrey W. Gettleman, Esq., serve as the Debtor's bankruptcy counsel. Kinetic Advisors is the Company's restructuring advisor. Plante & Moran is the Company's auditor and accountant. Kilpatrick Stockton LLP's Todd Meyers, Esq., and Sameer Kapoor, Esq.; and Neal Gerber & Eisenberg LLP's Mark Berkoff, Esq., Deborah Gutfeld, Esq., and Nicholas M. Miller, Esq., represent the official committee of unsecured creditors. Corus Bankshares' Third Amended Plan of Reorganization has been declared effective, and the Company emerged from Chapter 11 protection. The Court confirmed the Plan on Sept. 27, 2011. DEWEY & LEBOEUF: Ex-Chairman Agrees to Settle Claims ---------------------------------------------------- Casey Sullivan, writing for Reuters, reported that the former chairman of Dewey & LeBoeuf has agreed to pay more than half a million dollars in a proposed settlement with Dewey's trustee and insurer to resolve claims that bad management led to the law firm's demise, according to papers filed in federal bankruptcy court. According to the Reuters report, former Dewey Chairman Steve Davis has agreed to pay $511,145 to settle claims that he mismanaged Dewey & LeBoeuf, which last May became the largest law firm in U.S. history to file for Chapter 11 bankruptcy. XL Specialty Insurance Co, which issued Dewey's management liability insurance policy, has agreed to pay $19 million in the proposed settlement, according to court documents. If the settlement is approved, Davis would pay less than other former Dewey partners to be released from claims related to the firm's demise, the Reuters report said. "He got off easy," John Altorelli, a former Dewey partner who is now co-chair of DLA Piper's U.S. Finance practice, told Reuters. Davis' half a million dollar settlement with the estate was negotiated during mediation between creditors, XL Insurance and Davis that was conducted by Jed Melnick of JAMS earlier this year, according to court papers, Reuters related. Melnick declined comment. "The Settlement Agreement is a substantially more favorable result than litigation," said Edward Weisfelner, speaking on behalf of the liquidation trustee Alan Jacobs, in court papers, Reuters cited. Reuters said that without a settlement, Dewey's estate would face large litigation expenses to go after Davis and the insurance company in court, as well as the risk of not collecting a full recovery from the parties. "Litigation of the Management Claims would require extensive discovery, including millions of pages of documents to review and over 100 depositions," Weisfelner said, Reuters further cited. The settlement agreement still needs a judge's approval. A hearing on the proposed deal is scheduled for May 13. About Dewey & LeBoeuf Dewey & LeBoeuf LLP sought Chapter 11 bankruptcy (Bankr. S.D.N.Y. Case No. 12-12321) to complete the wind-down of its operations. The firm had struggled with high debt and partner defections. Dewey disclosed debt of $245 million and assets of $193 million in its chapter 11 filing late evening on May 29, 2012. Dewey & LeBoeuf LLP operated as a prestigious, New York City- based, law firm that traced its roots to the 2007 merger of Dewey Ballantine LLP -- originally founded in 1909 as Root, Clark & Bird -- and LeBoeuf, Lamb, Green & MacCrae LLP -- originally founded in 1929. In recent years, more than 1,400 lawyers worked at the firm in numerous domestic and foreign offices. At its peak, Dewey employed about 2,000 people with 1,300 lawyers in 25 offices across the globe. When it filed for bankruptcy, only 150 employees were left to complete the wind-down of the business. Dewey's offices in Hong Kong and Beijing are being wound down. The partners of the separate partnership in England are in process of winding down the business in London and Paris, and administration proceedings in England were commenced May 28. All lawyers in the Madrid and Brussels offices have departed. Nearly all of the lawyers and staff of the Frankfurt office have departed, and the remaining personnel are preparing for the closure. The firm's office in Sao Paulo, Brazil, is being prepared for closure and the liquidation of the firm's local affiliate. The partners of the firm in the Johannesburg office, South Africa, are planning to wind down the practice. The firm's ownership interest in its practice in Warsaw, Poland, was sold to the firm of Greenberg Traurig PA on May 11 for $6 million. The Pension Benefit Guaranty Corp. took $2 million of the proceeds as part of a settlement. Judge Martin Glenn oversees the case. Albert Togut, Esq., at Togut, Segal & Segal LLP, represents the Debtor. Epiq Bankruptcy Solutions LLC serves as claims and notice agent. The petition was signed by Jonathan A. Mitchell, chief restructuring officer. JPMorgan Chase Bank, N.A., as Revolver Agent on behalf of the lenders under the Revolver Agreement, hired Kramer Levin Naftalis & Frankel LLP. JPMorgan, as Collateral Agent for the Revolver Lenders and the Noteholders, hired FTI Consulting and Gulf Atlantic Capital, as financial advisors. The Noteholders hired Bingham McCutchen LLP as counsel. The U.S. Trustee formed two committees -- one to represent unsecured creditors and the second to represent former Dewey partners. The creditors committee hired Brown Rudnick LLP led by Edward S. Weisfelner, Esq., as counsel. The Former Partners hired Tracy L. Klestadt, Esq., and Sean C. Southard, Esq., at Klestadt & Winters, LLP, as counsel. Dewey filed a Chapter 11 Plan of Liquidation and an accompanying Disclosure Statement on Nov. 21, 2012. It filed amended plan documents on Dec. 31, in an attempt to address objections lodged by various parties. A second iteration was filed Jan. 7, 2013. The plan is based on a proposed settlement between secured lenders and Dewey's official unsecured creditors' committee, as well as a settlement with former partners. On Feb. 27, 2013, the Bankruptcy Court confirmed Dewey & Leboeuf's Second Amended Chapter 11 Plan of Liquidation dated Jan. 7, 2013, As of the Effective Date of the Plan, the Debtor will be dissolved. DEX ONE: Has Final OK of Equity Trading Restrictions ---------------------------------------------------- Judge Kevin Gross issued a final order approving certain notification and hearing procedures related to transfers of equity securities of Dex One Corp., et al. The procedures are designed to limit trading of equity securities as the Debtors previously asserted that certain transfers of these securities may trigger an "ownership change" for Internal Revenue Code purposes, which can affect their ability to utilize net operating losses. The Debtors specify that they have approximately $1.0 billion NOLs as of the Petition Date ? which they anticipate will generate up to $400 million in cash savings from reduced taxes considering an assumed effective tax rate of 40% for the combined post-emergence company. As reported by The Troubled Company Reporter on April 4, 2013, the procedures relating to the equity security transfers, among other things, provide that (i) an entity that had or has beneficial ownership of 4.5% or more of the Equity Securities up to three years before the Petition Date must serve and file a Declaration of Substantial Shareholder; (ii) parties to an equity security transfer transaction must serve and file a Declaration of Proposed Transfer; and (iii) the Debtors have 14 calendar days after receipt of a Declaration of Proposed Transfer to object to the proposed transaction. Any transfer of the Equity Securities in violation of the Procedures will be null and void ab initio. About Dex One Dex One Corp., headquartered in Cary, North Carolina, is a local business marketing services company that includes print directories and online voice and mobile search. The company employs 2,200 people across the United States. Dex One provides print yellow pages directors, which it co-brands with other recognizable brands in the industry, including Century Link and AT&T. It also provides the yellow pages websites DexKnows.com and DexPages.com, as well as mobile apps Dex Mobile, Dex CityCentral. Dex One and 11 affiliates sought Chapter 11 protection (Bankr. D. Del. Lead Case No. 13-10534) on March 17 and 18, 2013, with a prepackaged plan of reorganization designed to effectuate a merger with SuperMedia Inc. Dex One disclosed total assets of $2.84 billion and total liabilities of $2.79 billion as of Dec. 31, 2012. Houlihan Lokey is acting as financial advisor to Dex One, and Kirkland & Ellis LLP is acting as its legal counsel. Pachulski Stang Ziehl & Jones LLP is co-counsel. Epiq Systems serves as claims agent. This is Dex One's second stint in Chapter 11. Its predecessor, R.H. Donnelley Corp., sought Chapter 11 protection in May 2009 (Bankr. Bank. D. Del. Case No. 09-11833 through 09-11852) and changed its name to Dex One Corp. after emerging from bankruptcy in January 2010. As of Dec. 31, 2012, persons or entities directly or indirectly own, control, or hold 5% or more of the voting securities of Dex One are Franklin Advisers, Inc., Hayman Capital Management LP, Robert E. Mead, Restructuring Capital Associates LP, Paulson & Co., Inc., and Mittleman Investment Management LLC. DEX ONE: Gets Final OK to Continue Current Investment Practices --------------------------------------------------------------- Dex One Corp. and its debtor affiliates obtained a final court order authorizing the use of their existing cash management system, honor certain prepetition obligations; continue to invest funds under current investment practices; and maintain existing business forms. The Debtors have also been given final authority by the court to pay on a timely basis all undisputed invoices for postpetition utility services provided by their utility providers. They are to maintain an Adequate Assurance Account -- which should have a minimum balance of $270,000 -- for the purpose of providing each Utility Provider adequate assurance of payment of its postpetition utility services. Moreover, absent further court order, all of the Debtors' Utility Providers are prohibited from altering or discontinuing utility services to the Debtors on account of the commencement of the Chapter 11 cases or any unpaid prepetition charges. Any Utility Provider desiring additional assurances of payment must submit an additional assurance request. About Dex One Dex One Corp., headquartered in Cary, North Carolina, is a local business marketing services company that includes print directories and online voice and mobile search. The company employs 2,200 people across the United States. Dex One provides print yellow pages directors, which it co-brands with other recognizable brands in the industry, including Century Link and AT&T. It also provides the yellow pages websites DexKnows.com and DexPages.com, as well as mobile apps Dex Mobile, Dex CityCentral. Dex One and 11 affiliates sought Chapter 11 protection (Bankr. D. Del. Lead Case No. 13-10534) on March 17 and 18, 2013, with a prepackaged plan of reorganization designed to effectuate a merger with SuperMedia Inc. Dex One disclosed total assets of $2.84 billion and total liabilities of $2.79 billion as of Dec. 31, 2012. Houlihan Lokey is acting as financial advisor to Dex One, and Kirkland & Ellis LLP is acting as its legal counsel. Pachulski Stang Ziehl & Jones LLP is co-counsel. Epiq Systems serves as claims agent. This is Dex One's second stint in Chapter 11. Its predecessor, R.H. Donnelley Corp., sought Chapter 11 protection in May 2009 (Bankr. Bank. D. Del. Case No. 09-11833 through 09-11852) and changed its name to Dex One Corp. after emerging from bankruptcy in January 2010. As of Dec. 31, 2012, persons or entities directly or indirectly own, control, or hold 5% or more of the voting securities of Dex One are Franklin Advisers, Inc., Hayman Capital Management LP, Robert E. Mead, Restructuring Capital Associates LP, Paulson & Co., Inc., and Mittleman Investment Management LLC. EAGLE RECYCLING: Meeting to Form Creditors' Panel on May 6 ---------------------------------------------------------- Roberta A. DeAngelis, United States Trustee for Region 3, will hold an organizational meeting on May 6, 2013, at 11:00 a.m. in the bankruptcy cases of Eagle Recycling Systems, Inc. (13-18412) and Lieze Associates, Inc. dba Eagle Recycling of NJ (13-18413). The meeting will be held at: United States Trustee's Office One Newark Center 1085 Raymond Blvd. 21st Floor, Room 2106 Newark, NJ 07102 The sole purpose of the meeting will be to form a committee or committees of unsecured creditors in the Debtors' cases. The organizational meeting is not the meeting of creditors pursuant to Section 341 of the Bankruptcy Code. A representative of the Debtor, however, may attend the Organizational Meeting, and provide background information regarding the bankruptcy cases. To increase participation in the Chapter 11 proceeding, Section 1102 of the Bankruptcy Code requires that the United States Trustee appoint a committee of unsecured creditors as soon as practicable. The Committee ordinarily consists of the persons, willing to serve, that hold the seven largest unsecured claims against the debtor of the kinds represented on the committee. Section 1103 of the Bankruptcy Code provides that the Committee may consult with the debtor, investigate the debtor and its business operations and participate in the formulation of a plan of reorganization. The Committee may also perform other services as are in the interests of the unsecured creditors whom it represents. Eagle Recycling Systems and affiliate Lieze Associates Inc. sought bankruptcy reorganization (Bankr. D.N.J. Case No. 13-18412 and 13- 18413) on April 19 in Newark, New Jersey. EDISON MISSION: ELPC Has Green Light to Pursue Regulatory Action ---------------------------------------------------------------- Judge Jacqueline P. Cox of the U.S. Bankruptcy Court for the Northern District of Illinois has granted the Environmental Law and Policy Center's motion for relief from the automatic stay to continue a regulatory action against debtor Midwest Generation LLC (MWG) pending before the Illinois Pollution Control Board. The motion is granted to the limited purpose of adjudicating MWG's motion to dismiss. As reported in the Troubled Company Reporter on March 19, 2013, the Environmental Law and Policy Center (ELPC) requests that the Bankruptcy Court enter an order granting relief from the automatic stay to continue a regulatory action against debtor Midwest Generation LLC (MWG) pending before the Illinois Pollution Control Board. About Edison Mission Santa Ana, California-based Edison Mission Energy is a holding company whose subsidiaries and affiliates are engaged in the business of developing, acquiring, owning or leasing, operating and selling energy and capacity from independent power production facilities. EME also engages in hedging and energy trading activities in power markets through its subsidiary Edison Mission Marketing & Trading, Inc. EME was formed in 1986 and is an indirect subsidiary of Edison International. Edison International also owns Southern California Edison Company, one of the largest electric utilities in the United States. EME and its affiliates sought Chapter 11 protection (Bankr. N.D. Ill. Lead Case No. 12-49219) on Dec. 17, 2012. EME has reached an agreement with the holders of a majority of EME's $3.7 billion of outstanding public indebtedness and its parent company, Edison International EIX, that, pursuant to a plan of reorganization and pending court approval, would transition Edison International's equity interest to EME's creditors, retire existing public debt and enhance EME's access to liquidity. The Company's balance sheet at Sept. 30, 2012, showed $8.17 billion in total assets, $6.68 billion in total liabilities and $1.48 billion in total equity. In its schedules, Edison Mission Energy disclosed total assets of assets of $5,721,559,170 and total liabilities of $6,202,215,094 as of the Petition Date. Kirkland & Ellis LLP is serving as legal counsel to EME, Perella Weinberg Partners, LP is acting as financial advisor and McKinsey Recovery & Transformation Services U.S., LLC is acting as restructuring advisor. GCG, Inc., is the claims and notice agent. An official committee of unsecured creditors has been appointed in the case and is represented by the law firms Akin Gump and Perkins Coie. The Committee also has tapped Blackstone Advisory Partners as investment banker and FTI Consulting as financial advisor. ELITE PHARMACEUTICALS: Gets $10MM Commitment From Lincoln Park -------------------------------------------------------------- Elite Pharmaceuticals, Inc., has entered into a $10 million common stock purchase agreement with Lincoln Park Capital Fund, LLC, a Chicago-based institutional investor. The Company has agreed to file a registration statement with the U.S. Securities & Exchange Commission covering the shares that may be issued to Lincoln Park Capital under the terms of the common stock purchase agreement. After the SEC has declared the registration statement related to the transaction effective, the Company has the right, at its sole discretion over a period of three years to sell up to $10 million of its common stock to LPC under the terms set forth in the agreement. Proceeds from the transaction will be used to develop the Company's pipeline of products, including the abuse resistant opioids, and for general corporate purposes. Commenting on the new financing, Elite's Chairman and CEO, Jerry Treppel said, "We are pleased to have Lincoln Park as an investor in Elite. Since the fall of 2011, Elite has demonstrated its ability to add new products, having eight new products approved or launched since then. We intend to use some of the proceeds from this financing to help develop and advance our pipeline of products, including the abuse resistant opioids." Under the terms of the agreement, there are no upper limits to the price that LPC may pay to purchase Elite's common stock. Elite will control the timing and the amount of shares to be sold. LPC has no right to require any sales and is obligated to purchase common stock as directed by Elite. Under the terms of the agreement, LPC has agreed not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of Elite's shares of common stock. In consideration for entering into the agreement, Elite has issued shares of common stock to LPC as a commitment fee and will issue additional commitment fee shares in proportion to the amount of shares purchased by LPC under the agreement. Additional details regarding the financing are included in a Current Report on Form 8-K filed with the Securities and Exchange Commission, a copy of which is available at http://is.gd/H0iHd9 About Elite Pharmaceuticals Northvale, New Jersey-based Elite Pharmaceuticals, Inc., is a specialty pharmaceutical company principally engaged in the development and manufacture of oral, controlled-release products, using proprietary technology and the development and manufacture of generic pharmaceuticals. The Company has one product, Phentermine 37.5mg tablets, currently being sold commercially. Elite Pharmaceuticals reported a net loss attributable to common shareholders of $15.05 million for the year ended March 31, 2012, compared with a net loss attributable to common shareholders of $13.58 million during the prior year. Demetrius & Company, L.L.C., in Wayne, New Jersey, issued a "going concern" qualification on the consolidated financial statements for the year ended March 31, 2012, citing significant losses resulting in a working capital deficiency and shareholders' deficit, which raise substantial doubt about the Company's ability to continue as a going concern. The Company's balance sheet at Dec. 31, 2012, showed $10.37 million in total assets, $22.72 million in total liabilities and a $12.35 million total stockholders' deficit. FUNCTIONAL TECHNOLOGIES: Files Bankruptcy Proposal Notice --------------------------------------------------------- Functional Technologies Corp. on April 25 disclosed that it has filed a notice of intention to make a proposal to its creditors under the Canada Bankruptcy and Insolvency Act. This process has been initiated because the Company is currently unable to meet its obligations to its secured and unsecured creditors. The Company's intent in filing the Notice, and later the proposal, is to seek to restructure its affairs and make an arrangement with its creditors in order to carry on its business. As a consequence of the filing of the Notice, all of the Company's creditors are automatically stayed from taking any proceedings against the Company or its assets for an initial period of thirty days. About Functional Technologies Corp. Functional Technologies (OTCQX:FEBTF) -- http://www.functionaltechcorp.com-- develops and commercializes proprietary, advanced yeast-based solutions to significant challenges in the food, beverage and healthcare industries. The head office and R&D operations for Functional Technologies are based in Vancouver, BC, Canada. GMX RESOURCES: Creditors Object to $2 Million Banker's Fee ---------------------------------------------------------- Bill Rochelle, the bankruptcy columnist for Bloomberg News, reports that the GMX Resources Inc. creditors' committee sees no reason for paying a $2 million "restructuring" fee to Jefferies LLC when a sale of the Oklahoma City-based oil and gas exploration and production company was baked in the cake before bankruptcy. GMX filed under Chapter 11 with a deal to sell the business to secured lenders in exchange for $324.3 million in first-lien notes. The company simultaneously filed papers to hire Jefferies as investment banker for a $125,000 monthly fee and an additional $2 million if the company is sold or reorganized. According to the report, the official committee filed papers this week opposing the fee and contending that it "provides no incentive for Jefferies to maximize any sale price." As it stands, the business will be sold, leaving behind only $250,000 to clean up the Chapter 11 case, the committee said. About GMX Resources GMX Resources Inc. -- http://www.gmxresources.com/-- is an independent natural gas production company headquartered in Oklahoma City, Oklahoma. GMXR has 53 producing wells in Texas & Louisiana, 24 proved developed non-producing reservoirs, 48 proved undeveloped locations and several hundred other development locations. GMXR has 9,000 net acres on the Sabine Uplift of East Texas. GMXR has 7 producing wells in New Mexico. The Company's strategy is to significantly increase production, revenues and reinvest in increasing production. GMXR's goal is to grow and build shareholder value every day. The Company reported net losses of $206.44 million in 2011, $138.29 million in 2010, and $181.08 million in 2009. The Company's balances sheet at Sept. 30, 2012, showed $343.14 million in total assets, $467.64 million in total liabilities and a $124.49 million total deficit. GMX Resources filed a Chapter 11 petition in its hometown (Bankr. W.D. Okla. Case No. 13-11456) on April 1, 2013, so secured lenders can buy the business in exchange for $324.3 million in first-lien notes. GMX missed a payment due in March 2013 on $51.5 million in second- lien notes. Other principal liabilities include $48.3 million in unsecured convertible senior notes. The DIP financing provided by senior noteholders requires court approval of a sale within 75 days following approval of sale procedures. The lenders and principal senior noteholders include Chatham Asset Management LLC, GSO Capital Partners, Omega Advisors Inc. and Whitebox Advisors LLC. GSC GROUP: Kaye Scholer Deal Withdrawn -------------------------------------- Nick Brown, writing for Reuters, reports that law firm Kaye Scholer and the Justice Department appeared to be working on a resolution on Wednesday over alleged conflicts of interest during GSC Group Inc.'s bankruptcy. The department filed court papers on Wednesday afternoon dropping its claims against Kaye Scholer and announcing a new settlement, after creditor outrage had derailed a resolution last week. But in an unusual move, the department later withdrew the filing without explanation, Reuters continues. Spokeswomen for both the department and the law firm did not respond to inquiries about the retraction. The settlement would have required Kaye Scholer to waive $1.5 million in attorney fees in the GSC Group case and have a special committee sign off on representations to the court in applications to work on future bankruptcy cases. Reuters recounts the U.S. Trustee has accused Kaye Scholer, GSC's financial adviser Capstone, and restructuring officer Robert Manzo of violating bankruptcy rules governing disclosures and fee arrangements. Lender Black Diamond Capital has demanded sanctions. Reuters says if the settlements cannot be worked out consensually, the matter could wind up going to trial before Judge Shelley Chapman in U.S. Bankruptcy Court in New York. Reuters relates lawyers for Capstone and Mr. Manzo did not respond to requests for comment on Wednesday. About GSC Group Florham Park, New Jersey-based GSC Group, Inc. -- http://www.gsc.com/-- was a private equity firm that specialized in mezzanine and fund of fund investments. Originally named Greenwich Street Capital Partners Inc. when it was a subsidiary of Travelers Group Inc., GSC became independent in 1998 and at one time had $28 billion of assets under management. Market reverses, termination of some funds, and withdrawal of customers' investments reduced funds under management at the time of bankruptcy to $8.4 billion. GSC Group, Inc., filed for Chapter 11 bankruptcy protection (Bankr. S.D.N.Y. Case No. 10-14653) on Aug. 31, 2010, estimating assets at $1 million to $10 million and debts at $100 million to $500 million as of the Chapter 11 filing. Effective Jan. 7, 2011, James L. Garrity Jr., was named Chapter 11 trustee for the Debtors. The Chapter 11 trustee completed the sale of business in July 2011 and filed a liquidating Chapter 11 plan and explanatory disclosure statement in late August. The bankruptcy court authorized the trustee to sell the business to Black Diamond Capital Finance LLC, as agent for the secured lenders. Proceeds were used to pay secured claims. The price paid by the lenders' agent was designed for full payment on $256.8 million in secured claims, with $18.6 million cash left over. Black Diamond bought most assets with a $224 million credit bid, a $6.7 million note, $5 million cash, and debt assumption. A minority group of secured lenders filed an appeal from the order allowing the sale. Through a suit in state court, the minority lenders failed to halt Black Diamond from completing the sale. The Chapter 11 Trustee and Black Diamond filed rival repayment plans for GSC Group. The Chapter 11 trustee reached a handshake deal on Dec. 13, 2011, ending the dispute with Black Diamond that delayed a $235 million asset sale. Michael B. Solow, Esq., at Kaye Scholer LLP, served as the Debtor's bankruptcy counsel. Epiq Bankruptcy Solutions, LLC, was the Debtor's notice and claims agent. Capstone Advisory Group LLC served as the Debtor's financial advisor. The Chapter 11 trustee tapped Shearman & Sterling LLP as his counsel, and Togut, Segal & Segal LLP as his conflicts counsel. Black Diamond Capital Management, LLC, is represented by attorneys at Latham & Watkins and Kirkland & Ellis LLP. HANDY HARDWARE: Looking for New Chief Executive, President ---------------------------------------------------------- Bill Rochelle, the bankruptcy columnist for Bloomberg News, reports that Handy Hardware Wholesale Inc. currently is without a chief executive officer. Anyone interested in taking on the chore of working out a reorganization plan should contact Lucas Associates Inc., the executive search firm being retained to find a new CEO. According to the report, the company is intent on using Chapter 11 to restructure about $25 million in secured debt owing to Capital One Bank USA NA. Other liabilities include $14.6 million owing on a revolving credit with Wells Fargo Bank NA. The Capital One debt is secured by equipment along with warehouses in Houston and Meridian, Mississippi. The Mississippi warehouse was closed. About Handy Hardware Handy Hardware Wholesale, Inc., filed a Chapter 11 petition (Bankr. D. Del. Case No. 13-10060) on Jan. 11, 2013. Handy Hardware is engaged in the business of buying goods from vendors and selling those goods at a discounted price to its members for sale in their retail stores. Handy Hardware, which has 300 employees, is operating on a cooperative basis and is completely member-owned, with over 1,000 members. The Debtor's warehouse facilities are located in Houston, Texas, and in Meridian, Mississippi. Trucking services are provided by Averitt Express, Inc., and Trans Power Corp. Its members operate 1,300 retail stores, home centers, and lumber yards. The members are located in 14 states throughout the U.S. as well as in Mexico, South America, and Puerto Rico. Bankruptcy Judge Mary F. Walrath oversees the case. Lawyers at Ashby & Geddes, P.A., serve as the Debtor's counsel. MCA Financial serves as financial advisor. Donlin Recano serves as claims and noticing agent. The Debtor disclosed $79,169,106 in assets and $77,605,085 plus an unknown in liabilities as of the Chapter 11 filing. A seven-member official committee of unsecured creditors has been appointed in the case. Wells Fargo is providing a $30 million revolving credit to finance operations in Chapter 11. HOSTESS BRANDS: Buyer to Re-Launch Emporia Bakery ------------------------------------------------- Hostess Brands, LLC, a new company and employer under new ownership, on April 25 announced plans to expand and re-launch its bakery in Emporia, Kansas. The Company will initially add 250 jobs to the local economy and plans to create a total of more than 300 jobs in the community within the next several years. The baking facility, located at 1525 Industrial Road in Emporia, will resume operations this summer and will produce a full assortment of Hostess' iconic snack products, including Twinkies, Cup Cakes, HoHos and Ding Dongs. The investment in the Emporia baking facility is being funded by affiliates of Apollo Global Management, LLC and Metropoulos & Co., which purchased selected Hostess assets out of bankruptcy in April 2013. "I am delighted with the progress we have made upgrading the Emporia facility since we acquired Hostess," said Dean Metropoulos, the Chairman and Chief Executive Officer of Hostess. "We have expanded the bakery's capacity significantly, which will result in meaningful job growth in the Emporia community and ultimately help us achieve our goal of bringing Hostess products back to the shelves for our customers as quickly as possible. The state of Kansas and city of Emporia have been extremely helpful throughout the redevelopment process, and we want to thank them for their assistance with this project in particular and for their long-standing support of Hostess." "I am thrilled that the re-launch of the Emporia factory will result in the creation of hundreds of jobs," said Kansas Commerce Secretary Pat George. "Kansas has created an attractive business environment that helps companies invest in the state and hire a significant number of Kansas workers." "The city is delighted that the new owners of Hostess Brands are resuming production at the Emporia plant," said Mayor Bobbi Mlynar, who helped lead the cooperative effort to keep the local plant open. "Making the best snack cakes in the world is something that Emporia-area workers know how to do well and are eager to resume doing. The plant has been a major employer here for almost 50 years, providing significant support to our economy, as well as being a good corporate citizen in our community. We look forward to the same type of relationship with the new owners." "The Emporia community is excited to officially welcome back Hostess Brands," said Chair Jon Geitz of the Regional Development Association of East Central Kansas ("RDA") and Vice-Mayor of the city of Emporia. "The RDA in collaboration with community leaders worked diligently over the past 15 months to ensure a positive outcome after the bankruptcy was announced. Once again, Emporia has earned its reputation as a community that speaks with one voice." Hostess is seeking motivated, energetic and team-oriented candidates for a variety of positions at our Emporia facility as we bring Hostess products back to American consumers. Applicants interested in joining the Company can apply at the KANSASWORKS office at 1622 Industrial Road in Emporia, Kansas (Flint Hills Mall) or online at www.the-arnold-group.com. Applicants can also visit jobs.hbnewco.com or call Hostess at (816) 701-4600 for more information. About Hostess Brands Founded in 1930, Irving, Texas-based Hostess Brands Inc., is known for iconic brands such as Butternut, Ding Dongs, Dolly Madison, Drake's, Home Pride, Ho Hos, Hostess, Merita, Nature's Pride, Twinkies and Wonder. Hostess has 36 bakeries, 565 distribution centers and 570 outlets in 49 states. Hostess filed for Chapter 11 bankruptcy protection early morning on Jan. 11, 2011 (Bankr. S.D.N.Y. Case Nos. 12-22051 through 12-22056) in White Plains, New York. Hostess Brands disclosed assets of $982 million and liabilities of $1.43 billion as of the Chapter 11 filing. The bankruptcy filing was made two years after predecessors Interstate Bakeries Corp. and its affiliates emerged from bankruptcy (Bankr. W.D. Mo. Case No. 04-45814). In the new Chapter 11 case, Hostess has hired Jones Day as bankruptcy counsel; Stinson Morrison Hecker LLP as general corporate counsel and conflicts counsel; Perella Weinberg Partners LP as investment bankers, FTI Consulting, Inc. to provide an interim treasurer and additional personnel for the Debtors, and Kurtzman Carson Consultants LLC as administrative agent. Matthew Feldman, Esq., at Willkie Farr & Gallagher, and Harry Wilson, the head of turnaround and restructuring firm MAEVA Advisors, are representing the Teamsters union. Attorneys for The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union and Bakery & Confectionery Union & Industry International Pension Fund are Jeffrey R. Freund, Esq., at Bredhoff & Kaiser, P.L.L.C.; and Ancela R. Nastasi, Esq., David A. Rosenzweig, Esq., and Camisha L. Simmons, Esq., at Fulbright & Jaworski L.L.P. The official committee of unsecured creditors selected New York law firm Kramer Levin Naftalis & Frankel LLP as its counsel. Tom Mayer and Ken Eckstein head the legal team for the committee. Hostess Brands in mid-November 2012 opted to pursue the orderly wind down of its business and sale of its assets after the Bakery, Confectionery, Tobacco and Grain Millers Union (BCTGM) commenced a nationwide strike. The Debtor failed to reach an agreement with BCTGM on contract changes. Hostess Brands said it intends to retain approximately 3,200 employees to assist with the initial phase of the wind down. Employee headcount is expected to decrease by 94% within the first 16 weeks of the wind down. The entire process is expected to be completed in one year. Hostess has received court approval for sales raising about $800 million. Apollo Global Management LLC and C. Dean Metropoulos & Co. are buying the snack cake business for $410 million. Flowers Foods Inc. is taking most of the bread business, including the Wonder bread brand for $360 million. Neither of the sales attracted competitive bidding. After an auction with competitive bidding, Mexican baker Grupo Bimbo SAB was given a green light to buy the Beefsteak rye bread business for $31.9 million. HOWREY LLP: Avoids Suits as Deal with Holland, Fenwick Okayed ------------------------------------------------------------- Stewart Bishop of BankruptcyLaw360 reported that a California bankruptcy judge on Tuesday approved Howrey LLP's settlements with Holland & Knight LLP and Fenwick & West LLP that wrap up unfinished-business claims but leave individual attorneys who left Howrey for the other two firms open to potential clawback claims. According to the report, U.S. Bankruptcy Judge Dennis Montali signed off on the deals, noting that no one has raised any objection and the settlements are "fair, equitable and in the best interest of the estate." About Howrey LLP Three creditors filed an involuntary Chapter 7 petition (Bankr. N.D. Calif. Case No. 11-31376) on April 11, 2011, against the remnants of the Washington-based law firm Howrey LLP. The filing was in San Francisco, where the firm had an office. The firm previously was known as Howrey & Simon and Howrey Simon Arnold & White LLP. The firm at one time had more than 700 lawyers in 17 offices. The partners voted to dissolve in March 2011. The firm specialized in antitrust and intellectual-property matters. The three creditors filing the involuntary petition together have $36,600 in claims, according to their petition. The involuntary chapter 7 petition was converted to a chapter 11 case in June 2011 at the request of the firm. In its schedules filed in July, the Debtor disclosed assets of $138.7 million and liabilities of $107.0 million. Representing Citibank, the firm's largest creditor, is Kelley Cornish, Esq., a partner at Paul, Weiss, Rifkind, Wharton & Garrison. Representing Howrey is H. Jason Gold, Esq., a partner at Wiley Rein. The Official Committee of Unsecured Creditors is represented in the case by Bradford F. Englander, Esq., at Whiteford, Taylor And Preston LLP. In September 2011, Citibank sought conversion of the Debtor's case to Chapter 7 or, in the alternative, appointment of a Chapter 11 Trustee. The Court entered an order appointing a Chapter 11 Trustee. In October 2011, Allan B. Diamond was named as Trustee. HOWREY LLP: Former Partners Settle 'Jewel' Claims Cheaply --------------------------------------------------------- Bill Rochelle, the bankruptcy columnist for Bloomberg News, reports that a controversy roiling the legal community enables lawyers from failed firms to settle with their former firms at affordable prices. The issue revolves around a California case called Jewel where an appellate court ruled that the profit a lawyer makes completing on-going business at a new firm belongs to the old firm if it goes bankrupt. Mr. Rochelle notes that not all courts agree that Jewel is good law. In New York, two federal district judges in Manhattan reached opposite results, one saying Jewel is good law and the other saying it's not. According to the report, in San Francisco, the bankruptcy trustee for Howrey LLP is making claims against the firm's former partners who took business with them to new firms. This week the bankruptcy court approved settlements at fraction of the potential liabilities. One settlement involved a lawyer who went to Holland & Knight LLP and generated $238,000 in collections on unfinished business. The Howrey trustee claimed $67,000, representing the profit at the firm's 28% reported profit margin. The trustee settled for about $26,000, or about 40% of the trustee's potential recovery. Another partner went to Fenwick & West LLP and brought in $59,000 on unfinished work. At the firm's published 41% profit margin, the trustee could have recovered about $24,000. Instead, the trustee settled for $15,000, or about 62 percent of the possible recovery. According to Mr. Rochelle, the settlements are good news for partners at financially weak law firms. Were the Howrey trustee collecting 100%, partners might have difficulty finding new firms to take them in. He adds Settlements make sense for former Howrey partners because the same bankruptcy judge wrote an opinion in March in the liquidation of Heller Ehrman LLC, another defunct firm, where he concluded that Jewel remains good law. About Howrey LLP Three creditors filed an involuntary Chapter 7 petition (Bankr. N.D. Calif. Case No. 11-31376) on April 11, 2011, against the remnants of the Washington-based law firm Howrey LLP. The filing was in San Francisco, where the firm had an office. The firm previously was known as Howrey & Simon and Howrey Simon Arnold & White LLP. The firm at one time had more than 700 lawyers in 17 offices. The partners voted to dissolve in March 2011. The firm specialized in antitrust and intellectual-property matters. The three creditors filing the involuntary petition together have $36,600 in claims, according to their petition. The involuntary chapter 7 petition was converted to a chapter 11 case in June 2011 at the request of the firm. In its schedules filed in July, the Debtor disclosed assets of $138.7 million and liabilities of $107.0 million. Representing Citibank, the firm's largest creditor, is Kelley Cornish, Esq., a partner at Paul, Weiss, Rifkind, Wharton & Garrison. Representing Howrey is H. Jason Gold, Esq., a partner at Wiley Rein. The Official Committee of Unsecured Creditors is represented in the case by Bradford F. Englander, Esq., at Whiteford, Taylor And Preston LLP. In September 2011, Citibank sought conversion of the Debtor's case to Chapter 7 or, in the alternative, appointment of a Chapter 11 Trustee. The Court entered an order appointing a Chapter 11 Trustee. In October 2011, Allan B. Diamond was named as Trustee. INSPIRATION BIOPHARMA: Seeks Extension of Plan Filing Deadline -------------------------------------------------------------- Inspiration Biopharmaceuticals, Inc., asks the U.S. Bankruptcy Court for the District of Massachusetts (Eastern Division) to further extend its exclusive period to file a plan until June 27, 2013, and its exclusive solicitation period until Aug. 26. The Debtor states in court papers that it needs the additional time to prepare its disclosure statement, complete its review of claims filed, and to formulate an appropriate mechanism to administer the estate's interest in the predetermined formula agreed to by the principal constituencies in the case called "Waterfall." The Debtor, the Official Committee of Unsecured Creditors and Ipsen Pharma, S.A.S., also separately ask the Court to approve a stipulation authorizing the Debtor to use the cash collateral until April 26, 2013. About Inspiration Biopharmaceuticals Inspiration Biopharmaceuticals Inc. develops recombinant blood coagulation factor products for the treatment of hemophilia. Inspiration, based in Cambridge, Massachusetts, has two products in what the company calls "advanced clinical development." Two other products are in "pre-clinical development." None of the products can be marketed as yet. Inspiration filed for voluntary Chapter 11 reorganization (Bankr. D. Mass. Case No. 12-18687) on Oct. 30, 2012, in Boston. Bankruptcy Judge William C. Hillman oversees the case. Mark Weinstein and Michael Nolan, at FTI Consulting, Inc., serve as the Debtor's Chief Restructuring Officers. The Debtor is represented by Harold B. Murphy of Murphy & King. The petition shows assets and debt both exceed $100 million. Assets include patents, trademarks and the products in development. Liabilities include $195 million owing to Ipsen Pharma SAS, which is also a 15.5% shareholder. Ipsen -- http://www.ipsen.com/-- is also owed $19.4 million in unsecured debt. There is another $12 million in unsecured claims. Ipsen is pledged to provide $18.3 million in financing. The Debtor disclosed $20,383,300 in assets and $241,049,859 in liabilities. Ipsen is represented in the case by J. Eric Ivester, Esq., at Skadden Arps. The Official Committee of Unsecured Creditors tapped Jeffrey D. Sternklar and Duane Morris LLP as its counsel, and The Hawthorne Consulting Group, LLC as its financial advisor. INSPIRATION BIOPHARMA: Has Authority to Employ McGladrey -------------------------------------------------------- Inspiration BioPharmaceuticals, Inc., received authority from the U.S. Bankruptcy Court for the District of Massachusetts, Eastern Division, to employ McGladrey LLP to provide advisory services related to analyses and calculation of available net operating losses resulting from any changes of ownership under Section 382 of Title 26 of the U.S. Code. McGladrey will be paid $25,000 to $30,000 for Phase I of the project and up to $7,500 for Phase II of the project. About Inspiration Biopharmaceuticals Inspiration Biopharmaceuticals Inc. develops recombinant blood coagulation factor products for the treatment of hemophilia. Inspiration, based in Cambridge, Massachusetts, has two products in what the company calls "advanced clinical development." Two other products are in "pre-clinical development." None of the products can be marketed as yet. Inspiration filed for voluntary Chapter 11 reorganization (Bankr. D. Mass. Case No. 12-18687) on Oct. 30, 2012, in Boston. Bankruptcy Judge William C. Hillman oversees the case. Mark Weinstein and Michael Nolan, at FTI Consulting, Inc., serve as the Debtor's Chief Restructuring Officers. The Debtor is represented by Harold B. Murphy of Murphy & King. The petition shows assets and debt both exceed $100 million. Assets include patents, trademarks and the products in development. Liabilities include $195 million owing to Ipsen Pharma SAS, which is also a 15.5% shareholder. Ipsen -- http://www.ipsen.com/-- is also owed $19.4 million in unsecured debt. There is another $12 million in unsecured claims. Ipsen is pledged to provide $18.3 million in financing. The Debtor disclosed $20,383,300 in assets and $241,049,859 in liabilities. Ipsen is represented in the case by J. Eric Ivester, Esq., at Skadden Arps. The Official Committee of Unsecured Creditors tapped Jeffrey D. Sternklar and Duane Morris LLP as its counsel, and The Hawthorne Consulting Group, LLC as its financial advisor. INDYMAC BANCORP: $80MM Ruling for Insurers Too Broad ---------------------------------------------------- Bibeka Shrestha of BankruptcyLaw360 reported that IndyMac Bancorp Inc.'s bankruptcy trustee, the Federal Deposit Insurance Corp. and former IndyMac executives on Monday disputed a ruling that put $80 million of directors and officers coverage out of reach, asking the Ninth Circuit to interpret an exclusion for interrelated claims narrowly. According to the report, filing five opening briefs with the Ninth Circuit, the parties challenged a California federal judge's holding that coverage for securities and other lawsuits against former executives at failed mortgage lender IndyMac and its subsidiary IndyMac Bank FSP. About Indymac Bancorp Based in Pasadena, California, IndyMac Bancorp Inc. (NYSE:IMB) -- http://www.indymacbank.com/-- is the holding company for IndyMac Bank FSB, a hybrid thrift/mortgage bank that originated mortgages in all 50 states of the United States. Through its hybrid thrift- mortgage bank business model, IndyMac designed, manufactured, and distributing cost-efficient financing for the acquisition, development, and improvement of single-family homes. IndyMac also provided financing secured by single-family homes to facilitate consumers' personal financial goals and strategically invests in single-family mortgage-related assets. On July 11, 2008, the Office of Thrift Supervision closed IndyMac Bank and appointed FDIC as the bank's receiver. Thacher Proffitt & Wood LLP was engaged as counsel to the FDIC. Indymac Bancorp filed for Chapter 7 bankruptcy protection (Bankr. C.D. Calif., Case No. 08-21752) on July 31, 2008. Representing the Debtor are Dean G. Rallis, Jr., Esq., and John C. Weitnauer, Esq. Bloomberg noted that Indymac had about $32.01 billion in assets as of July 11, 2008. In court documents, IndyMac disclosed estimated assets of $50 million to $100 million and estimated debts of $100 million to $500 million. INTELSAT INVESTMENTS: Refinancing Prompts Moody's to Up CFR to B3 ----------------------------------------------------------------- Moody's Investors Service upgraded Intelsat Investments S.A.'s (Intelsat; formerly Intelsat S.A.) corporate family rating (CFR) to B3 from Caa1, while also upgrading ratings for certain of the company's debt instruments as well as its probability of default rating (PDR; upgraded to B3-PD from Caa1-PD). The company's speculative grade liquidity rating was affirmed at SGL-2 (good). The rating action concludes a review initiated on April 2, 2013 when Intelsat's indirect ultimate parent company, Intelsat S.A. (formerly Intelsat Global Holdings S.A.) announced an equity issue with most of the proceeds reducing debt at Intelsat and its subsidiaries. With the review concluded, Intelsat's ratings outlook was changed to stable. The CFR upgrade results from Moody's expectations that Intelsat's capital structure will "be sustainable as a consequence of modest, positive cash flow resulting from refinancing debt at historically low interest rates," said Bill Wolfe, Senior Vice President, Moody's. Wolfe said that the upgrade was limited to one notch since Intelsat's continues to be highly levered at 7.8x (pro forma for debt reduction from the IPO) and has limited capacity to repay debt. All debt instruments were upgraded except for unsecured/guaranteed debts at Intelsat Jackson Holdings S.A. (Jackson). With IPO and insurance proceeds mostly applied to repay junior-ranking debts at Intelsat (Luxembourg) S.A. and at Intelsat, the proportion of debt represented by the unsecured/guaranteed debts increased to the extent they are no longer notched above Intelsat's CFR. Accordingly, their rating remains unchanged and was confirmed at B3, equal to the CFR. Intelsat's speculative grade liquidity rating was affirmed at SGL- 2 (good), an assessment that relies on three extraordinary items: some $387 million of net insurance proceeds from Intelsat 27; lower 2013 capital expenditures than the annual spending Moody's estimates is required, on average, to maintain Intelsat's asset base; and customer pre-payments exceeding non-cash deferred revenues (and EBITDA) by $100 million. The following summarizes Moody's rating actions for Intelsat: Issuer: Intelsat Investments S.A. Corporate Family Rating, Upgraded to B3 from Caa1 Probability of Default Rating, Upgraded to B3-PD from Caa1-PD Speculative Grade Liquidity Rating, Affirmed at SGL-2 Outlook, Changed to Stable from On Review for Upgrade Senior Unsecured Regular Bond/Debenture, Upgraded to Caa2 (LGD6, 96%) from Caa3 (LGD6, 96%) Issuer: Intelsat (Luxembourg) S.A. Senior Unsecured Regular Bond/Debenture, Upgraded to Caa2 (LGD5, 87%) from Caa3 (LGD5, 86%) Issuer: Intelsat Jackson Holdings S.A. Senior Secured Bank Credit Facility, Upgraded to Ba3 (LGD1, 7%) from B1 (LGD1, 7%) Senior Unsecured Regular Bond/Debenture, Confirmed at B3 with LGD Assessment revised to (LGD3, 44%) from (LGD3, 43%) Senior Unsecured Regular Bond/Debenture, Upgraded to Caa1 (LGD5, 71%) from Caa2 (LGD5, 70%) Ratings Rationale: Intelsat's B3 CFR primarily reflects a limited ability to repay debt, elevated leverage and uncertain free cash flow after 2014. On average, free cash flow available to reduce debt is limited to only about 1% of Intelsat's debt because maintenance capital expenditures, interest expense and cash taxes consume nearly all of the company's EBITDA. Post-2014 free cash flow is uncertain since plans for several satellites whose useful lives expire within four years have not been disclosed and deferred revenue will exceed customer pre-payments and become a use of cash. There is also the potential of interest rates increasing and, over several years, of competition from terrestrial fiber eroding satellite's market share. Despite these uncertainties and already elevated leverage of 7.8x (pro forma), Moody's views Intelsat's capital structure as sustainable since cash flow will be modestly positive. The company's strong business profile, which features a large 42 station-kept satellite fleet covering 99% of Earth's population, and a stable, predictable, contract-based revenue stream with a solid $10.7 billion backlog (over 4 years of revenue) booked with well-regarded customers, also supports the rating. Rating Outlook Intelsat's stable ratings outlook is based on reasonable visibility of modest, positive cash flow through 2014, along with good liquidity arrangements. What Could Change the Rating -- Up With company guidance indicating a three-year period of lower- than-average capital spending, depending on plans for several satellites whose useful lives expire within four years, Intelsat has an opportunity to de-lever by way of debt reduction. Should this result in sustainable free cash flow to debt approaching/exceeding 5% of debt (all measures incorporating Moody's adjustments), positive ratings pressure could result. An upgrade would also depend on positive industry fundamentals, maintenance of solid liquidity and clarity on capital structure planning. What Could Change the Rating - Down Downwards rating pressure is most likely to come from debt- financed capital expenditures related to several satellites whose useful lives expire within four years or, alternatively, reduced EBITDA should Intelsat not replace the applicable satellites. Irrespective, should Debt-to-EBITDA trend back towards 8x, or should sustainable free cash flow revert to a deficit, or should liquidity arrangements deteriorate materially, downwards rating pressure would result. Company Profile Headquartered in Luxembourg, and with executive offices in Washington D.C., Intelsat Investments S.A. (Intelsat) is one of the two largest fixed satellite services operators in the world. After a recent IPO by the company's indirect parent, Intelsat S.A., there is an approximate 20% float of publicly traded shares with the balance of company continuing to be owned by financial investors and management. Annual revenues are approximately $2.6 billion; EBITDA is approximately $2.0 billion. The principal methodology used in rating Intelsat Investments S.A. was the Global Communications Infrastructure Industry Methodology published in June 2011. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. IOWA FINANCE: Fitch to Assigns 'BB-' Rating to $1.19-Bil. Bonds --------------------------------------------------------------- Fitch Ratings expects to assign a 'BB-' rating with a Stable Outlook to approximately $1.194 billion of proposed Midwestern Disaster Area Revenue Bonds to be issued by the Iowa Finance Authority on behalf of Iowa Fertilizer Company LLC (IFCo). The final ratings are contingent upon the receipt by Fitch of executed documents and legal opinions conforming to information already received and reviewed as well as the final pricing of the bonds. The bonds are expected to price on April 29, 2013 and the proceeds will be used to pay for the construction of the fertilizer plant and certain infrastructure improvements, capitalized interest, a deposit to the debt service reserve fund, and associated financing fees. KEY RATING DRIVERS -- Nitrogen Market Price Exposure: IFCo will sell its nitrogen products to farmers, distributers, and blenders at market prices. The project's main products have historically exhibited considerable price volatility as evidenced by the average 5 - and 10-year one standard deviation ranges of 25% - 30% and 35%, respectively. However, Fitch believes that IFCo will benefit from a favorable pricing environment in the medium-term, but recognizes that a shift in the supply-demand balance could negatively impact prices. Fitch forecasts that a 10% change in nitrogen product prices will result in a 0.40x - 0.50x change in debt service coverage ratios (DSCRs). -- Natural Gas Price Risk: The project will procure its natural gas feedstock via an existing pipeline at prices linked to Henry Hub. IFCo has entered into natural gas call swaptions for the first seven years of the project with a strike price of $6 and $6.50 per mmBtu to moderate gas price risk. In addition, the project will fund from operations, over seven years, an annual $25.8 million reserve requirement to provide liquidity and help mitigate price risk during the non-hedging period. Alternatively, IFCo can enter into call swaptions at a $7 per mmBtu strike price during part or all of the final three years of the debt term. Fitch believes that the call swaptions and hedging reserve moderate natural gas price risk and forecasts that DSCRs change by 0.10x - 0.15x for every $1 per mmBtu price movement. -- Manageable Operating Risks: IFCo will utilize commercially proven technologies with relatively low maintenance risk. The independent engineer (IE) opined that the non-feedstock O&M and major maintenance costs were reasonable and forecasted technical operating performance was achievable. Further, Fitch believes that the project's oversized production capacity helps mitigate operating performance risk. -- Strong Completion Arrangement: The fixed-price, turn-key, date-certain, fully-wrapped engineering, procurement, and construction (EPC) agreement with an experienced contractor that has delivered similar projects on-schedule and on-budget substantially mitigates construction risk. Fitch considers the credit quality of the EPC contractor to be below that of the project, but does not view this as a rating constraint. Fitch believes that the structural features of the EPC contract and financing agreements, use of conventional technology, availability of substitute contractors, favorable IE opinion regarding construction costs, and potential for sponsor support, albeit uncommitted, help mitigate counterparty risk. -- Speculative-Grade Forecasted Financial Profile: The Fitch rating case forecasts average and minimum DSCRs of 1.16x and 1.06x, respectively. Fitch believes that the project exhibits an ability to endure a combination of financial and performance stresses, but views the exposure to margin risk as a rating constraint. While natural gas price exposure has been moderated, the nitrogen fertilizer price remains subject to the U.S. trade balance, cost of production, and changes in supply and demand. Fitch recognizes that the debt term moderates long-term price uncertainty and reserve accounts help to mitigate the impact of short-term price fluctuations, but the cash flow cushion provides a limited margin of safety. RATING SENSITIVITIES: -- Nitrogen Market Prices: Fundamental shift in the supply- Demand balance that results in a materially different nitrogen market pricing environment than forecasted -- Higher Cost Profile: Higher than expected natural gas market prices or an inability to effectively manage operating costs -- Reduced Operational Capabilities: Failure to reach and sustain projected capacity and utilization rates -- Heightened Completion Risk: Material increases in costs or delays during construction SECURITY First priority security interest in all tangible and intangible assets of the project and a pledge by Iowa Holding LLC of its membership interests in IFCo. TRANSACTION SUMMARY IFCo was formed to develop, construct, operate, and own a $1.8 billion greenfield nitrogen fertilizer facility in southeast Iowa. The project will have up to 2.2 million short tons of flexible capacity to produce ammonia, urea, urea-ammonium nitrate, and diesel exhaust fluid (DEF). The project has entered into a fixed- price, turn-key, date-certain, fully wrapped EPC contract with Orascom E&C USA. The EPC contractor's obligations are unconditionally guaranteed by its parent OCI Construction Holding, a wholly-owned affiliate of OCI N.V. IFCo will sell its products to farmers, distributors, and blenders at market prices. The project will be connected directly to the ANR pipeline and pay prices linked to Henry Hub. The project will enter into hedging arrangements for approximately 50% of its natural gas cost exposure using call swaptions for the first seven years at $6 per mmBtu in years one to three and $6.50 per mmBtu in years four to seven. The Fitch base case represents Fitch's expected performance for IFCo. The Fitch base case uses a production ramp-up at the commencement of operations and assumes scheduled turnarounds every four years beginning in 2019 consistent with management's estimate and the IE opinion. Fitch believes the forecasted ammonia and downstream plant capacity levels and conversion yield estimates are reasonable. The IE verified that the capacity and conversion yield assumptions are reasonable and achievable. Fitch utilized 2015 nitrogen fertilizer prices generally consistent with the post-Energy Independence and Security Act historical average with a long-term growth rate of 2.75% to capture the impact of inflationary adjustments and modest demand increases. The DEF price was linked to the forecasted urea price plus a premium. Fitch's annual base case projections for the Henry Hub market price of $4.22 - $7.55 per mmBtu were used to forecast the effective all-in price of natural gas. Management's operating and capital cost estimates were maintained based on feedback from the IE. The Fitch base case average and minimum DSCRs are 2.61x and 2.39x, respectively. The Fitch rating case applies a combination of uncorrelated operational and financial stress to the Fitch base case to reflect the potential results that are reasonably likely to occur occasionally, but not persist during the life of the project financing. The Fitch rating case incorporated a 2.5% utilization rate haircut for all years that may occur due to operational issues. Operating and capital costs were increased by 10% in all years to reflect the potential volatility of occasionally higher cost requirements for a new fertilizer project. The Fitch base case natural gas prices were increased by $1.50 per mmBtu given IFCo's exposure to market price movements. Additionally, the base case nitrogen fertilizer prices were reduced by 25% to reflect the volatility in market prices based on the lower end of the average historical one standard deviation change in prices. Similar to the Fitch base case, DEF prices were linked to forecasted urea prices plus a premium. The Fitch rating case average and minimum DSCRs are 1.16x and 1.06x, respectively. Fitch completed additional financial analyses to review the probability of default, which will be provided in the Fitch presale report. JEFFERSON COUNTY, AL: Hires New Top Attorney -------------------------------------------- Verna Gates, writing for Reuters, reported that Alabama's Jefferson County, readying a plan to emerge from the largest U.S. municipal bankruptcy, on Wednesday hired a judge to replace the county's top in-house lawyer, who was fired nearly two weeks ago. According to the Reuters report, Alabama Supreme Court Justice Mike Bolin will step down from that post to succeed Jeff Sewell, who took involuntary retirement on April 12, officials said. Bolin will earn $224,000 per year, or a bit more than half the nearly $400,000 salary of his predecessor. Bolin was probate judge for Jefferson County for 16 years and has a deep familiarity with the legal history of the county's sewer system, which is at the heart of the $4.27 billion Chapter 9 bankruptcy filed by Jefferson County in November 2011, according to officials. "He is an expert in state and federal law, so he brings a wealth of knowledge and instant credibility," said County Commissioner Jimmie Stephens. Sewell had been in Jefferson County's legal department for 25 years and was dismissed due to directions he gave the county's outside bankruptcy attorneys "that were not in the best interests of Jefferson County." The federal judge overseeing the bankruptcy has scheduled a hearing on May 9 to discuss the schedule for filing a plan of adjustment for the county's debts, but no hard deadline has yet been set. About Jefferson County Jefferson County has its seat in Birmingham, Alabama. It has a population of 660,000. Jefferson County filed a bankruptcy petition under Chapter 9 (Bankr. N.D. Ala. Case No. 11-05736) on Nov. 9, 2011, after an agreement among elected officials and investors to refinance $3.1 billion in sewer bonds fell apart. John S. Young Jr. LLC was appointed as receiver by Alabama Circuit Court Judge Albert Johnson in September 2010. Jefferson County's bankruptcy represents the largest municipal debt adjustment of all time. The county said that long-term debt is $4.23 billion, including about $3.1 billion in defaulted sewer bonds where the debt holders can look only to the sewer system for payment. The county said it would use the bankruptcy court to put a value on the sewer system, in the process fixing the amount bondholders should be paid through Chapter 9. Judge Thomas B. Bennett presides over the Chapter 9 case. Lawyers at Bradley Arant Boult Cummings LLP and Klee, Tuchin, Bogdanoff & Stern LLP, led by Kenneth Klee, represent the Debtor as counsel. Kurtzman Carson Consultants LLC serves as claims and noticing agent. Jefferson estimated more than $1 billion in assets. The petition was signed by David Carrington, president. The bankruptcy judge in January 2012 ruled that the state court- appointed receiver for the sewer system largely lost control as a result of the bankruptcy. Before deciding whether Jefferson County is eligible for Chapter 9, the bankruptcy judge will allow the Alabama Supreme Court to decide whether sewer warrants are the equivalent of "funding or refunding bonds" required under state law before a municipality can be in bankruptcy. U.S. District Judge Thomas B. Bennett ruled in March 2012 that Jefferson County is eligible under state law to pursue a debt restructuring under Chapter 9. Holders of more than $3 billion in defaulted sewer debt had challenged the county's right to be in Chapter 9. J.C. PENNEY: Soros Fund Acquires 7.91% Stake -------------------------------------------- Suzanne Kapner, writing for The Wall Street Journal, reports that George Soros' Soros Fund Management LLC has bought a 7.91% stake in J.C. Penney Co. The Soros fund said in a regulatory filing on April 25 it had acquired 17.4 million Penney shares. WSJ says Penney's shares jumped 7% to $16.31 in after-hours trading after the stake was disclosed. About J.C. Penney Plano, Texas-based J.C. Penney Company, Inc. is one of the U.S.'s largest department store operators with about 1,100 locations in the United States and Puerto Rico. J.C. Penney disclosed a net loss of $985 million in 2012, as compared with a net loss of $152 million in 2011. The Company's balance sheet at Feb. 2, 2013, showed $9.78 billion in total assets, $6.61 billion in total liabilities and $3.17 billion in total stockholders' equity. * * * The Company carries Moody's Investors Service's B3 Corporate Family Rating with negative outlook. Early in March 2013, Standard & Poor's Ratings Services lowered its corporate credit rating on Penney to 'CCC+' from 'B-'. The outlook is negative. At the same time, S&P lowered the issue- level rating on the company's unsecured debt to 'CCC+' from 'B-' and maintained its '3' recovery rating on this debt, indicating S&P's expectation of meaningful (50% to 70%) recovery for debtholders in the event of a payment default. "The downgrade reflects the performance erosion that has accelerated throughout the previous year and seems likely to persist over the next 12 months," explained Standard & Poor's credit analyst David Kuntz. At the same time, Fitch Ratings downgraded the Company's Issuer Default Ratings to 'B-' from 'B'. The Rating Outlook is Negative. The rating downgrades reflect Fitch's concerns that there is a lack of visibility in terms of the Company's ability to stabilize its business in 2013 and beyond after a precipitous decline in revenues leading to negative EBITDA of $270 million in 2012. Penney, Fitch said, will need to tap into additional funding to cover a projected FCF shortfall of $1.3 billion to $1.5 billion in 2013, which could begin to strain its existing sources of liquidity. In February 2013, Penney received a notice of default from a law firm representing more than 50% of its 7.4% Debentures due 2037. The Company has filed a lawsuit in Delaware Chancery Court seeking to block efforts by the bondholder group to declare a default on the 2037 bonds. Penney also asked lawyers at Brown Rudnick LLP to identify the investors they represent. In March 2013, Penney received a letter from bondholders withdrawing and rescinding the Notice of Default. On April 12, 2013, Penney borrowed $850 million out of its $1.85 billion committed revolving credit facility with JPMorgan Chase Bank, N.A., as Administrative Agent, and Wells Fargo Bank, National Association, as LC Agent. Penney said the move was to enhance the Company's financial flexibility and position. KAHN FAMILY: Voluntary Chapter 11 Case Summary ---------------------------------------------- Debtor: Kahn Family, LLC 101 Flintlake Road Columbia, SC 29223 Bankruptcy Case No.: 13-02354 Chapter 11 Petition Date: April 22, 2013 Court: United States Bankruptcy Court District of South Carolina (Columbia) Debtor's Counsel: R. Geoffrey Levy, Esq. LEVY LAW FIRM, LLC 2300 Wayne Street Columbia, SC 29201 Tel: (803) 256-4693 E-mail: llfecf@levylawfirm.org Estimated Assets: $50,000,001 to $100,000,000 Estimated Debts: $50,000,001 to $100,000,000 The petition was signed by Alan B. Kahn, managing member. The Debtor did not file its list of largest unsecured creditors when it filed its petition. Related entities that simultaneously filed Chapter 11 petitions: Debtor Case No. ------ -------- Kahn Properties South, LLC 13-bk-2355 Alan Kahn 13-bk-2351 KIT DIGITAL: Files for Chapter 11 in Manhattan ---------------------------------------------- KIT digital Inc., filed for Chapter 11 bankruptcy (Bankr. S.D.N.Y. Case No. 13-11298) in Manhattan on April 25, listing more than $10 million in both assets and debts. On April 16, KIT digital said it has reached an agreement with three of the Company's largest shareholders, Prescott Group Capital Management, JEC Capital Partners, and Ratio Capital Partners, to sponsor a reorganization of the Company under chapter 11 of the U.S. Bankruptcy Code. The reorganization is expected to be effectuated pursuant to a Plan of Reorganization. This is anticipated to include, among other things, a recapitalization of the Company fully backstopped by the Plan Sponsor Group, an opportunity for all existing shareholders to participate in the recapitalization, and the regrouping of the core operating entities Ioko 365, Polymedia, Kewego, Multicast and Megahertz into a newly formed group entity called Piksel. Through the Plan, the Company expects to be in a position to pay all vendors, suppliers and other holders of valid pre-petition claims. Only the non-operating parent holding company, KIT digital, Inc., will commence a chapter 11 case to effectuate the proposed restructuring. At that time, the Company said it anticipated a Chapter 11 filing by April 24. KIT digital said its profitable operating subsidiaries, including Ioko 365, Polymedia, Kewego, Multicast and Megahertz will not be impacted. KIT said the bankruptcy filing has the support of its Independent Special Committee of the Board of Directors. William V. Russell, Non-executive Chairman of the Board of Directors, said in an April 16 statement, "We are pleased to announce this comprehensive solution that will provide KIT with relief from the financial, legal, and regulatory issues currently encumbering it. The Plan allows all shareholders the opportunity to participate in the future growth of the Company and at the same time it will complete the Company's restructuring by strengthening the balance sheet and positioning it for profitable growth." "The Plan provides certainty and comfort to our customers and employees and it will allow the reorganized company to aggressively pursue growth opportunities with confidence," said Peter Heiland, Interim Chief Executive Officer and Plan Sponsor Group member. "By moving the core businesses forward together unburdened by the issues currently plaguing the corporate parent, our customers and products can once again become the sole focus of this exciting business." Dawn McCarty, writing for Bloomberg News, reports that KIT digital's last financial statements show revenue of $107.3 million for the six months ended June 30, resulting in a $110.8 million loss from operations, including a $55 million goodwill-impairment charge. Jones Day, with a claim of $1.6 million for legal services, is listed as the largest unsecured creditor, Bloomberg says. New York-based KIT digital Inc. -- http://www.kitd.com/-- is a video management software and services company. With its proprietary OVP and OTT platform products, Cloud and Cosmos, as well as systems integration and solutions design expertise, KIT delivers complete video solutions to clients, helping to power the transformation from traditional broadcast to multiscreen broadband TV. KIT digital services nearly 2,500 clients in 50+ countries including some of the world's biggest brands, such as Airbus, The Associated Press, AT&T, BBC, BSkyB, Disney-ABC, Google, HP, MTV, News Corp, Sky Deutschland, Sky Italia, Telecom Argentina, Telecom Italia, Telefonica, Universal Studios, Verizon, Vodafone VRT and Volkswagen. LEARNING CARE: Moody's Assigns 'Ba3' Rating to New Senior Debt -------------------------------------------------------------- Moody's Investors Service assigned ratings to Learning Care Group (US) No. 2 Inc. ("LCG"), including a B3 Corporate Family, B3-PD Probability of Default and Ba3 senior secured instrument ratings. The ratings outlook is stable. The proceeds of the new $220 million senior secured term loan due 2019 and balance sheet cash will be used to repay in full $200 million of existing secured indebtedness and pay associated fees and expenses. Ratings Rationale: The B3 Corporate Family rating reflects high leverage and expectations for limited near term deleveraging. High ongoing capital investment requirements, interest and operating lease expenses will limit free cash flow, leading Moody's to expect debt to EBITDA to remain above 6 times over the next 12 to 18 months. All financial metrics reflect Moody's standard adjustments. Moody's anticipates low single digit same center revenue growth in LCG's portfolio of 956 mostly-leased child care centers in 2013 to drive a small revenue increase. LCG has experienced year over year same center revenue growth since late 2011, lending support to Moody's expectations. Continuing improvements in utilization, which has also been improving, driven by local employment growth and effective selling, as well as ongoing cost management initiatives, should drive higher profit margins. Liquidity is adequate, with over $10 million of cash and no usage under a $40 million revolver expected throughout fiscal 2014 (ends June). The rating incorporates the expectation that any free cash flow may be used to buy back franchises, invest in new or existing centers or make acquisitions, as opposed to reducing debt. The stable ratings outlook reflects expectations for moderate same center sales improvements and slowly increasing utilization to drive revenue and profitability growth. The ratings could be lowered if, due to enrollment declines, pricing pressure or cost increases, Moody's expects flat to declining revenue or EBITDA, or if liquidity becomes strained. If Moody's comes to expect higher than currently anticipated revenue and EBITDA growth, enabling debt reduction, leading to expectations for debt to EBITDA to be sustained below 5.5 times and free cash flow to debt approaching 5% or $50 million, the ratings could be raised. The following ratings (assessments) were assigned: Corporate Family, B3 Probability of Default, B3-PD Senior Secured Revolving Credit Facility due 2018, Ba3 (LGD2, 22%) Senior Secured Term Loan B due 2019, Ba3 (LGD2, 22%) The principal methodology used in this rating was Global Business & Consumer Service Industry published in October 2010. Other methodologies used include Loss Given Default for Speculative- Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Learning Care Group is a provider of children's care services for children between the ages of six weeks and 12 years, through 956 centers, most of which are located in residential neighborhoods throughout the U.S. About 1/3rd of its centers are in Texas, California and Florida. Learning Care Group is controlled by affiliates of Morgan Stanley Private Equity. Moody's expects fiscal 2014 (ends June) revenue of over $700 million. LEHMAN BROTHERS: Wins OK to Hire Bonn Steichen ---------------------------------------------- The trustee overseeing the liquidation of Lehman Brothers Holdings Inc.'s brokerage obtained court approval to hire Bonn Steichen & Partners as his special counsel. James Giddens, the court-appointed trustee, tapped the Luxembourg- based firm to advise him on matters relating to the brokerage's claims against Lehman Brothers (Luxembourg) Equity Finance S.A. In exchange for its services, Bonn Steichen will charge a reduced, public interest discount rate on an hourly basis at a 10% discount from their standard rates, and will receive reimbursement for work-related expenses. The firm's current hourly rates are: Hourly Rates Professionals (In Euros) ------------- ------------ Partners 450 Counsel 360 Senior Associates 315 Associates 202.50 Paralegals 90 The firm does not have connection with and interest in the Lehman brokerage, or interest materially adverse to any class of creditors, according to a declaration by Fabio Trevisan, Esq., a partner at Bonn Steichen. Interim Fees Meanwhile, a professional retained by the LBI trustee, Hughes Hubbard & Reed LLP, filed an application for interim allowance of $24,795,838 in fees and reimbursement of $189,208 in expenses for the period March 1 to June 30, 2012. 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 has been a leader in the global financial markets by serving the financial needs of corporations, governmental units, institutional clients and individuals worldwide. Lehman Brothers filed for Chapter 11 bankruptcy Sept. 15, 2008 (Bankr. S.D.N.Y. Case No. 08-13555). Lehman's bankruptcy petition disclosed US$639 billion in assets and US$613 billion in debts, effectively making the firm's bankruptcy filing the largest in U.S. history. Several other affiliates followed thereafter. Affiliates Merit LLC, LB Somerset LLC and LB Preferred Somerset LLC sought for bankruptcy protection in December 2009. 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. Dennis F. Dunne, Esq., Evan Fleck, Esq., and Dennis O'Donnell, Esq., at Milbank, Tweed, Hadley & McCloy LLP, in New York, serve as counsel to the Official Committee of Unsecured Creditors. Houlihan Lokey Howard & Zukin Capital, Inc., is the Committee's investment banker. On Sept. 19, 2008, the Honorable Gerard E. Lynch of the U.S. 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 (Case No. 08-CIV-8119 (GEL)). James W. Giddens has been appointed as trustee for the SIPA liquidation of the business of LBI. The Bankruptcy Court approved Barclays Bank Plc's purchase of 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, purchased LBHI's operations in Europe for US$2 plus the retention of most of employees. Nomura also bought Lehman's operations in the Asia Pacific for US$225 million. Lehman emerged from bankruptcy protection on March 6, 2012, more than three years after it filed the largest bankruptcy in U.S. history. The Chapter 11 plan for the Lehman companies other than the broker was confirmed in December 2011. Bankruptcy Creditors' Service, Inc., publishes Lehman Brothers Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by Lehman Brothers Holdings, Inc., and other insolvency and bankruptcy proceedings undertaken by its affiliates. LEHMAN BROTHERS: SMBC Allowed $13.7MM Unsecured Claim vs. LBI ------------------------------------------------------------- The trustee of Lehman Brothers Inc. signed an agreement granting SMBC Capital Markets Inc. an allowed, general unsecured claim against the brokerage in the sum of $13.7 million. A copy of the agreement is available for free at http://is.gd/INHNBz 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 has been a leader in the global financial markets by serving the financial needs of corporations, governmental units, institutional clients and individuals worldwide. Lehman Brothers filed for Chapter 11 bankruptcy Sept. 15, 2008 (Bankr. S.D.N.Y. Case No. 08-13555). Lehman's bankruptcy petition disclosed US$639 billion in assets and US$613 billion in debts, effectively making the firm's bankruptcy filing the largest in U.S. history. Several other affiliates followed thereafter. Affiliates Merit LLC, LB Somerset LLC and LB Preferred Somerset LLC sought for bankruptcy protection in December 2009. 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. Dennis F. Dunne, Esq., Evan Fleck, Esq., and Dennis O'Donnell, Esq., at Milbank, Tweed, Hadley & McCloy LLP, in New York, serve as counsel to the Official Committee of Unsecured Creditors. Houlihan Lokey Howard & Zukin Capital, Inc., is the Committee's investment banker. On Sept. 19, 2008, the Honorable Gerard E. Lynch of the U.S. 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 (Case No. 08-CIV-8119 (GEL)). James W. Giddens has been appointed as trustee for the SIPA liquidation of the business of LBI. The Bankruptcy Court approved Barclays Bank Plc's purchase of 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, purchased LBHI's operations in Europe for US$2 plus the retention of most of employees. Nomura also bought Lehman's operations in the Asia Pacific for US$225 million. Lehman emerged from bankruptcy protection on March 6, 2012, more than three years after it filed the largest bankruptcy in U.S. history. The Chapter 11 plan for the Lehman companies other than the broker was confirmed in December 2011. Bankruptcy Creditors' Service, Inc., publishes Lehman Brothers Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by Lehman Brothers Holdings, Inc., and other insolvency and bankruptcy proceedings undertaken by its affiliates. LEHMAN BROTHERS: Trustee Signs Deals to Settle Avoidance Claims --------------------------------------------------------------- The trustee of Lehman Brothers Inc. entered into two separate agreements to settle the claims asserted by the brokerage for certain transfers it made to D&D Securities Inc. and ConvergEx Solutions LLC. Under the agreement with D&D, the trustee agreed to drop the claim in exchange for D&D's payment of $45,000 to the Lehman brokerage. Meanwhile, the other agreement requires ConvergEx to withdraw its claims, including a general creditor claim it filed in 2009, against the brokerage. In return, the Lehman brokerage agreed to drop its claim against ConvergEx, and agreed not to sue the company. The agreements are available for free at: http://bankrupt.com/misc/LBHI_StipConvergex.pdf http://bankrupt.com/misc/LBHI_StipD&D.pdf 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 has been a leader in the global financial markets by serving the financial needs of corporations, governmental units, institutional clients and individuals worldwide. Lehman Brothers filed for Chapter 11 bankruptcy Sept. 15, 2008 (Bankr. S.D.N.Y. Case No. 08-13555). Lehman's bankruptcy petition disclosed US$639 billion in assets and US$613 billion in debts, effectively making the firm's bankruptcy filing the largest in U.S. history. Several other affiliates followed thereafter. Affiliates Merit LLC, LB Somerset LLC and LB Preferred Somerset LLC sought for bankruptcy protection in December 2009. 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. Dennis F. Dunne, Esq., Evan Fleck, Esq., and Dennis O'Donnell, Esq., at Milbank, Tweed, Hadley & McCloy LLP, in New York, serve as counsel to the Official Committee of Unsecured Creditors. Houlihan Lokey Howard & Zukin Capital, Inc., is the Committee's investment banker. On Sept. 19, 2008, the Honorable Gerard E. Lynch of the U.S. 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 (Case No. 08-CIV-8119 (GEL)). James W. Giddens has been appointed as trustee for the SIPA liquidation of the business of LBI. The Bankruptcy Court approved Barclays Bank Plc's purchase of 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, purchased LBHI's operations in Europe for US$2 plus the retention of most of employees. Nomura also bought Lehman's operations in the Asia Pacific for US$225 million. Lehman emerged from bankruptcy protection on March 6, 2012, more than three years after it filed the largest bankruptcy in U.S. history. The Chapter 11 plan for the Lehman companies other than the broker was confirmed in December 2011. Bankruptcy Creditors' Service, Inc., publishes Lehman Brothers Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by Lehman Brothers Holdings, Inc., and other insolvency and bankruptcy proceedings undertaken by its affiliates. LEHMAN BROTHERS: Wins Greenlight for Settlement with Swiss Unit --------------------------------------------------------------- Sindhu Sundar of BankruptcyLaw360 reported that a New York federal judge on Wednesday approved a settlement that resolved a sprawling four-year tussle between Lehman Brothers Holdings Inc. and its former Swiss subsidiary, closing the chapter on one of the biggest claims disputes that has beset the erstwhile investment banking giant since it slid into bankruptcy. According to the report, U.S. District Judge James M. Peck approved the settlement between Lehman Brothers and its Swiss unit Lehman Brothers Finance SA, a spokeswoman for Weil Gotshal & Manges LLP, counsel for Lehman Brothers, confirmed Wednesday. Under the deal, Lehman's former Swiss derivatives unit agreed to cut its claim against the company to $942 million from $15.4 billion. LBF will also assign to the holding company billions of dollars of claims that it asserted against certain Lehman affiliates. In return, Lehman agreed to cut its claim against LBF to $8.75 billion from $14.2 billion. The holding company also agreed to partially subordinate its claim against LBF to the claims of the Swiss company's third-party creditors. The deal is formalized in a 23-page agreement, which is available for free at http://is.gd/9aQJZo 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 has been a leader in the global financial markets by serving the financial needs of corporations, governmental units, institutional clients and individuals worldwide. Lehman Brothers filed for Chapter 11 bankruptcy Sept. 15, 2008 (Bankr. S.D.N.Y. Case No. 08-13555). Lehman's bankruptcy petition disclosed US$639 billion in assets and US$613 billion in debts, effectively making the firm's bankruptcy filing the largest in U.S. history. Several other affiliates followed thereafter. Affiliates Merit LLC, LB Somerset LLC and LB Preferred Somerset LLC sought for bankruptcy protection in December 2009. 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. Dennis F. Dunne, Esq., Evan Fleck, Esq., and Dennis O'Donnell, Esq., at Milbank, Tweed, Hadley & McCloy LLP, in New York, serve as counsel to the Official Committee of Unsecured Creditors. Houlihan Lokey Howard & Zukin Capital, Inc., is the Committee's investment banker. On Sept. 19, 2008, the Honorable Gerard E. Lynch of the U.S. 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 (Case No. 08-CIV-8119 (GEL)). James W. Giddens has been appointed as trustee for the SIPA liquidation of the business of LBI. The Bankruptcy Court approved Barclays Bank Plc's purchase of 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, purchased LBHI's operations in Europe for US$2 plus the retention of most of employees. Nomura also bought Lehman's operations in the Asia Pacific for US$225 million. Lehman emerged from bankruptcy protection on March 6, 2012, more than three years after it filed the largest bankruptcy in U.S. history. The Chapter 11 plan for the Lehman companies other than the broker was confirmed in December 2011. Bankruptcy Creditors' Service, Inc., publishes Lehman Brothers Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by Lehman Brothers Holdings, Inc., and other insolvency and bankruptcy proceedings undertaken by its affiliates. LIBERTY MEDICAL: Wants Bankruptcy Cloak Extended to Medco Health ---------------------------------------------------------------- Stephanie Gleason, writing for Dow Jones Newswires, reports that Liberty Medical Supply Inc. is asking the bankruptcy court to extend the automatic stay in its Chapter 11 case to its former parent company, its former parent Medco Health Solutions Inc., and two employees, Arlene Rodriguez and Carl Dolan, who are involved in a $69 million lawsuit that is set to go to trial this summer. Dow Jones relates Liberty Medical, Medco Health, Ms. Rodriguez and Mr. Dolan are being sued for allegedly failing to return overpayments from Medicare and Medicaid, which allegedly took place between 2004 and 2009. The lawsuit was filed in 2008, but a trial that may last a month is slated for June, according to court documents. The action against Liberty Medical was halted when it filed for bankruptcy as a result of a Bankruptcy Code provision called the automatic stay that protects debtors from being sued. However, it has proceeded against Medco Health, Ms. Rodriguez and Mr. Dolan because they are not in Chapter 11. According to Dow Jones, Liberty Medical is arguing that: -- because it is responsible for defending and covering any costs associated with the outcome of the lawsuit, Medco Health and the employees should be protected from the lawsuit while Liberty Medical is in bankruptcy; and -- a judgment against Medco or the employees would have to be paid by Liberty Medical, which would affect the bankruptcy estate. About Liberty Medical Entities that own diabetics supply provider Liberty Medical led by ATLS Acquisition, LLC, sought Chapter 11 protection (Bankr. D. Del. Lead Case No. 13-10262) on Feb. 15, 2013, just less than three months after a management buy-out and amid a notice by the lender who financed the transaction that it's exercising an option to acquire the business. Liberty has been in business for 22 years serving the needs of both type 1 and type 2 diabetic patients. Liberty is a mail order provider of diabetes testing supplies. In addition to diabetes testing supplies, the Debtors also sell insulin pumps and insulin pump supplies, ostomy, catheter and CPAP supplies and operate a large mail order pharmacy. Liberty operates in seven different locations and has 1,684 employees. The Debtors have tapped Greenberg Traurig, LLP as counsel; Ernst & Young LLP to provide investment banking advice; and Epiq Bankruptcy Solutions, LLC, as claims and noticing agent for the Clerk of the Bankruptcy Court. MERISEL INC: Saints Capital Swaps Conv. Notes with 17.5MM Shares ---------------------------------------------------------------- Saints Capital Granite, L.P., and Saints Capital Granite, LLC, delivered a conversion notice under the Convertible Notes on April 18, 2013, notifying Merisel that they were converting $1,750,000 of the principal amount of the Convertible Notes into 17,500,000 shares of Common Stock at a conversion price of $0.10 per share effective April 18, 2013. As a result, as of April 18, 2013, the Reporting Persons directly own 22,500,000 shares of Common Stock, representing 91.0% of the outstanding shares of Common Stock. As of April 18, 2013, the reporting persons beneficially owned 47,500,000 shares of common stock of Merisel, Inc., representing 95.5% of the shares outstanding. A copy of the amended regulatory filing is available at: http://is.gd/JDjhGY About Merisel Merisel operates in a single reporting segment, the visual communications services business. It entered that business beginning March 2005, through a series of acquisitions, which continued through 2006. These acquisitions include Color Edge, Inc., and Color Edge Visual, Inc.; Comp 24, LLC; Crush Creative, Inc.; Dennis Curtin Studios, Inc.; Advertising Props, Inc.; and Fuel Digital, Inc. Merisel incurred a net loss of $18.13 million in 2012, as compared with a net loss of $2.45 million in 2011. The Company's balance sheet at Dec. 31, 2012, showed $32.53 million in total assets, $42.53 million in total liabilities and a $10 million total stockholders' deficit. METALS USA: S&P Raises Corporate Credit Rating From 'B+' -------------------------------------------------------- Standard & Poor's Ratings Services said it raised its corporate credit rating on Fort Lauderdale, Fla.-based Metals USA to 'BBB' from 'B+' following the announcement by Los Angeles, Calif.-based Reliance that it has completed the acquisition of the company. At the same time, S&P removed all ratings on Metals USA from CreditWatch, where it had placed them with positive implications on Feb. 6, 2013. The outlook is stable. "We subsequently withdrew all of our corporate credit and issue- level ratings on Metals USA and its existing secured debt, which has been repaid," said Standard & Poor's credit analyst Chiza Vitta. S&P raised the ratings on Metals USA and removed them from CreditWatch to reflect its view that its credit quality is now aligned with that of Reliance, following the April 12, 2013, closing of the acquisition by the metals service center company, Reliance. Immediately thereafter, S&P withdrew the ratings because the company's debt has been repaid. METROPCS WIRELESS: Moody's Lifts CFR to 'Ba3', Stable Outlook ------------------------------------------------------------- Moody's Investors Service upgraded several ratings of MetroPCS Wireless Inc., including the company's corporate family rating ("CFR") to Ba3 from B1, the company's probability of default rating ("PDR)" to Ba3-PD from B1-PD, and MetroPCS' senior unsecured rating to Ba3 from B1 because Moody's believes that the company's reverse acquisition of T-Mobile USA ("T-Mobile") will proceed as planned after the MetroPCS shareholders approve the transaction. Deutsche Telekom AG ("DT"), rated Baa1, the owner of T-Mobile USA, will hold 74% of the combined company's shares, while MetroPCS's shareholders will hold the remaining 26% and receive a cash payment of $1.5 billion. The reverse acquisition gives MetroPCS improved scale, additional spectrum to compete in the U.S. wireless industry, and new market potential for MetroPCS' well-regarded service plans in unserved and underserved areas. The upgrade also reflects Moody's expectation for steadily increasing free cash flow generation and a sustained gradual reduction in leverage. Finally, the rating does not reflect any lift from the ownership stake held by Deutsche Telecom. Moody's also affirmed the company's speculative grade liquidity ("SGL") rating of SGL-1, indicating a very good liquidity position. The company's senior secured debt ratings were confirmed at current levels. Moody's anticipates the loans will be paid down with MetroPCS' senior notes offering from March 2013 upon completion of the merger at which point Moody's will withdraw the senior secured debt ratings. The outlook is stable. Moody's has taken the following rating actions: Issuer: MetroPCS Wireless, Inc. Corporate Family Rating -- Upgraded to Ba3, from B1 Probability of Default Rating -- Upgraded to Ba3-PD, from B1-PD Outlook -- Stable, from Ratings under Review $1,000m Sr. Unsec. Notes, 7.875% due 2018 -- Ba3 (LGD4, 52%), from B1 (LGD4, 51%) $1,000m Sr. Unsec. Notes, 6.625% due 2020 -- Ba3 (LGD4, 52%), from B1 (LGD4, 51%) $1,750m Sr. Unsec. Notes, 6.25% due 2021 -- Ba3 (LGD4, 52%), from B1 (LGD4, 51%) $1,750m Sr. Unsec. Notes, 6.625% due 2023 -- Ba3 (LGD4, 52%), from B1 (LGD4, 51%) Senior Secured Term Loan B due 2016 -- Confirmed at Ba1 (LGD2, 19%) Senior Secured Term Loan B due 2018 -- Confirmed at Ba1 (LGD2, 19%) Senior Secured Revolver due 2016 -- Confirmed at Ba1 (LGD2, 19%) Ratings Rationale: MetroPCS' Ba3 CFR reflects Moody's expectation for improved execution as a result of enhanced scale, better device lineup (especially the iPhone), accelerated network investment and a new pricing structure for smartphones. In addition, a strong liquidity profile and valuable spectrum assets also provide credit support. These strengths are offset by the combined company's fourth position in the highly competitive U.S. wireless industry, the capital intensity associated with building out its 4G LTE network and meeting rapidly rising bandwidth demand and a moderately leveraged balance sheet. The rating does not receive any lift as a result of DT's ownership stake. Deutsche Telekom is 32.0% owned by the German government (14.96% directly and 17.02% through state-owned development bank KfW). As such, Deutsche Telekom qualifies as a GRI under Moody's GRI methodology. The company's Baa1 rating benefits from a one- notch uplift derived from the government's ownership. Moody's certainly doesn't believe the German government would support the combined entity and also doubt that DT would be willing to provide additional support as it has made several attempts to exit the US market, and retains the right to sell both the intercompany notes and its equity position in the new company. "The merger gives the combined company increased scale and an enhanced competitive position against the big two US wireless operators (Cellco Partnership dba "Verizon Wireless", rated A2 with a stable outlook, and AT&T Mobility, unrated) who dominate the market," said Dennis Saputo, Moody's Senior Vice President. That said, Sprint Nextel Corporation (Sprint) (B1 Corporate Family Rating, under review -- Direction Uncertain), the number three operator, would likely emerge as a stronger force should SOFTBANK Corporation (Baa3 Issuer Rating, ratings under review for downgrade) be successful in its acquisition of 70% of Sprint's common stock and planned $8 billion equity infusion. "Consequently, we believe that the combined company will still find it challenging to improve subscriber trends, increase market share and accelerate earnings growth", concluded Saputo. The combination of MetroPCS and T-Mobile USA will create a wireless operator with approximately $25 billion in revenues and 42 million customers, both of which represent about 12% of the U.S. wireless industry. The capital structure of the combined company will include MetroPCS' existing $5.5 billion of senior unsecured notes and financing provided by DT. DT will receive $11.2 billion of new senior unsecured notes to refinance T-Mobile's current intercompany debt. The DT notes consist of four $2.5 billion senior unsecured notes, each maturing annually from 2019 to 2022, and $1.2 billion senior unsecured notes maturing in 2023. The DT notes rank pari passu with MetroPCS' senior unsecured notes. MetroPCS' former $100 million senior secured revolving credit facility will be replaced with a $500 million senior unsecured revolving credit facility provided by DT. The new revolver and DT notes will be guaranteed by the combined company and by all of T- Mobile's wholly-owned domestic restricted subsidiaries. Moody's expects MetroPCS to maintain very good liquidity over the next twelve months, primarily consisting of its large cash balances. On December 30, 2012, MetroPCS had $2.37 billion in cash and $245 million in highly liquid short-term investments and also has access to $100 million under its senior secured revolving credit facility, which expires in March 2016. The facility was undrawn as of 12/30/2012. The current revolving credit facility will be replaced with a $500 million senior unsecured revolving credit facility expiring in 2018, which will further strengthen the combined company's liquidity profile. Moody's expects the combination of cash and short-term investments to grow modestly through 2013. Cash from operations (Moody's adjusted) is expected to be about $7 billion in 2013 and capital spending (Moody's adjusted) is expected to be about $6.6 billion in 2013. The company does not have any large debt maturities until 2018 when $1 billion of MetroPCS notes mature. Moody's also recognizes the combined company has a broad spectrum portfolio and its assets are divisible by markets, which could potentially be sold if needed, without materially impacting its overall business. MetroPCS' stable outlook reflects Moody's belief that the merger will present strategic and operational synergies that will enable the combined company to stabilize its market share over time and eventually lead to margin expansion. MetroPCS's rating could be upgraded if the combined company returns to a strong growth trajectory by reducing churn and increasing subscriber counts. If total churn falls below 3% (Moody's calculates it as 3.40% for year-end 2012) EBITDA growth will accelerate and free cash flow will grow rapidly. Specifically, Moody's could raise the rating if leverage is likely to drop below 4.0x and free cash flow were to improve to the high single digits percentage of total debt (note that all cited financial metrics are referenced on a Moody's adjusted basis). Downward rating pressure could develop if the Company's leverage approaches 4.5x and free cash flow drops below 2% of total debt. This could occur if EBITDA margins come under sustained pressure, declining to below 30%. In addition, deterioration in liquidity could pressure the rating downward. The principal methodology used in this rating was Global Telecommunications Industry Methodology published in December 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. MOOD MEDIA: S&P Lowers Corp. Credit Rating to 'B-'; Outlook Stable ------------------------------------------------------------------ Standard & Poor's Ratings Services said that it had lowered its long-term corporate credit rating on Canada-based in-store media company Mood Media Corp. to 'B-' from 'B'. The outlook is stable. At the same time, S&P lowered its issue ratings on Mood Media's senior unsecured notes to 'CCC+' from 'B-'. The recovery rating on these notes is '5', indicating S&P's expectation of "modest" (10%-30%) recovery for noteholders in the event of a payment default. S&P also lowered its issue ratings on Mood Media's revolving credit facility and on its $355 million first-lien term loan to 'B+' from 'BB-'. The recovery rating on these facilities is '1', indicating S&P's expectation of "very high" (90%-100%) recovery in an event of payment default. Unexpected operating underperformance in the fourth quarter of 2012, failure to execute on envisaged synergies, and a disappointing outlook for 2013 earnings have led S&P to revise downward its base-case scenario. In S&P's view, the various acquisitions undertaken in 2012 have created substantial execution risks that could lead to significantly weaker credit metrics and reduced financial flexibility. As a result, S&P has revised its assessment of Mood Media's financial risk profile to "highly leveraged" from "aggressive". S&P's assessment of Mood Media's "weak" business risk profile remains unchanged. The stable outlook reflects S&P's view that Mood Media will make progress in integrating acquisitions undertaken in 2012 and maintain an adjusted EBITDA margin of about 20% while generating modestly positive free cash flow. S&P considers adjusted debt to EBITDA of 5x-6x and EBITDA interest coverage of more than 1.5x as commensurate with the rating. S&P could lower the rating if a decline in earnings led to a further reduction in financial covenants headroom to below 10%. An upgrade would depend on adjusted debt to EBITDA of less than 5x and EBITDA interest coverage of more than 2.5x on a sustained basis. An upgrade would also hinge on Mood Media's increasing headroom under its financial covenants to more than 15%. NAVISTAR INTERNATIONAL: Names Jack Allen Chief Offering Officer --------------------------------------------------------------- Navistar International Corporation's Board of Directors has appointed Jack Allen as executive vice president and chief operating officer, effective immediately. Mr. Allen, 55, has been president of the company's North America Truck and Parts business since June 2012. "Jack is a results-focused leader with a deep understanding of the commercial truck industry and Navistar. He has successfully run nearly every important part of our business at one point during his 31-year career at the company," said Troy Clarke, Navistar president and chief executive officer. "Together, Jack and I look forward to working with our experienced leadership team and talented group of employees as we take further steps to strengthen our North American core businesses, improve quality and customer satisfaction, drive future profitability, and deliver value to shareholders." Prior to his most recent assignment, Mr. Allen served as president, North America Truck since 2008. Previously, he was president of Navistar's Engine Group, where he led major business initiatives including the acquisition of Brazilian engine producer MWM and a partnership with MAN of Germany. He also has served as vice president and general manager of the company?s Parts organization. Mr. Allen joined the company in 1981 as a design engineer. He holds a Bachelor of Science degree from the Milwaukee School of Engineering and an MBA from the Illinois Institute of Technology. He is a board member of The Valspar Corporation (NYSE: VAL). He also serves on the boards of the Milwaukee School of Engineering's Corporation Council and Lurie Children's Hospital of Chicago. In connection with Mr. Allen's promotion to Executive Vice President and Chief Operating Officer, the Compensation Committee of the Board approved an increase in Mr. Allen's base salary compensation to $740,000 and provided him with other benefits commensurate with his new position. On April 19, 2013, the Company filed with the Secretary of State of the State of Delaware (i) a Certificate of Correction that in effect voids the Company's Certificate of Retirement of Stock filed with the Secretary of State effective July 30, 2003, which had retired all of the Company's 26,000,000 authorized shares of Class B Common Stock, and (ii) a Certificate of Retirement of Stock, as set forth in Exhibit 3.1, retiring 25,641,545 authorized shares of the Company's Class B Common Stock. These filings were solely for the purpose of correcting an error in the 2003 Certificate of Retirement. The 2013 Certificate of Retirement has the effect of amending the Company's Restated Certificate of Incorporation, as amended. After giving effect to these filings, the Company has the authority to issue 260,358,455 shares, of which 358,455 shares are Class B Common Stock. About Navistar International Navistar International Corporation (NYSE: NAV) -- http://www.Navistar.com/-- is a holding company whose subsidiaries and affiliates subsidiaries produce International(R) brand commercial and military trucks, MaxxForce(R) brand diesel engines, IC Bus(TM) brand school and commercial buses, Monaco RV brands of recreational vehicles, and Workhorse(R) 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. Navistar incurred a net loss attributable to the Company of $3.01 billion for the year ended Oct. 31, 2012, compared with net income attributable to the Company of $1.72 billion during the prior year. The Company's balance sheet at Oct. 31, 2012, showed $9.10 billion in total assets, $12.36 billion in total liabilities and a $3.26 billion total stockholders' deficit. * * * In the Aug. 3, 2012, edition of the TCR, Moody's Investors Service lowered Navistar International Corporation's Corporate Family Rating (CFR), Probability of Default Rating (PDR), and senior note rating to B2 from B1. The downgrade of Navistar's ratings reflects the significant challenges the company will face during the next eighteen months in re-establishing the profitability and competitiveness of its US and Canadian truck operations in light of the failure to achieve EPA certification of its EGR emissions technology, the significant reductions in military revenues and substantially higher engine warranty reserves. As reported by the TCR on June 13, 2012, Standard & Poor's Ratings Services lowered its ratings on Navistar International Corp., including the corporate credit rating to 'B+', from 'BB-'. "The downgrade and CreditWatch placement reflect the company's operational and financial setbacks in recent months," said Standard & Poor's credit analyst Sol Samson. As reported by the TCR on Jan. 24, 2013, Fitch Ratings has affirmed the Issuer Default Ratings (IDR) for Navistar International Corporation and Navistar Financial Corporation at 'CCC' and removed the Negative Outlook on the ratings. The removal reflects Fitch's view that immediate concerns about liquidity have lessened, although liquidity remains an important rating consideration as NAV implements its selective catalytic reduction (SCR) engine strategy. Other rating concerns are already incorporated in the 'CCC' rating. NAVISTAR INTERNATIONAL: Inks Employment Agreement with CEO ---------------------------------------------------------- Navistar International Corporation entered into an employment agreement with Troy A. Clarke to serve as the Company's President and Chief Executive Officer. Mr. Clarke replaced Lewis B. Campbell, the Company's Executive Chairman and Interim Chief Executive Officer, who resigned on April 15, 2013. The employment of Mr. Clarke under the Agreement commenced on April 15, 2013, and will end on April 14, 2016, unless it is terminated earlier by the Company or by Mr. Clarke. The Company has agreed to nominate Mr. Clarke as a candidate for election as a director by the stockholders at each annual meeting held during the Service Term. Mr. Clarke will receive an initial annual base salary of $900,000, which will be reviewed by the Board at least annually and may increase (but not decrease) from the level in effect immediately prior to such review. Mr. Clarke was also appointed as a member of the Board filling the vacancy created by Mr. Campbell's resignation. Because he is an executive officer of the Company, Mr. Clarke will not receive any separate compensation for his services as director. A copy of the Employment Agreement is available at: http://is.gd/GCB3bF About Navistar International Navistar International Corporation (NYSE: NAV) -- http://www.Navistar.com/-- is a holding company whose subsidiaries and affiliates subsidiaries produce International(R) brand commercial and military trucks, MaxxForce(R) brand diesel engines, IC Bus(TM) brand school and commercial buses, Monaco RV brands of recreational vehicles, and Workhorse(R) 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. Navistar incurred a net loss attributable to the Company of $3.01 billion for the year ended Oct. 31, 2012, compared with net income attributable to the Company of $1.72 billion during the prior year. The Company's balance sheet at Oct. 31, 2012, showed $9.10 billion in total assets, $12.36 billion in total liabilities and a $3.26 billion total stockholders' deficit. * * * In the Aug. 3, 2012, edition of the TCR, Moody's Investors Service lowered Navistar International Corporation's Corporate Family Rating (CFR), Probability of Default Rating (PDR), and senior note rating to B2 from B1. The downgrade of Navistar's ratings reflects the significant challenges the company will face during the next eighteen months in re-establishing the profitability and competitiveness of its US and Canadian truck operations in light of the failure to achieve EPA certification of its EGR emissions technology, the significant reductions in military revenues and substantially higher engine warranty reserves. As reported by the TCR on June 13, 2012, Standard & Poor's Ratings Services lowered its ratings on Navistar International Corp., including the corporate credit rating to 'B+', from 'BB-'. "The downgrade and CreditWatch placement reflect the company's operational and financial setbacks in recent months," said Standard & Poor's credit analyst Sol Samson. As reported by the TCR on Jan. 24, 2013, Fitch Ratings has affirmed the Issuer Default Ratings (IDR) for Navistar International Corporation and Navistar Financial Corporation at 'CCC' and removed the Negative Outlook on the ratings. The removal reflects Fitch's view that immediate concerns about liquidity have lessened, although liquidity remains an important rating consideration as NAV implements its selective catalytic reduction (SCR) engine strategy. Other rating concerns are already incorporated in the 'CCC' rating. NETFLIX INC: Moody's Says Notes Conversion is Credit Positive ------------------------------------------------------------- Moody's Investors Service said that Netflix's (Ba3 Corporate Family Rating, stable outlook) conversion of its $200 million zero-coupon convertible notes is credit positive, but anticipated within Moody's outlook for the company. As a result of the conversion, the company's domestic leverage declines to 1.2x from 1.6x as of 3/31/13 (including Moody's standard adjustments and allocation of overhead to the domestic business) and gross leverage declines to 4.4x from 5.7x. Netflix had strong subscriber growth in the first quarter of 2013, adding about 2 million net domestic streaming subscribers. While the first quarter is typically a strong quarter for the company and Moody's doesn't expect such levels of growth to continue into the second and third quarter, Moody's believes Netflix is well placed to meet Moody's expectations of 4-5 million new domestic streaming subscribers in 2013. Netflix also demonstrated its ability to manage content costs while growing subscribers, as its total content liabilities (including off balance sheet liabilities) increased by only $100 million in the first quarter, to $5.7 billion. The company's domestic streaming contribution profit margin increased to 20.6% in Q1 2013 from 19.2% in Q4 2012. In Moody's view, it is crucial for the company's long term credit worthiness to increase the profitability of its streaming business, while retaining and growing streaming subscribers, as it loses high margin DVD subscribers. Given the debt reduction coupled with growth in subscribers and profitability, Moody's believes Netflix is on track to become well positioned in the Ba3 rating category over the course of 2013. Netflix Inc. ("Netflix"), with its headquarters in Los Gatos, California, is the largest subscription video-on-demand (SVOD) service in the United States, providing access to movies and TV shows online and via the delivery of DVD rentals, with annual revenues of over $3.7 billion. NORTEL NETWORKS: Units Spar on Discovery in $7B Liquidation Row --------------------------------------------------------------- Jamie Santo of BankruptcyLaw360 reported that with Nortel Networks Corp.'s $7.3 billion battle over liquidation proceeds now fixed to begin Jan. 6, the bankrupt Canadian telecom and its affiliates championed competing visions of pretrial discovery Wednesday as they scrambled to establish a working schedule before delays ate into the already cramped cross-border process. According to the report, the bankruptcy judges who will preside over the international clash -- U.S. Bankruptcy Judge Kevin Gross of the District of Delaware and Chief Justice Geoffrey Morawetz of the Ontario Superior Court -- announced last week that the joint trial will be conducted Jan. 6. About Nortel Networks Headquartered in Ontario, Canada, Nortel Networks Corporation and its various affiliated entities provided next-generation technologies, for both service provider and enterprise networks, support multimedia and business-critical applications. Nortel did business in more than 150 countries around the world. Nortel Networks Limited was the principal direct operating subsidiary of Nortel Networks Corporation. On Jan. 14, 2009, Nortel Networks Inc.'s ultimate corporate parent Nortel Networks Corporation, NNI's direct corporate parent Nortel Networks Limited and certain of their Canadian affiliates commenced a proceeding with the Ontario Superior Court of Justice under the Companies' Creditors Arrangement Act (Canada) seeking relief from their creditors. Ernst & Young was appointed to serve as monitor and foreign representative of the Canadian Nortel Group. That same day, the Monitor sought recognition of the CCAA Proceedings in U.S. Bankruptcy Court (Bankr. D. Del. Case No. 09-10164) under Chapter 15 of the U.S. Bankruptcy Code. That same day, NNI and certain of its affiliated U.S. entities filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code (Bankr. D. Del. Case No. 09-10138). In addition, the High Court of England and Wales placed 19 of NNI's European affiliates into administration under the control of individuals from Ernst & Young LLP. Other Nortel affiliates have commenced and in the future may commence additional creditor protection, insolvency and dissolution proceedings around the world. On May 28, 2009, at the request of administrators, the Commercial Court of Versailles, France, ordered the commencement of secondary proceedings in respect of Nortel Networks S.A. On June 8, 2009, Nortel Networks UK Limited filed petitions in U.S. Bankruptcy Court for recognition of the English Proceedings as foreign main proceedings under Chapter 15. U.S. Bankruptcy Judge Kevin Gross presides over the Chapter 11 and 15 cases. Mary Caloway, Esq., and Peter James Duhig, Esq., at Buchanan Ingersoll & Rooney PC, in Wilmington, Delaware, serves as Chapter 15 petitioner's counsel. In the Chapter 11 case, James L. Bromley, Esq., at Cleary Gottlieb Steen & Hamilton, LLP, in New York, serves as the U.S. Debtors' 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 United States Trustee appointed an Official Committee of Unsecured Creditors in respect of the U.S. Debtors. An ad hoc group of bondholders also was organized. Fred S. Hodara, Esq., at Akin Gump Strauss Hauer & Feld LLP, in New York, and Christopher M. Samis, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, represent the Official Committee of Unsecured Creditors. An Official Committee of Retired Employees and the Official Committee of Long-Term Disability Participants tapped Alvarez & Marsal Healthcare Industry Group as financial advisor. The Retiree Committee is represented by McCarter & English LLP as Delaware counsel, and Togut Segal & Segal serves as the Retiree Committee. The Committee retained Alvarez & Marsal Healthcare Industry Group as financial advisor, and Kurtzman Carson Consultants LLC as its communications agent. 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 Sept. 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 Sept. 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. Since the commencement of the various insolvency proceedings, Nortel has sold its business units and other assets to various purchasers. Nortel has collected roughly $9 billion for distribution to creditors. Of the total, $4.5 billion came from the sale of Nortel's patent portfolio to Rockstar Bidco, a consortium consisting of Apple Inc., EMC Corporation, Telefonaktiebolaget LM Ericsson, Microsoft Corp., Research In Motion Limited, and Sony Corporation. The consortium defeated a $900 million stalking horse bid by Google Inc. at an auction. The deal closed in July 2011. Nortel has filed a proposed plan of liquidation in the U.S. Bankruptcy Court. The Plan generally provides for full payment on secured claims with other distributions going in accordance with the priorities in bankruptcy law. ORLANDO, FL: Fitch Affirms 'BB+' Rating on TDT Revenue Bonds ------------------------------------------------------------ Fitch Ratings has affirmed the following bonds for the city of Orlando: -- $181.7 million senior lien tourist development tax (TDT) revenue bonds (sixth cent contract payments) series 2008A at 'BB+'; -- $33.4 million second lien subordinate TDT revenue bonds (sixth cent contract payments) series 2008B at 'B'. The Rating Outlook for the senior lien bonds is revised to Positive from Stable. The Rating Outlook for the second lien subordinate bonds is Stable. SECURITY The 2008A and 2008B revenue bonds are limited obligations of the city secured by the discrete trust estate, including pledged funds, for each respective series of bonds. The majority of pledged funds consist of 50% of a one cent tax levied county-wide on hotel stays. The hotel tax is collected by the county and remitted to the city according to an interlocal agreement. Pledged revenues also include a fixed installment payment payable from the remaining half of the one cent tax, and equal to $2.8 million available through 2018. Pledged funds are allocated to each trust estate of the three series of bonds (Fitch does not rate the series 2008C bonds) according to a flow of funds with revenues distributed to each trust estate according to the seniority of the series. Additional security is provided by a dedicated liquidity reserve and debt service reserve fund for each series with each established at 50% of respective maximum annual debt service (MADS) for a total combined reserve for each series of 100% of MADS. KEY RATING DRIVERS OUTLOOK REVISED TO POSITIVE: The revision in Outlook from Stable to Positive for the senior lien bonds reflects the consistent expansion of TDT receipts now extended for over three years. This growth trend is expected to continue as five month collections for fiscal 2013 are up significantly over prior year to date collections and nearly 25% above partial year fiscal 2009 receipts. With 15% declines in fiscals 2001-2002 and 2009, the TDT remains an economically sensitive and volatile revenue. THIN DEBT SERVICE COVERAGE DESPITE TDT GROWTH: Debt service coverage for the senior series 2008A bonds and combined senior bonds and subordinate series 2008B bonds has improved but remains thin, even with recent TDT growth. Negligible revenue growth for the series A bonds and generally modest growth for the series B bonds are required to ensure payment of both series of bonds without a draw upon reserves. RESERVE CUSHION: Each series of bonds was issued with a liquidity reserve equal to 1/2 maximum annual debt services (MADS) and a debt service reserve account (DSRA) equal to 1/2 MADS, with the intention that the cushion could provide sufficient cash flow to compensate against periods of weak revenue performance. A one-time cash infusion from unused construction proceeds has fully replenished the liquidity reserve for the series 2008B bonds, and the liquidity reserve for the series 2008A bonds remains fully funded. There has never been a draw on either DSRA. BONDHOLDERS PROTECTED UPON CROSS DEFAULT: A default for any of the series results in a cross default under the indenture. The ensuing flow of funds is structured to honor the lien status. NO ADDITIONAL DEBT: Additional debt is prohibited under the indentures, excluding refundings. PREMIER TOURIST DESTINATION: The city is home to Disney World, a world-class tourist attraction. The strength of the amusement park and other area attractions has enabled the leisure industry to rebound relatively quickly from downturns. RATING SENSITIVITIES SUSTAINED TDT GROWTH: Continuation of TDT growth could lead to positive rating action for the senior lien bonds. DECLINE IN TDT REVENUE: Conversely, a reversal of recent positive trends could lead to coverage at levels inconsistent with even the current low ratings. CREDIT PROFILE CONSISTENT THREE YEAR TDT GROWTH TDT revenues are experiencing a sustained recovery which is now entering its fourth year. Five month fiscal 2013 year-to-date collection through February 2013 are up 6.3% from the equivalent period in fiscal 2012 and are 24% higher than in the first five months of fiscal 2009. Since February 2010, TDT collections have increased every month on a year over year basis, with two exceptions. The first exception was a negligible 0.4% drop in December 2011 collections. The second exception was a 35% month over month decrease in September 2012, attributable to a sizable litigation settlement between the county and Expedia.com which was tacked on to September 2011 collections. Adjusting for the settlement payments, September 2012 TDT revenues expanded by a healthy 5.1% over prior year revenues. For the entire fiscal 2012, TDT revenues gained 4.2% net of the Expedia settlement and have grown a substantial 19% since fiscal 2009. The ongoing recovery has been boosted by a combination of pent-up theme park demand according to officials, an improving economy, an influx of foreign visitors and a Harry Potter attraction at the Universal Theme Park which opened in 2010. Area hotel occupancy and room rates, excluding Disney hotels which are not publicly disclosed, have exhibited solid growth since 2009. Both Disney World and Universal are in the process of making sizable investments in their Orlando theme parks. Disney recently opened the first phase of its Fantasyland expansion and is about to begin the renovation of Downtown Disney. Universal is in the process of developing an 1,800 room hotel on-site and will be premiering a new Transformers ride during the summer. New features at existing theme parks, such as the planned Antarctica ride at SeaWorld and the expansion of Legoland, are expected to further boost visitor numbers. HISTORICAL GROWTH MARRED BY PERIODS OF SHARP DECLINES Historical TDT revenues experienced robust growth, increasing at an average annual rate of 12.7% from 1979 to 2000. During the past decade, however, the TDT suffered its first-time annual drop falling 3.1% in fiscal 2001. The TDT fell an additional 12.6% in fiscal 2002 and 15.4% in fiscal 2009. The recent volatility of the revenue stream underscores the economically sensitive nature of the TDT and its dependence upon the local tourist sector. Some revenue stability is provided by an annual installment payment equal to $2.8 million to be received monthly through Nov. 15, 2018. In fiscal 2012, the installment payments equalled 16% of pledged revenues. THIN COVERAGE RATIOS, CUSHIONS FROM RESERVES Despite the recovery in TDT collections, coverage of series 2008A and 2008B debt service remains thin. The bonds were structured with the larger principal and interest payments payable on Nov. 1 as revenue collections have historically been more robust during the summer months. The flow of funds is unusual as the first interest payment in each bond year is paid across all series while for the second principal and interest payment, senior debt service is paid prior to the second and third liens. As a consequence, debt service requirements are substantially higher for November payment dates. Both on a historical and projected basis, coverage has been narrower for the November dates, and Fitch rates to these lower ratios. TDT revenues collected from March through August of 2012 provided a slim 1.25x debt service coverage for the series 2008A November, 2012 payment. September through February 2013 revenues will cover the May, 2013 interest-only bond payment much more robustly at 1.87x. For full year 2013 series 2008A debt service, projected TDT coverage is a narrow but improving 1.4x. Payment of all series 2008A bonds without a draw on the reserve funds requires very modest TDT growth over the life of the issue. Under the Fitch base case scenario of 2.3% annual growth, equal to the average annual growth since fiscal 2000, TDT revenues would provide debt service coverage of at least 1.2x. Fitch stress scenarios that mirror the severe historical revenue declines of the past decade, followed by a conservative recovery and then baseline growth, demonstrate that reserves would be required to augment pledged revenues. For combined series 2008A and subordinate series 2008B debt service, TDT revenues provided slim 1.13x coverage in November, 2012. Under the Fitch base case scenario, TDT coverage would range from 1.1x - 1.2x through November 2020. Fitch stress scenarios described above would result in a default of the series B bonds. CASH RESERVES OFFSET TDT VOLATILITY The liquidity reserves for each series were established to compensate for expected fluctuations in TDT collections. Use of the liquidity reserve does not constitute a material event, and use of the DSRA does not constitute a default. The series 2008A liquidity reserve has been fully funded since the middle of 2009 when it was replenished subsequent to a draw to compensate for lower than anticipated capitalized interest earnings. The series 2008B liquidity reserve was replenished in July, 2011 with the payment of $392K of unused construction. The DSRA has never been utilized for either series of bonds. ADEQUATE BONDHOLDER PROJECTIONS Legal provisions include a cross-default provision, which stipulates that the default of one series of bonds under the indenture is an event of default under all indentures. Upon default, the flow of funds directs payment of principal and interest to the holders of the series 2008A bonds and subsequently to the owners of the 2008B bonds, prior to any payments to third lien bondholders. It is likely that a cross-default will occur during the life of the bonds, given that the series 2008C defaults in the Fitch base case scenario and in all of the stress tests. Average annual revenue growth of 11.1% is required to generate sufficient income to avoid default on the series 2008C through 2020. Fitch considers this to be optimistic, given the recent trend of TDT volatility. Additional debt is prohibited under the indenture, except for refundings. Additional bonds for refunding purposes may be issued if, during any consecutive 12 of the previous 25 months, contract revenues equaled at least 1.33x MADS on all existing and proposed debt and 1.10x MADS on all senior and second-lien bonds. The calculation excludes installment payment revenues. CENTRAL FLORIDA ECONOMY STRENGTHENS The local economy is experiencing a sustained recovery as evidenced by solid job growth and lowered unemployment rates. Employment levels within the Orlando metropolitan statistical area (MSA) increased by 1.7% and 2.6% in 2011 and 2012, respectively after three consecutive years of job losses. MSA employment for February 2013 shows a year over year increase of 3.2% or approximately 32,000 jobs. Consequently, unemployment rates have dipped from over 10% during 2011 to 7.1% as of February, below the state and national rates of 7.8% and 7.7%, respectively. The leisure and hospitality sector is a major component of the local economy, comprising about 21% of total employment and leads all other sectors in job growth over the past several years. Disney is the dominant player, employing about 58,000 or over 10% and 5% of county and MSA employment, respectively. Universal reports 13,000 employees while SeaWorld of Orlando's workforce totals approximately 7,000. Beside growing TDT collections, consistent expansion in leisure and hospitality employment and generally higher occupancy and hotel room rates reflect the growing strength of this sector. Economic diversification continues to take hold, most notably within the education and health services sectors. A growing biotechnology and life sciences cluster is anchored by The University of Central Florida's (UCF) Health Sciences Campus, which is home to its College of Medicine and the Burnett College of Biomedical Sciences, in addition to M.D. Anderson Cancer Center and Sanford-Burnham Medical Research Institute. In addition, Nemours Children's Hospital recently opened and completion of a new Veteran's Administration hospital is projected for mid to late 2013. Arduin, Laffer & Moore Econometrics estimated the creation of 30,000 jobs and $7.6 billion in economic impact over 10 years as a result of the UCF activity and related life sciences development. OTELCO INC: Schedules Filing Deadline Extended Through May 23 ------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware extended Otelco, Inc., et al.'s deadline to file their schedules of assets and liabilities and statements of financial affairs through and including May 23, 2013. In the event that confirmation of the Debtors' Plan of Reorganization occurs before the schedules filing deadline, then the requirement that the Debtors file their Schedules and Statements will be waived; provided, however, that if the Debtors seek to establish a claims bar date, the waiver will be null and void and the extension of time will terminate. About Otelco Inc. Otelco Inc. and 16 affiliated Debtors filed for Chapter 11 protection (Bankr. D. Del. Case No. 13-10593) on March 24, 2013. Otelco filed for chapter 11 in order to implement its "pre- packaged" financial restructuring plan -- a plan that already has been accepted by 100% of the Company's senior lenders, as well as holders of over 96% in dollar amount of Otelco's senior subordinated notes who cast ballots. Otelco's restructuring plan will strengthen the Company by deleveraging its balance sheet and reducing its overall indebtedness by approximately $135 million. Because of the overwhelming support Otelco's plan has received from both its secured and unsecured creditors (including holders of the Company's IDS units), Otelco anticipates that the Company will be able to complete its financial restructuring at the end of the second quarter of 2013. The Company's restructuring counsel is Willkie Farr & Gallagher LLP and its financial advisor is Evercore Partners. The restructuring counsel for the administrative agent for the senior lenders is King & Spalding LLP and its financial advisor is FTI Consulting. Otelco Inc. is a wireline telecommunication services provider in Alabama, Maine, Massachusetts, Missouri, New Hampshire, Vermont and West Virginia. PALM COURT: Case Summary & 11 Unsecured Creditors ------------------------------------------------- Debtor: Palm Court Partners LLC c/o J Dapper 985 White Drive, Ste. 100 Las Vegas, NV 89119 Bankruptcy Case No.: 13-13448 Chapter 11 Petition Date: April 22, 2013 Court: United States Bankruptcy Court District of Nevada (Las Vegas) Judge: Linda B. Riegle Debtor's Counsel: Thomas H. Fell, Esq. GORDON SILVER 3960 Howard Hughes Pky 9th Flr Las Vegas, NV 89169 Tel: (702) 796-5555 Fax: (702) 369-2666 E-mail: tfell@gordonsilver.com Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $1,000,001 to $10,000,000 A list of the Company's 11 largest unsecured creditors, filed together with the petition, is available for free at http://bankrupt.com/misc/nvb13-13448.pdf The petition was signed by J. Christopher Dapper, manager. PATRIOT COAL: Reaches Accord on Nonunion Worker Benefits -------------------------------------------------------- Joe Whittington & Tiffany Kary, writing for Bloomberg News, reported that Patriot Coal Corp. (PCXCQ), the bankrupt mining company, reached a settlement resolving how it will reduce benefits for nonunion retirees, a lawyer said. According to the Bloomberg report, Patriot will pay $4 million into a plan administered by a trustee to pay benefits for nonunion workers, Brian Resnick, a lawyer for Patriot, said on April 24 in U.S. Bankruptcy Court in St. Louis. The payment would consist of $250,000 in cash plus stock in a reorganized company, he said. Life insurance will be capped at $30,000 and current benefits will stay in effect until July 31 under the settlement. "The deal we cut with the nonunion employees is encouraging," Marshall Huebner, another lawyer for Patriot, told U.S. Bankruptcy Judge Kathy Surratt-States, Bloomberg related. The company is "moving forward" talks with unionized employees, Huebner said. About Patriot Coal St. Louis-based Patriot Coal Corporation (NYSE: PCX) is a producer and marketer of coal in the eastern United States, with 13 active mining complexes in Appalachia and the Illinois Basin. The Company ships to domestic and international electricity generators, industrial users and metallurgical coal customers, and controls roughly 1.9 billion tons of proven and probable coal reserves. Patriot Coal and nearly 100 affiliates filed voluntary Chapter 11 petitions in U.S. bankruptcy court in Manhattan (Bankr. S.D.N.Y. Lead Case No. 12-12900) on July 9, 2012. Patriot said it had $3.57 billion of assets and $3.07 billion of debts, and has arranged $802 million of financing to continue operations during the reorganization. Davis Polk & Wardwell LLP is serving as legal advisor, Blackstone Advisory Partners LP is serving as financial advisor, and AP Services, LLC is providing interim management services to Patriot in connection with the reorganization. Ted Stenger, a Managing Director at AlixPartners LLP, the parent company of AP Services, has been named Chief Restructuring Officer of Patriot, reporting to the Chairman and CEO. GCG, Inc. serves as claims and noticing agent. The U.S. Trustee appointed a seven-member creditors committee. Kramer Levin Naftalis & Frankel LLP serves as its counsel. Houlihan Lokey Capital, Inc., serves as its financial advisor and investment banker. Epiq Bankruptcy Solutions, LLC, serves as its information agent. On Nov. 27, 2012, the New York bankruptcy judge moved Patriot's bankruptcy case to St. Louis. The order formally sending the reorganization to Missouri was signed December 19 by the bankruptcy judge. The New York Judge in a Jan. 23, 2013 order denied motions to transfer the venue to the U.S. Bankruptcy Court for the Southern District of West Virginia. PATRIOT COAL: Judge Denies Trustee, Equity Committee ---------------------------------------------------- Bill Rochelle, the bankruptcy columnist for Bloomberg News, reports that in a victory for Patriot Coal Corp., U.S. Bankruptcy Judge Kathy A. Surrat-States at an April 23 hearing denied a motion by noteholders Aurelius Capital Management LP and Knighthead Capital Management LLC seeking appointment of a Chapter 11 trustee. She said there was no evidence of fraud or mismanagement. The noteholders wanted a trustee, saying the company is proposing to saddle nonunion mines with liabilities to workers at union-organized operations. According to the report, the judge also denied a request for appointment of an official committee to represent shareholders. Patriot laid out financial information to show the company is insolvent and in no position to give stockholders a distribution in bankruptcy. The judge, the report adds, extended the company's exclusive right to propose a reorganization plan until Sept. 2. The noteholders opposed longer exclusive plan-filing rights, arguing for the ability to file a separate plan for the nonunion mines. The company contended it's impossible to reorganize only part of the company for multiple reasons. The coal producer is facing another pivotal hearing on April 29 regarding modifications to union contracts and benefits. Patriot is seeking modifications of union collective-bargaining agreements and retirement benefits. To prevail, Patriot must show that the company can't reorganize without relief from union contracts. According to the report Patriot announced April 23 it had reached an agreement allowing termination of health and life insurance benefits for salaried retirees and those who weren't represented by unions. The company initially was aiming to save $26.9 million in cash over five years. Patriot will fund a trust to purchase replacement insurance with $250,000 in cash plus stock in the reorganized company, for total funding of $4 million. Current benefits will continue until July. Life insurance benefits will be capped at $30,000. The judge also awarded Patriot the ability to investigate Peabody Energy Corp., the company's former parent. Patriot and the creditors want access to documents Peabody refused to turn over. Patriot and the creditors' committee are investigating whether the October 2007 spinoff "constituted an actual or constructive fraudulent transfer." About Patriot Coal St. Louis-based Patriot Coal Corporation (NYSE: PCX) is a producer and marketer of coal in the eastern United States, with 13 active mining complexes in Appalachia and the Illinois Basin. The Company ships to domestic and international electricity generators, industrial users and metallurgical coal customers, and controls roughly 1.9 billion tons of proven and probable coal reserves. Patriot Coal and nearly 100 affiliates filed voluntary Chapter 11 petitions in U.S. bankruptcy court in Manhattan (Bankr. S.D.N.Y. Lead Case No. 12-12900) on July 9, 2012. Patriot said it had $3.57 billion of assets and $3.07 billion of debts, and has arranged $802 million of financing to continue operations during the reorganization. Davis Polk & Wardwell LLP is serving as legal advisor, Blackstone Advisory Partners LP is serving as financial advisor, and AP Services, LLC is providing interim management services to Patriot in connection with the reorganization. Ted Stenger, a Managing Director at AlixPartners LLP, the parent company of AP Services, has been named Chief Restructuring Officer of Patriot, reporting to the Chairman and CEO. GCG, Inc. serves as claims and noticing agent. The U.S. Trustee appointed a seven-member creditors committee. Kramer Levin Naftalis & Frankel LLP serves as its counsel. Houlihan Lokey Capital, Inc., serves as its financial advisor and investment banker. Epiq Bankruptcy Solutions, LLC, serves as its information agent. On Nov. 27, 2012, the New York bankruptcy judge moved Patriot's bankruptcy case to St. Louis. The order formally sending the reorganization to Missouri was signed December 19 by the bankruptcy judge. The New York Judge in a Jan. 23, 2013 order denied motions to transfer the venue to the U.S. Bankruptcy Court for the Southern District of West Virginia. PHOENIX CORPORATION: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------------ Debtor: The Phoenix Corporation dba TPC Glass 611 Industrial Park Drive Newport News, VA 23608 Bankruptcy Case No.: 13-50614 Chapter 11 Petition Date: April 22, 2013 Court: United States Bankruptcy Court Eastern District of Virginia (Newport News) Judge: Stephen C. St. John Debtor's Counsel: Karen M. Crowley, Esq. CROWLEY, LIBERATORE, RYAN & BROGAN, P.C. Town Point Center, Suite 300 150 Boush Street Norfolk, VA 23510 Tel: (757) 333-4500 Fax: (757) 333-4501 E-mail: kcrowley@clrbfirm.com Estimated Assets: $500,001 to $1,000,000 Estimated Debts: $1,000,001 to $10,000,000 A copy of the Company's list of its 20 largest unsecured creditors, filed together with the petition, is available for free at http://bankrupt.com/misc/vaeb13-50614.pdf The petition was signed by Randy D. Pollard, president. POWER BUYER: S&P Assigns Preliminary 'B' Corp. Credit Rating ------------------------------------------------------------ Standard & Poor's Ratings Services said that it assigned its preliminary 'B' corporate credit rating to Plymouth, Mich.-based Power Buyer LLC. The outlook is stable. At the same time, S&P assigned preliminary 'B' issue level ratings and preliminary '3' recovery ratings to the company's proposed $60 million revolving credit facility, $385 million first-lien term loan, and $50 million delayed draw term loan. The '3' recovery rating indicates S&P's expectation that lenders would receive meaningful (50% to 70%) recovery in the event of a payment default. S&P also assigned a preliminary 'CCC+' issue-level rating and preliminary '6' recovery rating to the company's proposed $140 million second-lien term loan. The '6' recovery rating indicates S&P's expectation that lenders would receive negligible (0% to 10%) recovery in the event of a payment default. The ratings will depend on S&P's receipt and satisfactory review of all final transaction documentation as well as the 2012 audited financial statements for Power Holdings. Accordingly, the preliminary rating should not be construed as evidence of a final rating. If S&P do not receive final documentation within a reasonable time, or if final documentation departs from the materials it reviewed, S&P reserves the right to withdraw or revise its rating. The preliminary ratings on Power Buyer reflect S&P's assessment of the company's business risk profile as "weak" and financial risk profile as "highly leveraged." The business profile is supported by EBITDA margins in the high-teens percentage area as a regional provider of maintenance and infrastructure services to electric and gas utilities. The highly leveraged financial profile reflects the company's substantial debt burden and ownership by a financial sponsor. S&P expects an affiliate of Kelso & Co. will use proceeds of the term loans to refinance existing debt and partly fund the acquisition of PowerTeam Services LLC to combine with portfolio company Power Holdings to operate under Power Buyer LLC. S&P expects the revolving credit facility will remain undrawn at closing. The delayed draw term loan will be available for 12 months for acquisitions, provided pro forma first-lien net leverage is below 4x. "Pro forma for the transaction, we expect the company to generate positive free cash flow, with credit metrics consistent with a highly leveraged financial risk profile, such as debt to EBTDA approximately 5.7x," said Standard & Poor's credit analyst Robyn Shapiro. S&P expects credit metrics to remain stable over the intermediate term, given its assumptions for gradual EBITDA improvements and its assumption that management will approach growth prudently. S&P's stable rating outlook reflects its belief that Power Buyer will achieve positive free cash flow in 2013, given the relatively favorable trends in the electric and gas utility maintenance outsourcing markets and its track record of EBITDA margins in the high-teens percentage area. However, S&P could lower its rating if free operating cash flow generation were to become negative or if S&P believed that debt to EBITDA would trend higher than 6x. This could occur from an unexpected decline in its maintenance business or missteps with any acquisitions. S&P considers an upgrade unlikely because it believes the company's financial risk profile will remain highly leveraged under its financial sponsors. POWERWAVE TECHNOLOGIES: Loan Approved, Auction Set for May 13 ------------------------------------------------------------- Bill Rochelle, the bankruptcy columnist for Bloomberg News, reports that Powerwave Technologies Inc. received final approval from the bankruptcy court on April 23 for a $5 million loan that averted a forced sale when no buyer was in sight. The loan, from an affiliate of Gores Group, meant that Powerwave wasn't forced to hold an auction on April 8. Instead, bids are now due initially on May 9, followed by a May 13 auction and a sale-approval hearing on May 15. About Powerwave Technologies Powerwave Technologies Inc. (NASDAQ: PWAV) filed for Chapter 11 bankruptcy (Bankr. D. Del. Case No. 13-10134) on Jan. 28, 2013. Powerwave Technologies, headquartered in Santa Ana, Cal., is a global supplier of end-to-end wireless solutions for wireless communications networks. The Company has historically sold the majority of its product solutions to the commercial wireless infrastructure industry. The Company's balance sheet at Sept. 30, 2012, showed $213.45 million in total assets, $396.05 million in total liabilities and a $182.59 million total shareholders' deficit. Aside from a $35 million secured debt to P-Wave Holdings LLC, the Debtor owes $150 million in principal under 3.875% convertible subordinated notes and $106 million in principal under 2.5% convertible senior subordinated notes where Deutsche Bank Trust Company Americas is the indenture trustee. In addition, as of the Petition Date, the Debtor estimates that between $15 and $25 million is outstanding to its vendors. The Debtor is represented by attorneys at Proskauer Rose LLP and Potter Anderson & Corroon LLP. Prepetition secured lender, P-Wave Holdings LLC, is represented by Martin A. Sosland, Esq., and Joseph H. Smolinsky, Esq., at Weil Gotshal & Manges LLP; and Mark D. Collins, Esq., and John H. Knight, Esq., at Richards Layton & Finger. The Official Committee of Unsecured Creditors has retained Sidley Austin LLP; Young Conaway Stargatt & Taylor LLP; and Zolfo Cooper, LLC. PREMIERWEST BANCORP: Deregisters Common Stock with SEC ------------------------------------------------------ PremierWest Bancorp filed a Form 15 with the U.S. Securities and Exchange Commission to voluntarily terminate the registration of its common stock. As of April 9, 2013, there was no holder of the Company's common stock. As a result of the Form 15 filing, PremierWest's reporting obligations with the SEC under Sections 13 and 15(d) of the Exchange Act will be suspended. About PremierWest Bancorp PremierWest Bancorp is a bank holding company headquartered in Medford, Oregon. The Company operates primarily through its principal subsidiary, PremierWest Bank, which offers a variety of financial services. The Company incurred a net loss of $11.4 million in 2012, as compared to a net loss of $15.1 million in 2011. The Company's balance sheet at Dec. 31, 2012, showed $1.140 billion in total assets, $1.067 billion in total liabilities, and stockholders' equity of $73.4 million. "Pursuant to the Agreement with the FDIC, the Bank was required to increase and maintain its Tier 1 capital in such an amount as to ensure a leverage ratio of 10% or more by Oct. 3, 2010, well in excess of the 5% requirement set forth in regulatory guidelines. The 10% leverage ratio was not achieved by Oct. 3, 2010. Management believes that, while not achieving this target in the timeframe required, the Company has demonstrated progress, taken prudent actions and maintained a good-faith commitment to reaching the requirements of the Agreement. Management continues to work toward achieving all requirements contained in the regulatory agreements in as expeditious a manner as possible," the Company said in its annual report for the year ended Dec. 31, 2012. PREMIUM PROTEIN: MatlinPatterson Can't Slip WARN Suit ----------------------------------------------------- Jamie Santo of BankruptcyLaw360 reported that a Delaware district judge on Tuesday refused to dismiss a putative class action against MatlinPatterson Global Advisers LLC, ruling that terminated workers of a meat processing operation could bring a federal employment claim against the private equity firm as the bankrupt company's parent. According to the report, the complaint alleges that MatlinPatterson and its affiliates, as majority owners of Nebraska-based Premium Protein Products LLC, violated the Worker Adjustment and Retraining Notification Act by shuttering the company's plants on three days' notice. Premium Protein Products, LLC, is an operator of slaughtering and fabrication operations in Nebraska. Premium Protein filed for Chapter 11 bankruptcy protection on November 10, 2009 (Bankr. D. Neb. Case No. 09-43291). Robert V. Ginn, Esq., at Blackwell Sanders Peper Martin LLP, assists the Company in its restructuring efforts. The Company listed $10,000,001 to $50,000,000 in assets and $50,000,001 to $100,000,000 in liabilities. QUALTEQ INC: Full-Payment Plan Confirmed in Chicago --------------------------------------------------- Bill Rochelle, the bankruptcy columnist for Bloomberg News, reports that creditors of Qualteq Inc. are almost all being paid in full under the liquidating Chapter 11 plan approved when the bankruptcy judge in Chicago signed a confirmation order on April 23. Creditors were practically unanimous in accepting the plan. According to the report, creditors with about $9.8 million in claims are being paid in full from a liquidating trust. Lenders with mortgages on real estate securing about $34 million also will be paid in full from sales of the underlying properties. The plan was the product of a sale when the business was purchased in November by Valid USA Inc. for $51.2 million. The price included $46.1 million in cash plus the assumption of liabilities. Seven parcels real estate were sold separately for $37 million. The disclosure statement contained a projection showing $13.7 million left over for the company's owners after creditors are paid. About QualTeq Inc. South Plainfield, New Jersey-based QualTeq, Inc., engages in the design, manufacture, and personalization of plastic cards in the United States. The company manufactures magnetic, contact, and dual interface smart cards. Qualteq Inc. and 17 affiliated companies filed for Chapter 11 bankruptcy protection (Bankr. D. Del. Lead Case No. 11-12572) on Aug. 14, 2011. Eric Michael Sutty, Esq., and Jeffrey M. Schlerf, Esq., at Fox Rothschild LLP, serve as local counsel to the Debtors. K&L Gates LLP is the general bankruptcy counsel. Eisneramper LLP is the accountants and financial advisors. Scouler & Company is the restructuring advisors. Lowenstein Sandler PC is counsel to the Committee. Avadamma LLC disclosed $38,491,767 in assets and $36,190,943 in liabilities as of the Petition Date. Roberta A. DeAngelis, U.S. Trustee for Region 3, appointed four unsecured creditors to serve on the Official Committee of Unsecured Creditors. Lowenstein Sandler PC represents the Committee. Eisneramper LLP serves as its accountants and financial advisors. In November 2012, the Qualteq trustee completed the sale of the business for $51.2 million to Valid USA Inc. The price included $46.1 million in cash plus the assumption of liabilities. At the request of Bank of America NA, the bankruptcy judge appointed a Chapter 11 trustee in May 2012. The case was transferred to Chicago from Delaware in February 2012. Fred C. Caruso, the Chapter 11 Trustee, tapped Hilco Real Estate, LLC, as real estate advisors. The Debtors' Third Amended Joint Plan of Reorganization provides that on or after the Confirmation Date, the applicable Debtors or Reorganized Debtors may enter into Restructuring Transactions and may take actions as the Debtors or the Reorganized Debtors determine to be necessary or appropriate to (i) effect a corporate restructuring of their respective businesses; (ii) to simplify the overall corporate structure of the Reorganized Debtors; or (iii) to preserve the value of any available net operating losses and other favorable tax attributes; or (iv) to maximize the value of the Reorganized Debtors, all to the extent not inconsistent with any other terms of the Plan or existing law. QUEBECOR WORLD: Bankr. Court Sides With Trustee in Clawback Suits ----------------------------------------------------------------- Eugene I Davis, as Litigation Trustee for the Quebecor World Litigation Trust, scored two victories this week after Bankruptcy Judge Sean H. Lane in Manhattan ruled in his favor in two clawback lawsuits: 1. Eugene I Davis, as Litigation Trustee for the Quebecor World Litigation Trust, Plaintiff, v. R.A. Brooks Trucking, Co., Inc., Defendant, Adv. Proc. No. 10-02212 (Bankr. S.D.N.Y.), and 2. Eugene I. Davis, as Litigation Trustee for the Quebecor World Litigation Trust, Plaintiff, v. All Points Packaging & Distribution, Inc., Defendant, Adv. Proc. No. 10-01009 (Bankr. S.D.N.Y.). On April 22, 2013, Judge Lane issued proposed findings of fact and conclusions of law in each of the adversary proceedings, recommending that the district court: -- grant, in large part, the motion for summary judgment filed by the Plaintiff and deny R.A. Brooks' cross-motion for summary judgment, and -- grant summary judgment in favor of the Plaintiff and deny All Points' motion for summary judgment. The Quebecor Litigation Trustee sued North Little Rock, Arkansas- based R.A. Brooks, which provides transportation services to its customers, to avoid and recover 10 alleged preferential transfers totaling $117,370 made by Quebecor World (USA) to R.A. Brooks during the 90-day period before the Debtor filed its Chapter 11 case plus prejudgment interest of $15,191. R.A. Brooks opposed the motion and filed a cross-motion for summary judgment. R.A. Brooks has filed a proof of claim, but has not consented to final adjudication of the preference action in the Bankruptcy Court. In view of Stern v. Marshall, 131 S.Ct. 2594, 2609 (2011), the Bankruptcy Court is limited to issuing recommendation -- through a proposed findings of fact and conclusions of law -- to the district court on the appropriate resolution of the pending motion. The Trustee also sued All Points, which provided shrink wrap materials to the Debtors, to recover property transferred in October 2007 in the amount of $67,078. All Points claims the transfer is not a preference because it is made in the ordinary course of business. Judge Lane is again limited to issuing a recommendation after the district court ruled on a motion to withdraw the reference filed by All Points, holding that the claims are "likely outside of the bankruptcy court's final adjudicative authority." A copy of the Bankruptcy Court's Proposed Findings of Fact and Conclusions of Law in the R.A. Brooks case is available at http://is.gd/Vlaiq1from Leagle.com. A copy of the Bankruptcy Court's Proposed Findings of Fact and Conclusions of Law in the All Points case is available at http://is.gd/ArTgUSfrom Leagle.com. In an April 23 memorandum and decision in the R.A. Brooks case, Judge Lane granted the Plaintiff's motion for summary judgment, in large part, and denies the Defendant's motion. A copy of that decision is available at http://is.gd/Z45f6Bfrom Leagle.com. About Quebecor World Based in Montreal, Quebec, Quebecor World Inc. (CA:IQW) -- http://www.quebecorworldinc.com/-- provides market solutions, including marketing and advertising activities, well as print solutions to retailers, branded goods companies, catalogers and to publishers of magazines, books and other printed media. It has 127 printing and related facilities located in North America, Europe, Latin America and Asia. In the United States, it has 82 facilities in 30 states, and is engaged in the printing of books, magazines, directories, retail inserts, catalogs and direct mail. The company has operations in Mexico, Brazil, Colombia, Chile, Peru, Argentina, and the British Virgin Islands. Ernst & Young, Inc., the monitor of Quebecor World Inc., and its affiliates' reorganization proceedings under the Canadian Companies' Creditors Arrangement Act, filed a petition under Chapter 15 of the Bankruptcy Code before the U.S. Bankruptcy Court for the Southern District of New York on September 30, 2008, on behalf of QWI (Bankr. S.D.N.Y. Case No. 08-13814). The Chapter 15 case is before Judge James M. Peck. Kenneth P. Coleman, Esq., at Allen & Overy LLP, in New York, serves as counsel to the Chapter 15 petitioner. QWI and certain of its subsidiaries commenced the CCAA proceedings before the Quebec Superior Court (Commercial Division) on January 20, 2008. The following day, 53 of QWI's U.S. subsidiaries, including Quebecor World (USA), Inc., filed petitions under Chapter 11 of the U.S. Bankruptcy Code. The Honorable Justice Robert Mongeon oversees the CCAA case. Francois-David Pare, Esq., at Ogilvy Renault, LLP, represents the Company in the CCAA case. Ernst & Young Inc. was appointed as Monitor. Quebecor World (USA) Inc., its U.S. subsidiary, along with other U.S. affiliates, filed for Chapter 11 bankruptcy before the U.S. Bankruptcy Court for the Southern District of New York (Lead Case No. 08-10152). Anthony D. Boccanfuso, Esq., at Arnold & Porter LLP, represents the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors is represented by Akin Gump Strauss Hauer & Feld LLP. Based in Corby, Northamptonshire, Quebecor World PLC -- http://www.quebecorworldplc.com/-- is the U.K. subsidiary of Quebecor World Inc. that specializes in web offset magazines, catalogues and specialty print products for marketing and advertising campaigns. The Company employs around 290 people. Quebecor PLC was placed into administration with Ian Best and David Duggins of Ernst & Young LLP appointed as joint administrators effective January 28, 2008. QWI is the only entity involved in the CCAA proceedings that is not a Debtor in the Chapter 11 Cases. As of June 30, 2008, Quebecor World's unaudited consolidated balance sheet showed total assets of US$3,412,100,000 total liabilities of US$4,326,500,000 preferred shares of US$62,000,000 and total shareholders' deficit of US$976,400,000. On June 30, 2009, Judge Peck and the Honorable Judge Robert Mongeon of the Quebec Superior Court of Justice, in a joint hearing, approved the plan of compromise filed by Quebecor World Inc. and its affiliates in their cases before the Canadian Companies' Creditors Arrangement Act and the Chapter 11 plan of reorganization filed by Quebecor World (USA), Inc., and its debtor affiliates in the U.S. Bankruptcy Court. On July 21, 2009, Quebecor World Inc. and its affiliated debtors and debtors-in-possession emerged from protection under the Companies' Creditors Arrangement Act in Canada and Chapter 11 of the U.S. Bankruptcy Code. Quebecor World emerged from bankruptcy as World Color Press Inc." RED MOUNTAIN: Incurs $3-Mil. Net Loss in Q3 Ended February 28 ------------------------------------------------------------- Red Mountain Resources, Inc., filed its quarterly report on Form 10-Q, reporting a net loss of $3.0 million on $2.5 million of revenue for the three months ended Feb. 28, 2013, compared with a net loss of $2.5 million on $1.7 million of revenue for the three months ended Feb. 29, 2012. For the nine months ended Feb. 28, 2013, the Company reported a net loss of $10.0 million on $4.9 million of revenue as compared to a net loss of $7.4 million on $3.8 million of revenue for the nine months ended Feb. 29, 2012. The Company's balance sheet at Feb. 28, 2013, showed $85.0 million in total assets, $39.3 million in total liabilities, and stockholders' equity of $45.7 million. A copy of the Form 10-Q is available at http://is.gd/d2dIHF About Red Mountain Dallas-based Red Mountain Resources, Inc., is engaged in the acquisition, development and exploration of oil and natural gas properties in established basins with demonstrable prolific producing zones. Currently, it has established acreage positions and production primarily in the Permian Basin of West Texas and Southeast New Mexico and the onshore Gulf Coast of Texas. * * * Hein & Associates LLP, in Dallas, Texas, expressed substantial doubt about Red Mountain's ability to continue as a going concern, following its audit of the Company's financial position and results of operations for the fiscal year ended May 31, 2012. The independent auditors noted that the Company has incurred a net loss from operations and its current liabilities exceed its total current assets. REGENCY ENERGY: Fitch Assigns 'BB' Rating to $600MM Senior Notes ---------------------------------------------------------------- Fitch Ratings has assigned a 'BB' rating to Regency Energy Partners L.P.'s proposed $600 million senior notes offering due 2023 (senior notes). Proceeds will be used to help fund RGP's acquisition of Southern Union Gathering Company, LLC (SUGS) from Southern Union Company, a jointly owned affiliate of Energy Transfer Equity, L.P. (ETE; IDR 'BB-') and Energy Transfer Partners, L.P. (ETP; IDR 'BBB-'). KEY RATINGS DRIVERS Increased Size/Scale: The acquisition of the SUGS assets helps RGP to increase the size and scale of its gathering and processing operations, with a beneficial focus on the Permian basin. SUGS's operations are generally moderate risk, they increase RGP's presence in the Permian basin where production and the need for gathering and processing services is expected to grow. Additionally, SUGS provides decent organic growth opportunities for RGP with two large scale projects currently under construction. Balanced Funding/Owner Support: The SUGS acquisition is being funded with a combination of this debt offering and $900 million in new Regency units issued to Southern Union Company comprised of $750 million of new common units and $150 million of new Class F common units. The balanced financing of the acquisition (60% equity/40% debt) and the support that ETE is providing by forgoing some of its incentive distribution rights and its $10 million management fee for two years, helps the deal be accretive to earnings. Increased Commodity Price Exposure: The rating considers that RGP will be increasing its commodity price exposure as a result of the transaction. With SUGS, RGP will be increasing both the size of its gathering and processing operations and its contribution to EBITDA, which should raise its sensitivity to changes in commodity prices. However, Fitch expects RGP will hedge its open exposure consistent with current practices. Increased Initial Leverage: With the SUGS acquisition, Fitch expects RGP's leverage to move higher relative to Fitch's prior expectations but remain well within expectations for the ratings category for MLPs and comparable to similarly rated peers. Fitch expects RGP's debt-to-adjusted EBITDA to be roughly 5.9x for 2013 assuming a second quarter (2Q) close for the transaction and between 4.0x to 4.5x for 2014. Should leverage remain elevated above 4.5x for a sustained time period Fitch would consider a negative ratings action. Fitch typically adjusts EBITDA to exclude nonrecurring extraordinary items, and noncash mark-to-market earnings. Adjusted EBITDA excludes equity in earnings and includes dividends from unconsolidated affiliates. JV/Structural Subordination: RGP is the owner of several joint venture (JV) interests some of which have external debt. RGP is structurally subordinate to the cash operating and debt service needs of these JVs and reliant on JV distributions to fund its capital spending and its own distributions. This transaction should help to reduce the overall percentage of cash flow RGP receives from non-consolidated JVs. General Partner Relationship: While Fitch's ratings are largely reflective of RGP's credit profile on a stand-alone basis, they also consider the company's relationship with ETE, the owner of its general partner interest. ETE's general partner interest gives it significant control over the MLP's operations, including most major strategic decisions such as investment plans, and management of daily operations. The relationship has also provided investment opportunities that might otherwise be unavailable to RGP, such as the current transaction. Adequate Liquidity: RGP's liquidity is adequate with roughly $1 billion in availability under its $1.15 billion revolving credit facility at Dec. 31, 2012. The revolving credit facility contains financial covenants requiring RGP and its subsidiaries to maintain debt to consolidated EBITDA ratio(as defined in the credit agreement - including JV and material projects pro forma EBITDA) of less than 5.25x, consolidated EBITDA to consolidated interest expense ratio greater than 2.75x and a secured debt to consolidated EBITDA ratio less than 3.00x. RATING SENSITIVITIES Negative: Future developments that may, individually or collectively, lead to a negative rating action include: -- Continued large-scale capital expenditures funded by higher than expected debt borrowings; -- A failure or reluctance to hedge open commodity price exposure. -- Significant and prolonged decline in demand/prices for NGLs, crude and natural gas; -- Aggressive growth of distributions at RGP. -- Debt/adjusted EBITDA above the 4.5x to 5.0x range and distribution coverage below 1.0x on a sustained basis. Positive: Future developments that may, individually or collectively, lead to a positive rating action include: -- A material improvement in credit metrics with sustained leverage at 4.0x or below. REGENCY ENERGY: Moody's Rates New Sr. Unsec. Notes Due 2023 'B1' ---------------------------------------------------------------- Moody's Investors Service assigned a B1 rating to Regency Energy Partners LP and co-issuer Regency Energy Finance Corp.'s senior unsecured notes due 2023. Note proceeds will be used to fund the cash consideration of Regency's $1.5 billion acquisition of Southern Union Company Gathering LLC (SUGS) from Southern Union Company (SUG, Baa3 stable). The outlook is positive. Ratings assigned: Senior Unsecured Notes Rating, assigned B1, LGD4 (63%) Ratings Rationale: "The SUGS acquisition, while representing a high EBITDA multiple for natural gas gathering and processing (G&P) operations, will be 60% equity-financed by Regency, and it is highly complementary with Regency's existing Permian Basin G&P system," commented Andrew Brooks, Moody's Vice President. "Moreover, the acquisition will further enlarge the already sizable scope and scale of Regency's midstream footprint." Regency is a publicly traded master limited partnership (MLP) whose midstream operations consist of natural gas G&P, gas pipeline transmission and natural gas liquids (NGLs) transportation, processing and fractionation. Regency's general partner is Energy Transfer Equity, L.P. (ETE, Ba2 stable), which also owns 15% of its limited partnership (LP) units. SUGS consists of a 5,600 mile natural gas gathering system together with associated processing and treating plants located in West Texas' Permian Basin. It was originally acquired by SUG in March 2006 for $1.6 billion. Regency plans to fully integrate SUGS into its existing Permian Basin G&P operations, generating potentially significant upside to EBITDA through synergies, efficiencies and ongoing organic growth. The $1.5 billion SUGS acquisition will be funded by Regency with $600 million of debt and $900 million in Regency units issued to SUG, giving Energy Transfer Partners, L.P. (ETP, Baa3 stable),through its evolving 100% ownership position in SUG, an approximate 18% ownership position in Regency. Moody's expects Regency's debt leverage, 5.43x at December 31 (reflecting Moody's standard adjustments), to stabilize in 2013, before dropping below 5x as a result of anticipated EBITDA growth and capital spending declines. Through growth capital spending and acquisitions, Moody's expects Regency's EBITDA to more than double over the period 2010 to 2013. Regency's Ba3 Corporate Family Rating (CFR) reflects its large size and scale, its business and geographic diversification and high level of fee-based income derived from recent expansions and acquisitions. Its rating also recognizes Regency's rapid growth and evolving business mix profile, the execution risks associated with its growth projects, increased structural complexity and its elevated leverage. Growth capital spending and the acquisition of SUGS will cause leverage to remain above 5.0x EBITDA in 2013, although leverage is expected to decline as growth projects reach completion and integration efficiencies are achieved at SUGS. The rating is further supported by Regency's track record of issuing equity and its commitment to the balanced funding of growth capital spending. Moody's also takes into account ETE's control of Regency through its GP interest, recognizing that ETE also looks to Regency to help fund its own distributions and debt service obligations. Regency should have adequate liquidity into early 2014, which is captured in its SGL-3 Speculative Grade Liquidity (SGL) rating. At December 31, Regency reported $53 million of cash and $192 million of borrowings outstanding under its $1.15 billion secured revolving credit facility. The revolver is scheduled to expire in June 2014. Regency should have sufficient cushion under its three financial covenants over the next 12 months. Its leverage ratio (debt/EBITDA) is limited to 5.25x, with secured debt/EBITDA limited to 3.0x. Covenant language is such that it permits Regency to employ an adjusted EBITDA for projects in construction to account for the lag in EBITDA attributable to debt-financed growth. The minimum interest coverage ratio is set at 2.75x EBITDA. The $1.15 billion revolving credit facility is secured by all assets, although Regency has an asset base significantly in excess of the $1.15 billion revolver, which could afford it the ability to raise additional liquidity through asset sales. Regency's positive outlook reflects Moody's expectation that elevated debt leverage will subside as the integration of SUGS and new growth projects begin to generate incremental EBITDA. Presuming Regency successfully integrates SUGS into its existing G&P asset base and executes on its growth initiatives, its rating could be upgraded. At the same time Moody's would expect Regency to restore debt to EBITDA to below 5x while maintaining operating margins from fee-based sources in the 70% range. Ratings could be downgraded should peak leverage not begin to trend down. Additionally, should the credit of ETE or ETP materially weaken, or should ETE or ETP aggressively pressure Regency for higher distribution payouts, a negative rating action could be considered. Regency's B1 senior unsecured note rating reflects its overall probability of default, to which Moody's assigns a PDR of Ba3-PD, and a loss given default of LGD4 (63%). The size of the $1.15 billion secured revolving credit results in a single notching of the senior unsecured notes below the Ba3 CFR under Moody's Loss Given Default Methodology. The principal methodology used in this rating was Global Midstream Energy published in December 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Regency Energy Partners LP is a midstream MLP headquartered in Dallas, Texas. Its general partner, Energy Transfer Equity, L.P., is also headquartered in Dallas, Texas. REGENCY ENERGY: S&P Rates $600MM Senior Unsecured Notes 'BB' ------------------------------------------------------------ Standard & Poor's Ratings Services said it assigned its 'BB' issue-level rating and '4' recovery rating to Regency Energy Partners L.P.'s and Regency Energy Finance Corp.'s issuance of up to $600 million of senior unsecured notes due 2024. The partnership intends to use the note proceeds to fund the cash consideration of the Southern Union Co. natural gas gathering and processing acquisition. As of Dec. 31, 2012, Regency had about $2.2 billion of reported debt. Dallas-based Regency is a midsize master limited partnership in the U.S. midstream sector. RATINGS LIST Regency Energy Partners L.P. Corporate Credit Rating BB/Stable/- New Rating Regency Energy Partners L.P. Regency Energy Finance Corp. $600 mil sr unsecd notes due 2024 BB Recovery Rating 4 RESIDENTIAL CAPITAL: Clawback Oral Motion Denied ------------------------------------------------ BankruptcyData reported that the U.S. Bankruptcy Court denied Ally Financial's oral motion to clawback documents produced by Cerberus for the examiner appointed to the Residential Capital case. The Court states, "It is unnecessary for the Court to resolve that issue in order to rule on the pending application, but it is clear to the Court that permitting [Ally Financial] at this late date to assert privilege would require potentially time-consuming discovery followed by an evidentiary hearing to resolve disputed issues of fact and law. It was precisely to avoid issues of this type arising shortly before the deadline for the Examiner to complete his report (May 13, 2013) -- an enormous undertaking -- that the deadline for Clawback Requests was established. The Court finds that privilege, if any, was waived by failing to make a timely Clawback Request," the report said, citing documents. About Residential Capital Residential Capital LLC, the unprofitable mortgage subsidiary of Ally Financial Inc., filed for bankruptcy protection (Bankr. S.D.N.Y. Lead Case No. 12-12020) on May 14, 2012. Neither Ally Financial nor Ally Bank is included in the bankruptcy filings. ResCap, one of the country's largest mortgage originators and servicers, was sent to Chapter 11 with 50 subsidiaries amid "continuing industry challenges, rising litigation costs and claims, and regulatory uncertainty," according to a company statement. ResCap disclosed $15.68 billion in assets and $15.28 billion in liabilities as of March 31, 2012. Centerview Partners LLC and FTI Consulting are acting as financial advisers to ResCap. Morrison & Foerster LLP is acting as legal adviser to ResCap. Curtis, Mallet-Prevost, Colt & Mosle LLP is the conflicts counsel. Rubenstein Associates, Inc., is the public relations consultants to the Company in the Chapter 11 case. Morrison Cohen LLP is advising ResCap's independent directors. Kurtzman Carson Consultants LLP is the claims and notice agent. Ray C. Schrock, Esq., at Kirkland & Ellis LLP, in New York, serves as counsel to Ally Financial. ResCap sold most of the businesses for a combined $4.5 billion. The Bankruptcy Court in November 2012 approved ResCap's sale of its mortgage servicing and origination platform assets to Ocwen Loan Servicing, LLC and Walter Investment Management Corporation for $3 billion; and its portfolio of roughly 50,000 whole loans to Berkshire Hathaway for $1.5 billion. Bankruptcy Creditors' Service, Inc., publishes RESIDENTIAL CAPITAL BANKRUPTCY NEWS. The newsletter tracks the Chapter 11 proceeding undertaken by affiliates of Residential Capital LLC and its affiliates (http://bankrupt.com/newsstand/or 215/945-7000). RESOLUTE FOREST: New $600MM Senior Notes Get Moody's 'Ba3' Rating ----------------------------------------------------------------- Moody's Investors Service assigned a Ba3 rating to Resolute Forest Products' proposed $600 million senior unsecured notes maturing 2023. The company's Ba3 corporate family rating, Ba3-PD probability of default rating and SGL-1 speculative-grade liquidity rating are affirmed. The outlook was changed to positive from stable. Assignments: Issuer: Resolute Forest Products Inc. Senior Unsecured Regular Bond/Debenture, Assigned Ba3 Senior Unsecured Regular Bond/Debenture, Assigned a range of LGD4, 58 % Outlook Actions: Issuer: Resolute Forest Products Inc. Outlook, Changed To Positive From Stable Affirmations: Issuer: Resolute Forest Products Inc. Probability of Default Rating, Affirmed Ba3-PD Speculative Grade Liquidity Rating, Affirmed SGL-1 Corporate Family Rating, Affirmed Ba3 The proceeds from the note offering will be used to repay the company's $501 million existing senior secured notes (due 2018) including financing fees and breakage costs. The company's proforma adjusted leverage will increase slightly following the refinancing, however, this is expected to be offset by the company's improved interest coverage. The ratings are subject to the conclusion of the proposed transaction and Moody's review of final documentation. Ratings Rationale: The positive outlook reflects Moody's expectations of improved financial performance, supported by higher earnings from its wood products segment due to the recovery in US housing starts, as well as the impact of the company's power projects and cost saving initiatives. Moody's also expects that the company will be able to offset declining demand in its paper business through productivity or pricing improvements, or through improvements in the company's market pulp business. Resolute's Ba3 CFR reflects the company's leading market position, product diversity and expectations of adjusted leverage trending below 4 times over the next two years. The rating is supported by the company's strong liquidity and favorable cost position for most of the products that it manufactures. The rating is tempered by the secular decline of newsprint, specialty and coated papers, which represents more than 60% of the company's revenue. This decline is somewhat offset by the burgeoning recovery of the company's wood products segment as the US housing market strengthens and the diversification provided by the recently expanded market pulp business. Resolute has a strong liquidity position (SGL-1). The company has $263 million of cash (as of December 31, 2012) and $519 million of availability under a $600 million asset based revolving credit facility that matures in October 2016. With higher than normal near term capital expenditures, Moody's estimates free cash flow of about $90 million over the next four quarters. Resolute has no near term debt maturities. A minimum fixed charge coverage ratio is the only financial requirement under the credit facility and is triggered when availability under the facility falls below 12.5% of facility size. An upgrade may be warranted if normalized adjusted debt to EBITDA approaches 3x through the business cycle, while maintaining good liquidity. Resolute's ratings could face downward ratings pressure if the company's liquidity position deteriorates or if normalized adjusted Debt to EBITDA exceeds 5.5x on a consistent basis. The principal methodology used in this rating was the Global Paper and Forest Products Industry Methodology published in September 2009. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Headquartered in Montreal (Quebec, Canada), Resolute produces various grades of newsprint, commercial printing papers, market pulp and wood products. Net sales for the last twelve months ending December 2012 were $4.5 billion. RESOLUTE FOREST: S&P Affirms 'BB-' Corp. Credit Rating ------------------------------------------------------ Standard & Poor's Ratings Services said it affirmed its 'BB-' long-term corporate credit rating on Montreal-based Resolute Forest Products Inc. The outlook is stable. At the same time, Standard & Poor's assigned its 'BB-' issue-level rating and '4' recovery rating to Resolute's proposed US$600 million 2023 senior unsecured notes. A '4' recovery rating reflects S&P's expectations of an average (30%-50%) recovery in a default scenario. The issue-level rating is based on S&P's expectation that all of the company's current 2018 senior secured debt outstanding will be repurchased and could change if 30% or more of the current notes remains outstanding after closing. The ratings on Resolute reflect what Standard & Poor's views as the company's "weak" business risk profile and "significant" financial risk profile. Standard & Poor's considers the business risk profile weak primarily because of the company's large exposure to declining North American newsprint and commercial printing paper markets. "The ratings also reflect the inherent volatility in pulp and paper prices, significant underfunded pension obligations, and Resolute's exposure to the cyclical U.S. housing construction market through its wood products business," said Standard & Poor's credit analyst Jamie Koutsoukis. "These risks will be somewhat tempered, we believe, by expected improvements to the company's cost structure, which are supplemented by capital expenditure projects to expand its current portfolio of co-generation assets," Ms. Koutsoukis added. The stable outlook on Resolute reflects S&P's view that, despite lower demand for newsprint and commercial printing papers, the company's low-cost assets will continue to generate positive cash flow from operations. S&P expects slight deleveraging through 2013 as consolidated earnings subsequent to the acquisition of Fibrek Inc. are realized. S&P could lower the ratings on Resolute if a greater-than-expected decline in paper demand and lower prices result in slower deleveraging than expected, or if a change in financial policy leads S&P to assess the financial risk profile on the company as "aggressive." S&P could upgrade Resolute if operating costs improve beyond its expectations, and free operating cash flows are used to repay debt outstanding, resulting in an adjusted debt-to-EBITDA of about 2.5x. ROTECH HEALTHCARE: Hires Proskauer, et al., as Lead Professionals ----------------------------------------------------------------- Rotech Healthcare Inc., and its debtor affiliates seek authority from the U.S. Bankruptcy Court for the District of Delaware to employ lead bankruptcy professionals: -- Proskauer Rose, LLP, (contact: Martin Bienenstock, Esq.) as lead bankruptcy attorneys to be paid the following hourly rates: $700-$1175 for partners, $700-$1150 for counsel, $325-$880 for associates, and $170-$325 for paraprofessionals; -- Young Conaway Stargatt & Taylor, LLP, as local Delaware bankruptcy counsel to be paid the following hourly rates: $975 for James L. Patton, Esq., Partner, $730 for Robert S. Brady, Esq., Partner, $560 for Joseph M. Barry, Esq., Partner, $410 for Kenneth J.Enos, Esq., Associate, $285 for Travis G. Buchanan, Esq., Associate, and $235 for Debbie Laskin, Paralegal. -- AlixPartners, LLP, to provide financial advisory and consulting services, to be paid the following hourly rates: $850 to $1,010 for managing directors, $645 to $790 for directors, $475 to $575 for vice presidents, $325 to $420 for associates, $280 to $310 for analysts, and $215 to $235 for paraprofessionals; -- Barclays Capital Inc. as financial advisor to be paid a $125,000 monthly retainer fee, a transaction fee equal to 1% of the consideration in an agreement to sell or acquire the Company, a fee equal to 25% of the break-up fee in connection to a sale or acquisition, a $3.0 million recapitalization fee, and a fee not exceeding $4.0 million if new debt or equity capital is raised by the Debtors, provided that the total fees, including expense reimbursement, will not exceed $8.0 million in the aggregate; and -- Epiq Bankruptcy Solutions, LLC, as administrative advisor to be paid the following hourly rates: $28-$43 for clerical, $57-$90 for case manager, $66-$128 for IT/Programming, $95-$133 for senior case manager/consultant, and $152-$185 for senior consultant. Each of the firm assure the Court that they are disinterested and do not represent any interest adverse to the Debtors and their estates. Mr. Bienenstock disclosed that Proskauer Rose received $800,000 from the Debtors prior to the Petition Date. According to AlixPartners' books and records, during the 90-day period prior to the Petition Date, the firm received approximately $621,807 from the Debtors for professional services performed and expenses incurred. Further, AlixPartners' current estimate is that it has received unapplied advance payments from the Debtors in excess of prepetition billings in the amount of $200,000. A hearing on the employment applications will be held on May 7, 2013, at 2:00 p.m. Objections are due April 30. About Rotech Healthcare Based in Orlando, Florida, Rotech Healthcare Inc. (NASDAQ: ROHI) -- http://www.rotech.com/-- provides home medical equipment and related products and services in the United States, with a comprehensive offering of respiratory therapy and durable home medical equipment and related services. The company provides equipment and services in 48 states through approximately 500 operating centers located primarily in non-urban markets. The Company reported a net loss of $14.76 million in 2011, a net loss of $4.20 million in 2010, and a net loss of $21.08 million in 2009. The Company's balance sheet at Sept. 30, 2012, showed $255.76 million in total assets, $601.98 million in total liabilities, and a $346.22 million total stockholders' deficiency. On April 8, 2013, Rotech Healthcare and 114 subsidiary companies filed petitions seeking relief under chapter 11 of the Bankruptcy Code (Bankr. D. Del. Lead Case No. 13-10741) to implement a pre- arranged plan negotiated with secured lenders. Attorneys at Proskauer Rose LLP, and Young, Conaway, Stargatt & Taylor serve as counsel to the Debtors; Foley & Lardner LLP is the healthcare regulatory counsel; Akin Gump Strauss Hauer & Feld LLP is the special healthcare regulatory counsel; Barclays Capital Inc. is the financial advisor; Alix Partners, LLP is the restructuring advisor; and Epiq Bankruptcy Solutions LLC is the claims agent. Prepetition term loan lender and DIP lender Silver Point Capital and other consenting noteholders are represented by Wachtell, Lipton, Rosen & Katz, and Richards Layton & Finger PA. ROTECH HEALTHCARE: Wants to Establish June 24 as Claims Bar Date ---------------------------------------------------------------- Rotech Healthcare Inc., et al., ask the U.S. Bankruptcy Court for the District of Delaware to establish June 24, 2013, as the deadline by which each person or entity, other than governmental units, must file a proof of claim based on prepetition claims against the Debtors, including requests for allowance and payment under Section 503(b)(9) of the Bankruptcy Code for goods delivered and received by the Debtors in the 20 days prior to the Petition Date. The Debtors also ask the Court to establish Oct. 7, 2013, as the deadline by which any governmental unit must file Proofs of Claim against the Debtors. A hearing on the request will be held on May 7, 2013, at 2:00 p.m. Objections are due April 30. About Rotech Healthcare Based in Orlando, Florida, Rotech Healthcare Inc. (NASDAQ: ROHI) -- http://www.rotech.com/-- provides home medical equipment and related products and services in the United States, with a comprehensive offering of respiratory therapy and durable home medical equipment and related services. The company provides equipment and services in 48 states through approximately 500 operating centers located primarily in non-urban markets. The Company reported a net loss of $14.76 million in 2011, a net loss of $4.20 million in 2010, and a net loss of $21.08 million in 2009. The Company's balance sheet at Sept. 30, 2012, showed $255.76 million in total assets, $601.98 million in total liabilities, and a $346.22 million total stockholders' deficiency. On April 8, 2013, Rotech Healthcare and 114 subsidiary companies filed petitions seeking relief under chapter 11 of the Bankruptcy Code (Bankr. D. Del. Lead Case No. 13-10741) to implement a pre- arranged plan negotiated with secured lenders. Attorneys at Proskauer Rose LLP, and Young, Conaway, Stargatt & Taylor serve as counsel to the Debtors; Foley & Lardner LLP is the healthcare regulatory counsel; Akin Gump Strauss Hauer & Feld LLP is the special healthcare regulatory counsel; Barclays Capital Inc. is the financial advisor; Alix Partners, LLP is the restructuring advisor; and Epiq Bankruptcy Solutions LLC is the claims agent. Prepetition term loan lender and DIP lender Silver Point Capital and other consenting noteholders are represented by Wachtell, Lipton, Rosen & Katz, and Richards Layton & Finger PA. ROTECH HEALTHCARE: Seeks Extension of Schedules Filing Deadline --------------------------------------------------------------- Rotech Healthcare Inc., et al., ask the U.S. Bankruptcy Court for the District of Delaware to extend until June 11, 2013, their deadline to file schedules of assets and liabilities and statements of financial affairs in order for their key legal and financial advisors to balance their attention on significant operational and restructuring issues during the crucial first month after filing the Chapter 11 cases --including the upcoming disclosure statement hearing scheduled for May 16, 2013, and other DIP loan milestones -- with the simultaneous preparation of Schedules and Statements. The 20-day extension will ensure the Debtors' smooth transition into Chapter 11 and, therefore, ultimately will maximize the value of the Debtors' estates to the benefit of creditors and all parties in interest, the Debtors state in court papers. The Debtors assure the Court that the proposed extension of the filing deadline will not prejudice creditors and other parties in interest because the Plan of Reorganization contemplates that trade creditors and vendors who agree to maintain or reinstate payment terms as existing prior to the Petition Date will be paid in full upon the effective date of the Plan. Other unsecured claims will be paid in full if the aggregate amount of unsecured claims does not exceed $2,500,000 and except as otherwise set forth in the Plan. Accordingly, the Debtors assert that their request for a 20-day extension of time to file the Schedules and Statements is appropriate and warranted under the circumstances. About Rotech Healthcare Based in Orlando, Florida, Rotech Healthcare Inc. (NASDAQ: ROHI) -- http://www.rotech.com/-- provides home medical equipment and related products and services in the United States, with a comprehensive offering of respiratory therapy and durable home medical equipment and related services. The company provides equipment and services in 48 states through approximately 500 operating centers located primarily in non-urban markets. The Company reported a net loss of $14.76 million in 2011, a net loss of $4.20 million in 2010, and a net loss of $21.08 million in 2009. The Company's balance sheet at Sept. 30, 2012, showed $255.76 million in total assets, $601.98 million in total liabilities, and a $346.22 million total stockholders' deficiency. On April 8, 2013, Rotech Healthcare and 114 subsidiary companies filed petitions seeking relief under chapter 11 of the Bankruptcy Code (Bankr. D. Del. Lead Case No. 13-10741) to implement a pre- arranged plan negotiated with secured lenders. Attorneys at Proskauer Rose LLP, and Young, Conaway, Stargatt & Taylor serve as counsel to the Debtors; Foley & Lardner LLP is the healthcare regulatory counsel; Akin Gump Strauss Hauer & Feld LLP is the special healthcare regulatory counsel; Barclays Capital Inc. is the financial advisor; Alix Partners, LLP is the restructuring advisor; and Epiq Bankruptcy Solutions LLC is the claims agent. Prepetition term loan lender and DIP lender Silver Point Capital and other consenting noteholders are represented by Wachtell, Lipton, Rosen & Katz, and Richards Layton & Finger PA. ROTHSTEIN ROSENFELDT: TD Bank Loses Bid to Keep Suit in Bankr. Ct. ------------------------------------------------------------------ Carolina Bolado of BankruptcyLaw360 reported that a Florida federal judge on Tuesday remanded to state court an investor suit accusing TD Bank NA of helping Scott Rothstein operate a $1.2 billion Ponzi scheme after a bankruptcy judge deemed the claims not essential to the Chapter 11 proceedings of Rothstein's law firm. According to the report, U.S. District Judge William P. Dimitrouleas adopted the report and recommendation of U.S. Bankruptcy Judge Raymond Ray to remand the suit, led by investor Don Beverly, back to the Seventh Judicial Circuit Court of Florida, where several similar investor suits are pending. About Rothstein Rosenfeldt Scott Rothstein, co-founder of law firm Rothstein Rosenfeldt Adler PA -- http://www.rra-law.com/-- was suspected of running a $1.2 billion Ponzi scheme. U.S. authorities claimed in a civil forfeiture lawsuit filed Nov. 9, 2009, that Mr. Rothstein, the firm's former chief executive officer, sold investments in non- existent legal settlements. Mr. Rothstein pleaded guilty to five counts of conspiracy and wire fraud on Jan. 27, 2010. Creditors of Rothstein Rosenfeldt Adler signed a petition sending the Florida law firm to bankruptcy (Bankr. S.D. Fla. Case No. 09-34791). The petitioners include Bonnie Barnett, who says she lost $500,000 in legal settlement investments; Aran Development, Inc., which said it lost $345,000 in investments; and trade creditor Universal Legal, identified as a recruitment firm, which said it is owed $7,800. The creditors alleged being owed money invested in lawsuit settlements. Herbert M. Stettin, the state-court appointed receiver for Rothstein Rosenfeldt, was officially carried over as the Chapter 11 trustee in the involuntary bankruptcy case. On June 10, 2010, Mr. Rothstein was sentenced to 50 years in prison. The official committee of unsecured creditors appointed in the case is represented by Michael Goldberg, Esq., at Akerman Senterfitt. RHYTHM & HUES: Hit With Wage Suit --------------------------------- Matt Chiappardi of BankruptcyLaw360 reported that a former employee of the Oscar-winning Hollywood visual effects studio behind "Life of Pi" sued the bankrupt company Monday, claiming he and others are owed two months' worth of unpaid compensation after being laid off. According to the report, visual effects artist Thomas C. Capizzi filed his adversarial class action against Rhythm & Hues Inc. in the U.S. Bankruptcy Court for the Central District of California, claiming he is not only owed for at least the one month the firm allegedly didn't pay him, but for an additional 30 days. About Rhythm and Hues Rhythm and Hues, Inc., aka Rhythm and Hues Studios Inc., filed its Chapter 11 petition (Bankr. C.D. Cal. Case No. 13-13775) in Los Angeles on Feb. 13, 2013, estimating assets ranging from $10 million to $50 million and liabilities ranging from $50 million to $100 million. Judge Neil W. Bason oversees the case. Brian L. Davidoff, Esq., C. John M Melissinos, Esq., and Claire E. Shin, Esq., at Greenberg Glusker, serve as the Debtor's counsel. Houlihan Lokey Capital Inc., serves as investment banker. The petition was signed by John Patrick Hughes, president and CFO. R&H provided visual effects and animation for more than 150 feature films and has received Academy Awards for Babe and the Golden Compass, an Academy Award nomination for The Chronicles of Narnia and Life of Pi. R&H owned a 135,000 square-foot facility in El Segundo, California, and had more than 460 employees. Key clients Universal City Studios LLC and Twentieth Century Fox, a division of Twentieth Century Fox Film Corporation, provided DIP financing. They are represented by Jones Day's Richard L. Wynne, Esq., and Lori Sinanyan, Esq. SCHOOL SPECIALTY: Disclosure Statement Gets Prelim. Court Okay -------------------------------------------------------------- School Specialty, Inc. on April 25 disclosed that the U.S. Bankruptcy Court for the District of Delaware issued an order preliminarily approving the Company's Disclosure Statement and authorized the Company to begin soliciting approval for its Amended Joint Plan of Reorganization from its creditor groups. Under the Plan, School Specialty will emerge from Chapter 11 as a stand-alone company. School Specialty's President and CEO Michael P. Lavelle, said, "The Court's approval of the Disclosure Statement and authorization to begin the solicitation process for approval of our Plan of Reorganization are important steps toward successfully completing School Specialty's debt restructuring. We anticipate emerging from the Chapter 11 process having strengthened the financial position of our company for the long-term. During this process, we have continued building our strategic brands and product offerings, and will continue to provide our customers with a broad range of supplemental educational and instructional products and equipment to meet their needs." School Specialty will begin mailing ballots and other information concerning its Plan shortly. A hearing at which the Court will be asked to confirm School Specialty's Plan has been scheduled for May 20, 2013. Assuming the requisite approvals are received and the Court confirms the Plan under the current proposed timetable, School Specialty expects to emerge from Chapter 11 by the end of May or early June. Based on preliminary indications of interest, the Company currently believes that it will receive commitments for exit financing that will be used to partially repay lenders of the debtor-in-possession financing, outstanding claims per the Plan's distribution formulas, and fund ongoing operations within the current proposed timetable for emergence. If the Company's Plan of Reorganization is confirmed as proposed, existing common stock will be extinguished under the Plan, and no distributions will be made to holders of the Company's current equity. Additional information concerning the restructuring is available on the Company's Web site at www.schoolspecialty.com. Claims and distributions information and a copy of the Plan and Disclosure Statement are available at www.kccllc.net/schoolspecialty or by calling (+1-877) 709-4758. This press release is not intended as a solicitation for a vote on the Plan of Reorganization and is for informational purposes only. The Disclosure Statement, along with ballots and other solicitation materials, will be distributed directly to those creditors of the Company who are entitled to vote on the Plan pursuant to the Disclosure Statement. About School Specialty Based in Greenville, Wisconsin, School Specialty is a supplier of educational products for kindergarten through 12th grade. Revenue in 2012 was $731.9 million through sales to 70% of the country's 130,000 schools. School Specialty and certain of its subsidiaries filed voluntary petitions for reorganization under Chapter 11 (Bankr. D. Del. Lead Case No. 13-10125) on Jan. 28, 2013. The petition estimated assets of $494.5 million and debt of $394.6 million. The Debtors are represented by lawyers at Paul, Weiss, Rifkind, Wharton & Garrison LLP and Young, Conaway, Stargatt & Taylor, LLP. Alvarez & Marsal North America LLC is the restructuring advisor and Perella Weinberg Partners LP is the investment banker. Kurtzman Carson Consultants LLC is the claims and notice agent. The ABL Lenders are represented by lawyers at Goldberg Kohn and Richards, Layton and Finger, P.A. The Ad Hoc DIP Lenders led by U.S. Bank are represented by lawyers at Stroock & Stroock & Lavan LLP, and Duane Morris LLP. The lending consortium consists of some of the holders of School Specialty Inc.'s 3.75% Convertible Subordinated Notes Due 2026. The Official Committee of Unsecured Creditors appointed in the case is represented by lawyers at Brown Rudnick LLP and Venable LLP. Bayside is represented by Pepper Hamilton LLP and Akin Gump Strauss Hauer & Feld LLP. As reported in the April 23 edition of the TCR, School Specialty decided to reorganize rather than sell. The company filed a so- called dual track plan that called for selling the business at auction on May 8 or reorganizing while giving stock to lenders and unsecured creditors. The company served a notice on April 19 that the auction was canceled and the plan would proceed by swapping debt for stock to be owned by lenders, noteholders, and unsecured creditors. SCHOOL SPECIALTY: Judge Rules Make-Whole Premium Enforceable ------------------------------------------------------------ Bill Rochelle, the bankruptcy columnist for Bloomberg News, reports that according to an opinion this week from the Delaware bankruptcy judge supervising the Chapter 11 reorganization of School Specialty Inc., a loan agreement calling for a $23.7 million make-whole premium on a $70 million loan is enforceable. The report recounts that the Debtor filed bankruptcy in January, having borrowed $70 million in May from Bayside Financial LLC. The loan agreement called for payment of the make-whole premium if the loan were in default. Conceding there was default, the official creditors' committee nonetheless sought to bar payment of the premium, arguing it was "grossly disproportionate" to the damage Bayside incurred by early repayment of the loan bearing a high interest rate. According to the report, U.S. Bankruptcy Judge Kevin J. Carey ruled in favor of Bayside in an 11-page opinion on April 22. He said the enforceability of make-whole premiums is governed by the same law covering liquidated damages. A make-whole premium is designed as compensation for premature repayment of a loan bearing an interest rate favorable to the lender. Judge Carey, the report notes, said the payment is barred only if it's "plainly disproportionate" to the lender's damages. Judge Carey decided it wasn't. Judge Carey, the report adds, rejected another argument from the creditors who contended that a make-whole is unmatured interest barred by Section 502(b)(2) of the U.S. Bankruptcy Code. Carey followed another Delaware bankruptcy judge, Brendan Shannon, and ruled that a make-whole is liquidated damages, not unmatured interest. Liquidated damages are damages the parties specify in advance, knowing that damages would be difficult to calculate after default. School Specialty is on the cusp of receiving court approval of disclosure materials so creditors can vote on a reorganization plan giving stock to lenders and unsecured creditors. The idea of selling the business was dropped. About School Specialty Based in Greenville, Wisconsin, School Specialty is a supplier of educational products for kindergarten through 12th grade. Revenue in 2012 was $731.9 million through sales to 70% of the country's 130,000 schools. School Specialty and certain of its subsidiaries filed voluntary petitions for reorganization under Chapter 11 (Bankr. D. Del. Lead Case No. 13-10125) on Jan. 28, 2013. The petition estimated assets of $494.5 million and debt of $394.6 million. The Debtors are represented by lawyers at Paul, Weiss, Rifkind, Wharton & Garrison LLP and Young, Conaway, Stargatt & Taylor, LLP. Alvarez & Marsal North America LLC is the restructuring advisor and Perella Weinberg Partners LP is the investment banker. Kurtzman Carson Consultants LLC is the claims and notice agent. The ABL Lenders are represented by lawyers at Goldberg Kohn and Richards, Layton and Finger, P.A. The Ad Hoc DIP Lenders led by U.S. Bank are represented by lawyers at Stroock & Stroock & Lavan LLP, and Duane Morris LLP. The lending consortium consists of some of the holders of School Specialty Inc.'s 3.75% Convertible Subordinated Notes Due 2026. The Official Committee of Unsecured Creditors appointed in the case is represented by lawyers at Brown Rudnick LLP and Venable LLP. Bayside is represented by Pepper Hamilton LLP and Akin Gump Strauss Hauer & Feld LLP. School Specialty in April 2013 decided to reorganize rather than sell. The company filed a so-called dual track plan that called for selling the business at auction on May 8 or reorganizing while giving stock to lenders and unsecured creditors. The company later served a notice that the auction was canceled and the plan would proceed by swapping debt for stock to be owned by lenders, noteholders, and unsecured creditors. SEALY CORP: S&P Withdraws 'B' Corporate Credit Rating ------------------------------------------------------ Standard & Poor's Ratings Services withdrew its ratings, including the 'B' corporate credit rating, on Trinity, N.C.-based Sealy Corp. following its acquisition by Tempur-Pedic International Inc. S&P is withdrawing the ratings following the repayment of Sealy's senior secured and subordinated debt. The convertible notes have been substantially repaid and S&P is withdrawing the ratings on these notes at Tempur-Pedic's request. SMART ONLINE: Sells Additional $200,000 Convertible Note -------------------------------------------------------- Smart Online, Inc., sold an additional convertible secured subordinated note due Nov. 14, 2016, in the principal amount of $200,000 to a current noteholder. The Company is obligated to pay interest on the New Note at an annualized rate of 8% payable in quarterly installments commencing July 16, 2013. The Company is not permitted to prepay the New Note without approval of the holders of at least a majority of the aggregate principal amount of the Notes then outstanding. The Company plans to use the proceeds to meet ongoing working capital and capital spending requirements. The sale of the New Note was made pursuant to an exemption from registration in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. Amir Elbaz Succeeds Robert Brinson as CEO Robert Brinson announced his resignation from his position as chief executive officer of the Company, effective April 30, 2013. Mr. Brinson will continue to serve as a strategic advisor to the Company under a consulting arrangement, the terms of which have not been finalized as of the date of this filing. On Feb. 17, 2013, Mr. Brinson announced that he would not stand for re-election to the board of directors of the Company, or the Board, at the end of his annual term. Mr. Brinson will remain a director until the Company's 2013 annual meeting of stockholders. The Board of Directors appointed its current Chairman of the Board, Amir Elbaz, age 36, to serve as Interim CEO of the Company, effective May 1, 2013. During his tenure as a Board member and the Chairman, Mr. Elbaz has been actively involved in the operations of the Company. Mr. Elbaz has served on the Company's Board since January 2010 and as the Chairman of the Board since November 2012. Mr. Elbaz currently serves as Chief Executive Officer of two companies in the technology and media sectors. Mr. Elbaz also advises technology and renewable energy companies on business strategy, restructuring and business development initiatives. Mr. Elbaz served as the Executive Vice President & Chief Financial Officer of Lithium Technology Corporation until November 2008. Mr. Elbaz joined LTC in 2006 to oversee finances and marketing, as well as business development. Prior to joining LTC, Mr. Elbaz served as a Senior Associate of Arch Hill Capital NV, a Dutch venture firm, from 2005-2006. During 2004 and most of 2005, Mr. Elbaz served as Vice President of Corporate Finance at Yorkville Advisors, where Mr. Elbaz sourced, structured and managed investments in more than a dozen public and private companies. Prior to joining Yorkville Advisors, Mr. Elbaz served for several years as an analyst with the Economic Department in the Procurement Mission of the Israeli Ministry of Defense in New York City. In that capacity, Mr. Elbaz co-headed multi-million dollar negotiations with first tier technology companies, and was in charge of the financial aspects of the day-to-day operations. Mr. Elbaz holds a B.A. from the University of Haifa, Israel, and an MBA in Finance & Investments from Bernard Baruch College, CUNY, New York. Following his MBA graduation, Mr. Elbaz was elected to the International Honorary Finance Society of Beta Gamma Sigma. There are no transactions in which Mr. Elbaz has an interest requiring disclosure under Item 404(a) of Regulation S-K. On April 22, 2013, Mr. Dror Zoreff, also announced that he would not stand for re-election to the Board. Mr. Zoreff served on the Corporate Governance and Nominating Committee. Mr. Zoreff will remain a director until new members are elected at the 2013 annual meeting of stockholders. About Smart Online Durham, North Carolina-based Smart Online, Inc., develops and markets a full range of mobile application software products and services that are delivered via a SaaS/PaaS model. The Company also provides Web site and mobile consulting services to not-for- profit organizations and businesses. Smart Online disclosed a net loss of $4.39 million in 2012, as compared with a net loss of $3.54 million in 2011. The Company's balance sheet at Dec. 31, 2012, showed $1.25 million in total assets, $28.41 million in total liabilities, and a $27.16 million total stockholders' deficit. Cherry Bekaert LLP, in Raleigh, North Carolina, issued a "going concern" qualification on the consolidated financial statements for the year ended Dec. 31, 2012. The independent auditors noted that the Company has suffered recurring losses from operations and has a working capital deficiency as of Dec. 31, 2012, which conditions raise substantial doubt about the Company's ability to continue as a going concern. SMART TECHNOLOGIES: S&P Affirms 'B' CCR; Outlook Stable ------------------------------------------------------- Standard & Poor's Ratings Services said it withdrew its issue- level and recovery ratings on SMART Technologies ULC's proposed senior secured notes offering. The company is a subsidiary of Calgary, Alta.-based interactive display provider SMART Technologies Inc. (SMART). The rating withdrawal follows SMART's announcement that it has decided not to proceed with the notes issuance. At the same time, Standard & Poor's affirmed its 'B' long-term corporate credit rating on SMART. The outlook is stable. Standard & Poor's also assigned its 'B' issue-level rating and '4' recovery rating to SMART Technologies ULC's US$405 million first- lien credit facility comprising a US$305 million term loan and two revolvers aggregating to US$100 million. The '4' recovery rating indicates S&P's expectation of average (30%-50%) recovery for creditors in the event of a default. "The ratings on SMART reflect Standard & Poor's assessment of the company's weak business risk profile and our expectation that the company will maintain credit metrics consistent with a highly leveraged financial risk profile over the next year," said Standard & Poor's credit analyst David Fisher. SMART is a leading provider of touch-sensitive interactive whiteboards (IWB) and related interactive display technologies, interactive response systems, and ancillary software, primarily targeting the kindergarten to grade 12 school education market. The company develops, assembles, and markets hardware and software products that enable group collaboration and interactive learning by both local and remote participants. SMART pioneered the IWB product category and remains a global market share leader according to Futuresource Consulting Ltd. For the 12 months ended Dec. 31, 2012, the company posted reported revenue and adjusted EBITDA of US$632 million and US$59 million, respectively. The stable outlook reflects S&P's expectation that SMART should be able to generate EBITDA in the range of US$50 million- US$60 million in the next 12 months, due in part to cost savings associated with recent restructuring actions, resulting in adjusted debt-to-EBITDA in the 6x area. S&P could consider lowering the ratings if trailing 12-month EBITDA declines materially below US$50 million. S&P believes this could occur if school board funding constraints or pricing pressures increase more than it expects. Alternatively, S&P would likely lower the ratings if the company fails to refinance its debt outstanding by early-to-mid 2014. While unlikely in the near term, S&P could consider raising the ratings if adjusted debt-to-EBITDA improved to the 3x-4x range on a sustained basis, driven by improved EBITDA generation and a lessened dependence on IWBs in the education market. SOUTH LAKES: Agrees to Pay Admin. And 503(b)(9) Claims ------------------------------------------------------ South Lakes Dairy Farm and Wells Fargo Bank, N.A., have entered into a stipulation regarding the payment of approved administrative claims and 11 U.S.C. Sec. 503(b)(9) claims from Wells Fargo's cash collateral, to wit: 1. Immediately upon entry of an order of the Court approving this stipulation, the Debtor is authorized to use cash collateral to pay from the Administrative Expenses Account $195,500 on allowed administrative claims pro-rata in accordance with the Orders authorizing administrative claims. 2. So long as there is no default under the cash collateral order, the Debtor is authorized to use cash collateral from the Administrative Expenses Account to pay administrative claims the amount of $30,000 per month pro-rata beginning 30 days after the initial distribution described in the immediately preceding paragraph and continuing at the rate of $30,000 per month until either (i) the claims are paid in full, or (ii) the effective date of any plan confirmed by the Debtor at which time all approved but unpaid administrative claims will be paid in full. At the Sept. 19, 2012 final hearing on the motion to use cash collateral, the Court approved the continued interim use of cash collateral through October 2012, and continued the hearing to Oct. 25, 2012, at which time the Court granted the Debtor the use of cash collateral indefinitely. The Debtor has been using cash collateral since that time pursuant to the Cash Collateral order entered on Nov. 15, 2012. The Cash Collateral Order authorizes the use of cash collateral pursuant to monthly budgets approved by Wells Fargo Bank. About South Lakes Dairy South Lakes Dairy Farm is a California partnership engaged in the dairy cattle4 and milking business. The partnership filed a bare- bones Chapter 11 petition (Bankr. E.D. Calif. Case No. 12-17458) in Fresno, California on Aug. 30, 2012, disclosing $19.5 million in assets and $25.4 million in liabilities in its schedules. The Debtor said it has $1.97 million in accounts receivable charged to Dairy Farmers of America on account of milk proceeds, and that it has cattle worth $12.06 million. The farm owes $12.7 million to Wells Fargo Bank on a secured note. Bankruptcy Judge W. Richard Lee presides over the case. Jacob L. Eaton, Esq., at Klein, DeNatale, Goldner, Cooper, Rosenlieb & Kimball, LLP, in Bakersfield, Calif., represents the Debtor as counsel. The Debtor tapped A&M Livestock Auction, Inc., to auction livestock. August B. Landis, the Acting U.S. Trustee for Region 17, appointed seven creditors to serve in the Official Committee of Unsecured Creditors. The Official Committee of Unsecured Creditors tapped Blakeley & Blakeley LLP as its counsel. SOUTH LAKES: Amends Schedules of Assets and Liabilities ------------------------------------------------------- South Lakes Dairy Farm filed with the U.S. Bankruptcy Court for the Eastern District of California amended schedules of its assets and liabilities, disclosing: Name of Schedule Assets Liabilities ---------------- ----------- ----------- A. Real Property $0 B. Personal Property $25,281,583 C. Property Claimed as Exempt D. Creditors Holding Secured Claims $19,961,380 E. Creditors Holding Unsecured Priority Claims $0 F. Creditors Holding Unsecured Non-priority Claims $6,232,026 ----------- ----------- TOTAL $25,281,583 $26,193,406 The Debtor disclosed $19.5 million in assets and $25.4 million in liabilities in a prior iteration of the schedules. About South Lakes Dairy South Lakes Dairy Farm is a California partnership engaged in the dairy cattle4 and milking business. The partnership filed a bare- bones Chapter 11 petition (Bankr. E.D. Calif. Case No. 12-17458) in Fresno, California on Aug. 30, 2012. The Debtor said it has $1.97 million in accounts receivable charged to Dairy Farmers of America on account of milk proceeds, and that it has cattle worth $12.06 million. The farm owes $12.7 million to Wells Fargo Bank on a secured note. Bankruptcy Judge W. Richard Lee presides over the case. Jacob L. Eaton, Esq., at Klein, DeNatale, Goldner, Cooper, Rosenlieb & Kimball, LLP, in Bakersfield, Calif., represents the Debtor as counsel. The Debtor tapped A&M Livestock Auction, Inc., to auction livestock. August B. Landis, the Acting U.S. Trustee for Region 17, appointed seven creditors to serve in the Official Committee of Unsecured Creditors. The Official Committee of Unsecured Creditors tapped Blakeley & Blakeley LLP as its counsel. SPENCER SPIRIT: Moody's Rates Proposed PIK Toggle Notes 'Caa1' -------------------------------------------------------------- Moody's Investors Service affirmed Spencer Spirit Holdings, Inc.'s B2 Corporate Family Rating following the company's announcement that it plans to fund an approximately $164 million non-pro rated stock repurchase with proceeds from a proposed $160 million senior PIK ("payment-in-kind") toggle note due 2018 to be issued by its parent, SSH Holdings, Inc. Moody's assigned a Caa1 to the proposed PIK toggle notes. The rating outlook is stable. The affirmation of Spencer's B2 Corporate Family Rating and stable rating outlook considers Moody's view that despite the increase in leverage that will occur as a result of the transaction -- pro forma debt/EBITDA is about 6.0 times compared to 5.1 times for the 12-month period ended February 2, 2013 -- the opening of additional stores coupled with a moderate amount of same store sales growth should generate enough incremental earnings to bring debt/EBITDA down to about 5.5 times over the next 12- 18 month period, a level that more solidly positions the company in the B2 rating category, and is one half of a turn below the downward rating trigger as it relates to leverage. Spencer has a demonstrated track record of success in opening new Spirit and Spencer's stores, and a consistent history of same store sales growth at Spencer's. Moody's expects the company can continue to do so given its strong operating history. The Caa1 assigned to SSH Holdings PIK toggle notes considers its structural subordination to all liabilities at Spencer, including a $150 million asset based revolver (not rated) and $175 million 11% senior secured notes due 2017. The PIK toggle notes will be senior unsecured obligations of SSH Holdings and will not be guaranteed by Spencer Spirit Holdings or any of Spencer's subsidiaries. The company will be required to pay interest in cash so long as there is restricted payment capacity available under the existing indenture. If not the company will have the option to pay interest in kind at a rate .75% higher than the cash coupon. New rating assigned to SSH Holdings, Inc.: $160 million senior PIK toggle notes due 2018 at Caa1 (LGD 5, 89%) Spencer Spirit Holdings, Inc. ratings affirmed: Corporate Family Rating at B2 Probability of Default Rating at B2- PD Senior secured notes due 2017 at B2 (LGD 4, 51%) The rating on the PIK toggle notes is subject to review of final documentation. Upon completion of the transaction, Spencer's Corporate Family and Probability of Default ratings will be moved to SSH Holdings Inc. Additionally, should the transaction conclude on the terms proposed, Moody's anticipates the rating on the secured term loan would likely be lifted by one notch to B1 in order to reflect the increase in debt cushion afforded to the secured notes due 2017 as a result of the proposed issuance of structurally subordinated SSH Holdings debt. Rating Rationale: Spencer's B2 Corporate Family Rating considers its high pro-forma leverage at about 6.0 times along with Moody's expectation that leverage will remain above 5.0 times as the company utilizes cash flow to fuel growth in its store base rather than reducing debt. The rating also reflects the company's limited scale in terms of sales ($696 million), significant reliance on the Halloween season, and highly discretionary product offerings that appeal to a relatively narrow demographic, primarily18-24 year olds. The rating also reflects the company's track record of debt-financed distributions to its shareholders. Positive rating consideration is given to Moody's expectation that the company will continue to improve its earnings through a combination of new store openings and modest same store sales growth. The stable outlook incorporates Moody's opinion that revenue and earnings will increase modestly and that Moody's adjusted operating margins will remain around current levels, about 12.5%, and that Spencer will be able to refinance its existing asset- based loan facility that expires in September 2014 at least 12- months before its September 2014 expiration. Ratings could be upgraded if Spencer demonstrates the ability and willingness to achieve and sustain debt/EBITDA of 5.0 times or lower, and EBITA/interest expense above 1.5 times. However, at this time, any upgrade would likely be limited to one notch as a result of the company's recently aggressive policies regarding debt financed shareholder distributions. Ratings could be downgraded if Spencer's new store openings underperform historical trends, the company is unable to maintain debt/EBITDA below 6 times and EBITA/interest above 1.25 times and/or or liquidity were to materially erode for any reason. Spencer Spirit Holdings, Inc., headquartered in Egg Harbor, NJ, is a specialty retailer primarily operating under two brands: Spencer's and Spirit Halloween. Revenue for the last twelve months ended February 2013 was $696 million. At February 2, 2013 SSH operates 624 Spencer's and, during FY 12, 997 Spirit Stores. The principal methodology used in this rating was the Global Retail Industry Methodology published in June 2011. Other methodologies used include Loss Given Default for Speculative- Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. STAFFORD RHODES: Can Use Cash Pursuant to 3rd Updated Budgets ------------------------------------------------------------- The U.S. Bankruptcy Court for the Middle District of Georgia has entered a second Consent Order authorizing Stafford Rhodes, LLC, et al., to continue to use cash collateral of the parties having an interest in the cash collateral (the secured party and Ameris) pursuant to the Third Updated Budgets, under the same terms and conditions of the Court's Sept. 10, 2012 cash collateral order. A copy of the Third Updated Budgets is available at: http://bankrupt.com/misc/staffordrhodes.doc250.pdf About Stafford Rhodes Stafford Rhodes, LLC, owns 27.41 acres of land located in Bluffton, Beaufort County, South Carolina. The land is improved by a 95,233 square foot retail shopping center that has 16 tenants, including Best Buy Stores, Petco, and Dollar Tree. Affiliate Beaufort Crossing, LLC, owns 10 acres of land, improved by an unanchored 19,600 square foot shopping center, the Crossings of Beaufort, in Beaufort County. Stafford Vista, LLC, owns 5.69 acres of land located in Decatur, DeKalb County, Georgia, which is improved by a 45,450 square foot shopping center identified as the Vista Grove Plaza. Stafford Wesley, LLC, has 2.34 acres of land in Decatur, improved by a 30,683 square foot shopping center identified as the Wesley Chappel Retail Shopping Center. Stafford Rhodes and its three affiliates sought Chapter 11 protection (Bankr. M.D. Ga. Lead Case No. 12-70859) on June 29, 2012. Judge John T. Laney, III, presides over the Debtors' cases. Attorneys at Arnall Golden Gregory LLP, in Atlanta, represent the Debtors as counsel. In its petition, Stafford Rhodes estimated assets and debts of between $10 million and $50 million. The petitions were signed by Frank J. Jones, Jr., VP, Treasurer and CFO of Debtor's sole member. STOCKTON, CA: Says Debt Talks Will Be Restarted ----------------------------------------------- Steven Church, writing for Bloomberg News, reported that Stockton, California, the biggest U.S. city to file for bankruptcy, will restart negotiations with creditors while it develops a plan to adjust its debts and exit court protection by year's end, a city lawyer told a judge. According to the Bloomberg report, lawyers for the city and creditors told a federal judge yesterday that they want to try to negotiate an end to the Chapter 9 case after a months-long fight over whether Stockton should be thrown out of bankruptcy. "We need to start talking," city attorney Marc A. Levinson told U.S. Bankruptcy Judge Christopher M. Klein in Sacramento, the Bloomberg report cited. "We are trying to go back to negotiations to see if we can work out a deal," attorney Jeffrey E. Bjork, who represents creditor Assured Guaranty Corp., said in court, according to Bloomberg. The city's goal is to file a plan to adjust its debt sometime in the third quarter of this year and, assuming Klein approves it, exit bankruptcy by year's end, the report said. This month creditors including Assured and Franklin Resources Inc. (BEN) lost a battle to force the city out of bankruptcy, the report noted. Klein ruled that the city was eligible to remain in bankruptcy, where it's protected from creditor lawsuits, while it develops a plan to reduce its debt. STONE ROSE: Section 341(a) Meeting Scheduled on May 29 ------------------------------------------------------ A meeting of creditors in the bankruptcy case of Stone Rose LP will be held on May 29, 2013, at 3:00 p.m. at 219 South Dearborn, Office of the U.S. Trustee, 8th Floor, Room 802, Chicago, Illinois 60604. This is the first meeting of creditors required under Section 341(a) of the Bankruptcy Code in all bankruptcy cases. All creditors are invited, but not required, to attend. This meeting of creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. About Stone Rose Aurora, Illinois-based Stone Rose, LP, filed a Chapter 11 petition (Bankr. N.D. Ill. Case No. 13-16410) in Chicago, Illinois, on April 19, 2013. Joseph G. Dinges signed the petition as president of Stone Rose Mgmt., Inc., general partner. Judge Eugene R. Wedoff presides over the case. The Debtor is represented by Myler, Ruddy & Mctavish. Stone Rose disclosed $16.5 million in total assets and $6.93 million in total liabilities in its schedules. The Debtor owns 82 acres of vacant land at 123rd St and Parallel Pky, in Kansas City, Missouri, which is valued at $4 million, and serves as collateral for a $2 million debt to Metcalf Bank. The Debtor also has a 75% interest as a member of Big House Investments, LLC, which owns 17 acres of vacant land at 110th St. and I-70 in Edwardsville, Kansas. The land is subject to a contract for sale for $6 million and is subject to a $4.0 million mortgage in favor of Metcalf Bank. STRADELLA INVESTMENTS: Trustee Seeks to Tap Bankruptcy Counsel -------------------------------------------------------------- Richard A. Marschack, the trustee appointed in the Chapter 11 case of Stradella Investments, Inc., seeks authority from the U.S. Bankruptcy Court for the Central District of California - Santa Ana Division, to hire his own law firm, Marshack Hays LLP as his general counsel. According to papers submitted in Court, the Chapter 11 Trustee at this time needs counsel for the following: (i) Analyzing the Estate's rights and interest in a $25 million note payable to the Debtor; (ii) Analyzing the collateral securing the Estate's interest in the Note; (iii) Analyzing the Estate's interest in a 25 acre of commercial real property; (iv) Analyzing the claims of major creditors of the Debtor including creditors claiming security interests in assets of the Estate; (v) Analyzing potential litigation claims held by the Estate; (vi) Assisting any special litigation counsel retained by the Trustee; and (vii) Assisting the Trustee in matters concerning the administration of the Estate. The Chapter 11 Trustee requires assistance of counsel to analyze these and other legal issues, identify real property assets of the estate, investigate and pursue assets and legal claims of the Estate, recover and effect turnover of liquid assets of the Estate, advise the Trustee in his administration of the Estate, and provide general legal counsel during the pendency of this Chapter 11 proceeding including assisting in preparation of a Chapter 11 plan to distribute the proceeds from the transaction. These Marshack Hays professionals will be paid the following hourly rates: D. Edward Hays ehays@marshackhays.com $475 David M. Goodrich DGoodrich@marshackhays.com $390 Cynthia A. Connors cconners@marshackhays.com $395 Kristine A. Thagard kthagard@marshackhays.com $380 Judith E. Marshack jmarshack@marshackhays.com $325 Martina A. Slocomb mslocomb@marshackhays.com $325 Sarah C. Boone sboone@marshackhays.com $325 Chad V. Haes chaes@marshackhays.com $295 Pamela Kraus pkraus@marshackhays.com $210 Layla Bergini lbergini@marshackhays.com $175 Chanel Mendoza cmendoza@marshackhays.com $175 Cynthia Bastida cbastida@marshackhays.com $150 The Firm will also be compensated from assets of the estate, if any, and will not be compensated absent the Estate's receipt or recovery of such assets. The Firm has received no retainer for the services to be performed in this case, and has agreed that no retainer will be paid. D. Edward Hays, a principal at Marshack Hays LLP, in Irvine, California, assures the Court 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 Chapter 11 Trustee and the Estate. About Stradella Investments San Juan Capistrano, California-based Stradella Investments, Inc., filed for Chapter 11 bankruptcy protection (Bankr. C.D. Cal. Case No. 10-23193) on Sept. 19, 2010. Timothy J. Yoo, Esq., at Levene Neale Bender Rankin & Brill LLP, assists the Debtor in its restructuring effort. The Debtor disclosed $25,000,000 in assets and $121,000,671 in liabilities in its schedules. The Debtor's primary assets is a $25 million promissory note in its favor made out by RM Eagle, LLC, in connection with the purchase of certain real property. RM Eagle defaulted on a construction loan with respect to the development of the Property, and the lender foreclosed on RM Eagle. An affiliate of Stark Investments is currently the title holder of the Property. The Note is secured by a deed of trust on the Property. The Debtor filed a First Amended Chapter 11 Plan of Reorganization on Feb. 13, 2013. Under the Plan, creditors are to be paid in full over time from the proceeds of the Debtor's assets. General unsecured creditors in Class 3 will be paid from any amounts remaining from the proceeds of the Note after Secured Creditors in Class 1 and Class 2 are paid. Class 4 Equity Interests in the Debtor will retain their interests. STRATEGIC CAPITAL: MBS Suit Ruled Time-Barred --------------------------------------------- Stewart Bishop of BankruptcyLaw360 reported that a California federal judge on Monday threw out an $11 million suit brought by the Federal Deposit Insurance Corp., acting as receiver for the failed Strategic Capital Bank, against JPMorgan Chase & Co. and others over allegedly faulty mortgage-backed securities certificates, finding the suit's claims are time-barred. According to the report, the FDIC brought the suit against units of JPMorgan, Bank of America Corp., Citigroup Inc. and Deutsche Bank AG, and it later was transferred into multidistrict litigation targeting BofA's Countrywide Financial Corp. and others over purportedly misleading statements. Strategic Capital Bank, Champaign, Illinois, was closed May 22 by the Illinois Department of Financial and Professional Regulation, Division of Banking, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Midland States Bank, Effingham, Illinois, to assume all of the deposits of Strategic Capital Bank. As of May 13, 2009, Strategic Capital Bank had total assets of $537 million and total deposits of approximately $471 million. In addition to assuming all of the deposits of the failed bank, Midland States Bank agreed to purchase approximately $536 million of assets. The FDIC will retain the remaining assets for later disposition. The FDIC and Midland States Bank entered into a loss-share transaction on approximately $420 million of Strategic Capital Bank's assets. Midland States Bank will share in the losses on the asset pools covered under the loss-share agreement. The loss- sharing arrangement is projected to maximize returns on the assets covered by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers. SUPERMEDIA INC: Gets Final OK on Procedures to Limit Secs. Trading ------------------------------------------------------------------ Judge Kevin Gross issued a final order approving certain notification and hearing procedures designed to limit the trading of equity securities of SuperMedia Inc, et al. As reported by The Troubled Company Reporter on April 4, 2013, the procedures will aid SuperMedia monitor, and object to, certain acquisitions of SuperMedia Equity Securities to maximize the combined company's ability to utilize its net operating losses. The procedures would affect only a limited subset of transfers of SuperMedia Equity Securities during the Chapter 11 Cases, i.e., transfers of SuperMedia Equity Securities to Dex One Substantial Shareholders (i.e., persons having Beneficial Ownership of more than approximately 2.29 million shares of Dex One Equity Securities during the three years prior to the Petition Date). SuperMedia expects to merge with Dex One Corp. on the effective date of their reorganization plans. About SuperMedia Headquartered in D/FW Airport, Texas, SuperMedia Inc., formerly known as Idearc, Inc., is a yellow pages directory publisher in the United States. Its portfolio includes the Superpages directories, Superpages.com, digital local search resource on both desktop and mobile devices, the Superpages.com network, which is a digital syndication network, and its Superpages direct mailers. SuperMedia is the official publisher of Verizon, FairPoint and Frontier print directories in the markets in which these companies are the incumbent local telephone exchange carriers. Idearc was spun off from Verizon Communications, Inc., in 2006. At Dec. 31, 2012, SuperMedia had approximately 3,200 employees, of which approximately 950 or 30% were represented by unions. SuperMedia and three affiliates sought Chapter 11 protection (Bankr. D. Del. Lead Case No. 13-10545) on March 18, 2013, to effectuate a merger of equals with Dex One Corp. SuperMedia disclosed total assets of $1.4 billion and total debt of $1.9 billion. Morgan Stanley & Co. LLC is acting as financial advisors to SuperMedia, and Cleary Gottlieb Steen & Hamilton LLP and Young Conaway Stargatt & Taylor, LLP are acting as its legal counsel. Fulbright & Jaworski L.L.P is special counsel. Chilmark Partners Is acting as financial advisor to SuperMedia's board of directors. Epiq Systems serves as claims agent. This is also SuperMedia's second stint in Chapter 11. Idearc and its affiliates filed for Chapter 11 protection (Bankr. N.D. Tex. Lead Case No. 09-31828) in March 2009 and emerged from bankruptcy in December 2009, reducing debt from more than $9 billion to $2.75 billion. SUPERMEDIA INC: Has Final OK to Continue Investment Practices ------------------------------------------------------------- Judge Kevin Gross has authorized SuperMedia, Inc., et al., on a final basis, to continue to invest funds in accordance with their current practices. The judge has also entered a final order allowing the Debtors to continue to operate their cash management system, honor certain related prepetition obligations, and maintain existing business forms. In separate orders, the Bankruptcy Court prohibits, on a final basis, the Debtors' Utility Providers from altering or discontinuing utility services to the Debtors on account of the commencement of the Chapter 11 cases or any unpaid prepetition charges. The Debtors have been granted final court authority to pay on a timely basis all undisputed invoices for postpetition utility services provided by the Utility Providers. They are to maintain an Adequate Assurance Account -- which should have a minimum balance of $555,000 -- for the purpose of providing each Utility Provider adequate assurance of payment of its postpetition utility services. About SuperMedia Headquartered in D/FW Airport, Texas, SuperMedia Inc., formerly known as Idearc, Inc., is a yellow pages directory publisher in the United States. Its portfolio includes the Superpages directories, Superpages.com, digital local search resource on both desktop and mobile devices, the Superpages.com network, which is a digital syndication network, and its Superpages direct mailers. SuperMedia is the official publisher of Verizon, FairPoint and Frontier print directories in the markets in which these companies are the incumbent local telephone exchange carriers. Idearc was spun off from Verizon Communications, Inc., in 2006. At Dec. 31, 2012, SuperMedia had approximately 3,200 employees, of which approximately 950 or 30% were represented by unions. SuperMedia and three affiliates sought Chapter 11 protection (Bankr. D. Del. Lead Case No. 13-10545) on March 18, 2013, to effectuate a merger of equals with Dex One Corp. SuperMedia disclosed total assets of $1.4 billion and total debt of $1.9 billion. Morgan Stanley & Co. LLC is acting as financial advisors to SuperMedia, and Cleary Gottlieb Steen & Hamilton LLP and Young Conaway Stargatt & Taylor, LLP are acting as its legal counsel. Fulbright & Jaworski L.L.P is special counsel. Chilmark Partners Is acting as financial advisor to SuperMedia's board of directors. Epiq Systems serves as claims agent. This is also SuperMedia's second stint in Chapter 11. Idearc and its affiliates filed for Chapter 11 protection (Bankr. N.D. Tex. Lead Case No. 09-31828) in March 2009 and emerged from bankruptcy in December 2009, reducing debt from more than $9 billion to $2.75 billion. SYNAGRO TECHNOLOGIES: Proposes EQT-Led Auction on June 10 --------------------------------------------------------- The Carlyle Group's Synagro Technologies, Inc., sought bankruptcy protection in Delaware and immediately proposed sale procedures where EQT Infrastructure II Limited Partnership will open the auction with a $455 million offer. The Debtor said in court filings that the sale process began in November 2012 at the behest of the secured lenders, who agreed to a temporary waiver following a default of the Debtors' total leverage covenants. More than 100 potential purchasers were contacted; six parties submitted indications of interests; and three of those bidders were invited to another round of bidding. EQT made a formal proposal in February. There were also talks with American Securities Opportunity Fund II ("ASOF"), a substantial holder in the first and second lien debt, regarding a restructuring transaction. The Debtor said that EQT's final offer set a purchase price for both a sale under 11 U.S.C. Sec. 363 or an out-of-court stock sale. But the out-of-court option was unfeasible because it required several substantial reserves. Accordingly, Synagro has filed for bankruptcy, asking the Bankruptcy Court to approve an asset purchase agreement where a subsidiary of EQT would serve as stalking horse bidder in an auction for substantially all of the assets. The purchase agreement with EQT envisions, and seeks to facilitate, a continuation of the Debtors' business operations in the ordinary course and, to that end, provides for, among other things, the assumption and assignment to EQT of a material portion of the Debtors' trade claims and of all contracts related to the operation of the business. The salient terms of the deal with EQT are: * EQT will purchase the assets for $455 million, subject to adjustments. * EQT will provide a deposit of $23 million. * EQT will receive a break-up fee of $13.8 million (3% of the purchase price) and expense reimbursement of up to $4.5 million in the event it is outbid at the auction. * All avoidance actions are excluded from the assets sold to EQT. Bidding Procedures The sale to EQT will be subject to higher and better offers. The Debtors propose this timeline: i. Potential bidders must submit confidentiality agreements and letters of indication to sign a sale agreement not later than May 20, 2013. ii. Initial bids must be at least $20 million higher than EQT's stalking horse offer and must be submitted by June 3, 2013 in order to participate in the auction. iii. If qualified bids are received, an auction will be conducted June 10, 2013, at 10:00 a.m. iv. If there is no auction, a hearing to consider approval of the sale to EQT will be held on June 10, and if an auction is conducted, the sale hearing will take place June 20. Objections are due a week before the sale hearing. Other First Day Motions Aside from the bidding procedures, the Debtors on the petition date also filed motions to, among other things, obtain DIP financing, extend the time to file schedules of assets and liabilities and statement of affairs by 30 days, pay employee wages ($2.15 million in accrued but unpaid as of Petition Date), pay prepetition claims of critical vendors, pay $3.5 million owed to subcontract haulers and landfill operators, and make the $1.5 million incentive payment earned by third-party contracts for a capital project in Woonsocket, Rhode Island. The Debtors estimate that the unpaid prepetition claims of critical vendors total $750,000. The Debtors seek authority to pay critical vendor claims up to $250,000 on an interim basis, and $750,000 on a final basis. The Debtors say that critical vendors include (i) suppliers of specialized chemicals necessary for the treatment of biosolids necessary to produce residual materials in accordance with federal regulations; (ii) providers of specialized repair services for the Debtors' machinery and equipment; and (iii) providers of biosolids testing and analysis, who assist the Debtors in maintaining compliance with a vast array of regulations and requirements. $536 Million Debt As of the Petition Date, Synagro had $536 million of long term debt consisting of: * $79 million of debt under a first lien revolving credit facility provided by lenders led by Bank of America, N.A. as administrative agent; * $249 million of debt under a first lien term loan credit facility, from lenders led by BofA as administrative agent; and collateral agent; * $100 million of debt under a second lien term loan credit facility from lenders led by U.S. Bank, National Association, as administrative and collateral agent. * $96 million of structurally senior bond debt; and * $12 million of capital leases. About Synagro Technologies Synagro Technologies, Inc., based in Houston, Texas, is the recycler of bio-solids and other organic residuals in the U.S. and is one of the largest national companies focused exclusivity on biosolids recycling, which has a market size of $2 billion. The Company was formed in 1986, under the name RPM Marketing, Inc. Synagro's corporate headquarters is currently located in Houston, Texas but is in the process of being transferred to White Marsh, Maryland. The Company also has offices in Lansdale, Pennsylvania, Rayne, Louisiana, and Watertown, Connecticut. Synagro Technologies and 29 affiliates sought Chapter 11 protection (Bankr. D. Del. Case no. 13-11041) on April 24, 2013. Synagro is being advised by the law firm of Skadden Arps Slate Meagher & Flom, along with financial adviser AlixPartners and investment bankers Evercore Partners. Kurtzman Carson & Consultants serves as notice and claims agent. Synagro was owned by The Carlyle Group at the time of the bankruptcy filing. SYNAGRO TECHNOLOGIES: Proposes $30MM of DIP Financing ----------------------------------------------------- Before filing for bankruptcy, Synagro Technologies, Inc., solicited offers for DIP financing from financial institutions. Only two groups -- (i) a potential lender and (ii) the majority of the holders of the existing first lien debt -- offered DIP financing on competitive terms. The Debtors ultimately selected that the proposal from Bank of America, N.A, on behalf of certain of the holders of the first lien debt of the Debtors, offered the Debtors an acceptable cost of financing, after taking into consideration the expected length of the cases prior to consummation of a sale of the Debtors' assets and the costs, time and distraction that would be associated with obtaining financing which required a non- consensual priming of the first lien lenders' liens. Accordingly, the Debtors seek approval to obtain DIP financing of $30 million from the first lien lenders and use cash collateral on these terms: * Upon interim approval of the DIP financing, BofA on behalf of the first lien lenders will provide in an aggregate principal amount of $15 million. * The DIP loans will be repaid in full on the date that is the earliest of (i) the date that is 270 days following the Closing Date, (ii) the date that is 35 days after the entry of the Interim Order if the Final Order has not been entered by the Bankruptcy Court on or before such date, (iii) the date that is 15 days after consummation of a sale of all or substantially all of the assets of STI pursuant to an asset sale under Section 363 of the Bankruptcy Code. * The DIP Facility requires the Debtors to waive the estate's 506(c) rights upon entry of the Final Order. * There will be a carve-out that will fund certain administrative expenses and professional fees following an event of default. * The DIP financing will be secured by priming liens that have limited scope. The First lien lenders have consented to the priming liens and the second lien lenders are deemed to consent to the priming liens pursuant to the intercreditor agreement. * Because their liens are primed, the first lien lenders and the second lenders would receive superpriority claims and liens junior only to the DIP lenders, cash interest payments, and reimbursement of expenses. As payment for services to be provided by BofA, STI, as borrower, will pay a fee to the DIP Agent. The Debtors seek approval to file the fee letter under seal as the document contains highly confidential and commercially sensitive information regarding Bank of America's business practices and it impacts future transactions in which BoA may participate. About Synagro Technologies Synagro Technologies, Inc., based in Houston, Texas, is the recycler of bio-solids and other organic residuals in the U.S. and is one of the largest national companies focused exclusivity on biosolids recycling, which has a market size of $2 billion. The Company was formed in 1986, under the name RPM Marketing, Inc. Synagro's corporate headquarters is currently located in Houston, Texas but is in the process of being transferred to White Marsh, Maryland. The Company also has offices in Lansdale, Pennsylvania, Rayne, Louisiana, and Watertown, Connecticut. Synagro Technologies and 29 affiliates sought Chapter 11 protection (Bankr. D. Del. Case no. 13-11041) on April 24, 2013. Synagro is being advised by the law firm of Skadden Arps Slate Meagher & Flom, along with financial adviser AlixPartners and investment bankers Evercore Partners. Kurtzman Carson & Consultants serves as notice and claims agent. Synagro was owned by The Carlyle Group at the time of the bankruptcy filing. SYNAGRO TECHNOLOGIES: Taps KCC as Claims and Noticing Agent ----------------------------------------------------------- Synagro Technologies, Inc., and its affiliates seek authority to employ Kurtzman Carson Consultants LLC as claim and noticing agent in the Chapter 11 cases. KCC will assume full responsibility for the distribution of notices and the maintenance, processing, and docketing of proofs of claim filed in the Chapter 11 cases. On account of its consulting services, KCC personnel will charge based on a 35% discounted rate: Position Hourly Rate -------- ----------- Clerical $26 to $39 Project Specialist $52 to $91 Technology/Programming Consultant $65 to $130 Consultant $81 to $130 Senior Consultant $146 to $179 Senior Managing Consultant $191 Weekend, holidays and overtime Waived Travel expenses and working meals Waived For its noticing services, KKC will charge $50 per 1,000 e-mails, and $0.10 per page for electronic noticing. For its claims administration services, KCC will charge $0.10 per creditor per month but is waiving the fee for its public website hosting services. Prior to the Petition Date, the Debtors paid KCC an initial retainer of $10,000. About Synagro Technologies Synagro Technologies, Inc., based in Houston, Texas, is the recycler of bio-solids and other organic residuals in the U.S. and is one of the largest national companies focused exclusivity on biosolids recycling, which has a market size of $2 billion. The Company was formed in 1986, under the name RPM Marketing, Inc. Synagro's corporate headquarters is currently located in Houston, Texas but is in the process of being transferred to White Marsh, Maryland. The Company also has offices in Lansdale, Pennsylvania, Rayne, Louisiana, and Watertown, Connecticut. Synagro Technologies and 29 affiliates sought Chapter 11 protection (Bankr. D. Del. Case no. 13-11041) on April 24, 2013. Synagro is being advised by the law firm of Skadden Arps Slate Meagher & Flom, along with financial adviser AlixPartners and investment bankers Evercore Partners. Kurtzman Carson & Consultants serves as notice and claims agent. Synagro was owned by The Carlyle Group at the time of the bankruptcy filing. TOREE DEL GRECO: Court Rules on Chapter 11 Trustee's Fees --------------------------------------------------------- Jeffrey Hutchinson, the Chapter 11 trustee for Luisa Hansen, dba Toree Del Greco, Inc., filed his second interim application. The Debtor objected to that application, contending that the fees sought exceed the cap imposed under 11 U.S.C. Section 326(a), because the Trustee improperly claimed the amount credit bid by secured lender as money disbursed to creditors. In a April 22, 2013 Memorandum available at http://is.gd/ziHcKd from Leagle.com, Bankruptcy Judge Thomas E. Carlson ruled that the Trustee's second interim application is allowed at this time in the amount of $41,382.81 -- the amount of the cap, excluding the $1.8 million note credit bid at the sale. The Trustee may supplement his application with evidence showing the amount Dr. Pappas paid to Chase to purchase the note. Luisa Hansen, dba Toree Del Greco, Inc., filed for Chapter 11 bankruptcy (Bankr. N.D. Cal. Case No. 09-31378) in 2009. TROPIC RANCH: Case Summary & 4 Unsecured Creditors -------------------------------------------------- Debtor: Tropic Ranch, Inc. 55 E. Long Lake Road Troy, MI 48085 Bankruptcy Case No.: 13-48107 Chapter 11 Petition Date: April 22, 2013 Court: United States Bankruptcy Court Eastern District of Michigan (Detroit) Judge: Thomas J. Tucker Debtor's Counsel: Morris B. Lefkowitz, Esq. LAW OFFICE OF MORRIS B. LEFKOWITZ 24100 Southfield Rd., Suite 203 Southfield, MI 48075 Tel: (248) 559-0180 E-mail: morris.lefkowitz@yahoo.com Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $1,000,001 to $10,000,000 A copy of the Company's list of its four largest unsecured creditors, filed together with the petition, is available for free at http://bankrupt.com/misc/mieb13-48107.pdf The petition was signed by Hanna Karcho, president. WACO TOWN SQUARE: Court Rules on Collateral Estoppel Issue ---------------------------------------------------------- Collateral estoppel does not establish whether the claims raised by NSJS Limited Partnership, in its suit currently pending in the District Court, 414th Judicial District, of McLennan County, Texas (Case No. 2010-4220-5) are derivative causes of action, belonging to the Estate of Debtors, Waco Town Square Partners, L.P. and Waco Town Square Partners II, L.P., said Bankruptcy Judge Marvin Isgur in an April 23, 2013 Memorandum Opinion available at http://is.gd/AjBbCGfrom Leagle.com. NSJS is a limited partner of WTSP II. Prior to the commencement of the bankruptcies, NSJS filed a state court suit against Michael Wray, David Wallace, Waco Town Square Management, II, LLC, WTSP II and Community Bank & Trust, Waco, Texas for, among other things, fraud, conversion, breach of contract, breach of fiduciary duty, and defalcation. The Debtors removed the State Court Litigation to the United States Bankruptcy Court for the Western District of Texas subsequent to filing bankruptcy. On February 16, 2012, the Bankruptcy Court remanded the suit to state court under based on mandatory abstention. The Court then denied the Debtors' request for reconsideration. On January 1, 2013, the Debtors filed their Motion to Hold NSJS Limited Partnership in Contempt for Violation of Confirmation Order and For Sanctions, arguing that on November 7, 2012, counsel for the Reorganized Debtor advised counsel for NSJS that since the Complaint had not been amended as required by the Confirmation Order, the State Court Litigation must be dismissed with prejudice. Counsel for the Reorganized Debtor further advised NSJS that if the suit was not dismissed, the Debtors would seek to hold NSJS in contempt of the Confirmation Order. On December 14, 2012, the Debtors' counsel received a copy of NSJS' Second Amended Petition filed in the State Court Litigation. The Debtors are no longer listed as a party in the State Court Litigation, but no party has been formally dismissed from the litigation. The Debtors seek a finding of contempt against NSJS because the Amended Complaint was filed more than six months after the date set forth in the confirmation order, and because it includes causes of action which have been barred by the Confirmation Order. NSJS filed its Response on February 21, 2013, arguing that Debtors are attempting to use the Motion for Sanctions to get a "second bite at the apple" regarding whether NSJS' claims in the State Court Litigation are derivative causes of action belonging to the Debtors. NSJS claims that the question of whether NSJS' claims are derivative causes of action is precluded by collateral estoppel because the issue was fully and fairly litigated and essential to the Western District Order Denying Motion for Reconsideration of Order to Remand. At the hearing on March 18, 2013, the Bankruptcy Court informed the parties that it was not inclined to hold NSJS in contempt, but asked the parties to brief the issue of whether collateral estoppel precluded a determination by the Bankruptcy Court of whether the claims asserted by NSJS in the State Court Litigation are derivative causes of action. Regardless of whether the Court finds NSJS to be in contempt, NSJS may still lose all of its claims if it failed to remove derivative claims as it was required to do pursuant to the Bankruptcy Court's May 20, 2012 Plan Confirmation Order. About Waco Town Square Partners Based in Sugar Land, Texas, Waco Town Square Partners, L.P., dba Austin Avenue Flats, filed for Chapter 11 bankruptcy (Bankr. S.D. Tex. Case No. 11-38928) on Oct. 21, 2011. Judge David R. Jones presides over the case. Edward L. Rothberg, Esq. -- rothberg@hooverslovacek.com -- at Hoover Slovacek LLP, served as the Debtor's counsel. In its petition, the Debtor estimated assets and debts of $1 million to $10 million. The petition was signed by David Wallace, manager and secretary. Waco Town Square Partners II LP filed a separate petition (Bankr. S.D. Tex. Case No. 11-38929) on the same day, listing $100,001 to $500,000 in assets and $1 million to $10 million in debts. SWB Waco SH, L.P. filed for Chapter 11 (Bankr. S.D. Tex. Case No. 10-38001) on Sept. 7, 2010. On May 20, 2012, the Bankruptcy Court entered Order Confirming Third Amended Joint Chapter 11 Plan of Reorganization of WTSP and WTSP II, As Modified on the Record at March 26, 2012 Hearing. WSP HOLDINGS: Posts $84.2MM 2012 Net Loss; Units in Loan Default ---------------------------------------------------------------- WSP Holdings Limited on April 25 reported unaudited financial results for the fourth quarter and full year ended December 31, 2012. "The fourth quarter of 2012 showed a decrease in total revenues from the third quarter of 2012, mainly due to a decrease in sales volume as well as average selling price of non-API products," commented Longhua Piao, the Chairman and Chief Executive Officer of WSP Holdings. "We will continue our marketing efforts to tap into new international markets amidst the current global economic uncertainties." WSP Holdings reported revenues of $131.4 million in the fourth quarter of 2012, compared to $141.3 million in the third quarter of 2012, primarily due to a decrease in revenues generated from export sales. Domestic sales and export sales accounted for 55.0% and 45.0%, respectively, of total revenues for the fourth quarter of 2012. On a quarter-over-quarter basis, domestic sales decreased primarily due to a 4.7% decrease in sales volume, partially offset by a 1.7% increase in average selling prices. Export sales decreased quarter-over-quarter primarily due to a 9.6% decrease in average selling prices and a 2.0% decreased in sales volume. On a year-over-year basis, domestic sales decreased primarily due to a 32.2% decrease in domestic sales volume and a 2.4% decrease in average selling prices. Export sales decreased year-over-year primarily due to a 24.2% decrease in average selling prices, partially offset by a 9.3% increase in sales volume. API and non-API product sales accounted for 77.5% and 13.3%, respectively, of total revenues in the fourth quarter of 2012. Higher quarter-over-quarter sales revenues from API product sales were primarily due to a 6.7% increase in sales volume. Non-API sales revenues decreased quarter-over-quarter due to a 20.7% decrease in sales volume and a 14.8% decrease in average selling prices. API sales revenues decreased year-over-year primarily due to a 13.6% decrease in sales volume and an 8.4% decrease in average selling prices. Non-API sales decreased year-over-year primarily due to a 20.8% decrease in sales volume and a 19.3% decrease in average selling prices. Gross margin in the fourth quarter of 2012 was 4.9%, compared to 5.5% in the third quarter of 2012 and 7.2% in the fourth quarter of 2011. Lower quarter-over-quarter and year-over-year gross margins were primarily due to decreases in average selling prices. Operating expenses in the fourth quarter of 2012 were $31.6 million, compared to $25.6 million in the third quarter of 2012 and $29.7 million in the fourth quarter of 2011. Selling and marketing expenses were $6.2 million, compared to $3.7 million in the third quarter of 2012 and $14.6 million in the fourth quarter of 2011. The year-over-year decrease in selling and marketing expenses was primarily due to a decrease in sales commission and sales activity levels associated with decreased sales volume. General and administrative expenses were $26.3 million, compared to $23.3 million in the third quarter of 2012 and $16.1 million in the fourth quarter of 2011. The quarter-over-quarter and year- over-year increase in general and administrative expenses were primarily due to increased bad debt provision in the fourth quarter of 2012. Loss from operations was $25.2 million in the fourth quarter of 2012, compared to loss from operations of $16.7 million in the fourth quarter of 2011 and $17.8 million in the third quarter of 2012. Net interest expense was $6.5 million in the fourth quarter of 2012, compared to $2.6 million in the fourth quarter of 2011 and $9.5 million in the third quarter of 2012. The year-over-year increase in net interest expense was attributable to lower interest expense in the fourth quarter of 2011 due to an increase in the capitalization of interest expense. The Company recorded an income tax benefit of $0.6 million in the fourth quarter of 2012, compared to $0.7 million in the fourth quarter of 2011 and $1.5 million in the third quarter of 2012. Net loss attributable to WSP Holdings was $29.1 million in the fourth quarter of 2012, compared to net loss attributable to WSP Holdings of $18.9 million in the fourth quarter of 2011 and $22.7 million in the third quarter of 2012. Basic and diluted loss per ADS were both $1.43 in the fourth quarter of 2012, compared to basic and diluted loss per ADS for both of $0.93 in the fourth quarter of 2011 and $1.11 in the third quarter of 2012. Full year 2012 Results Revenues for the full year 2012 were $561.3 million, a decrease of 18.2% from revenues of $686.1 million in the full year 2011. Gross profit was $24.5 million for the full year 2012, compared to gross profit of $48.5 million for the full year 2011. Gross margin was 4.4% for the full year 2012, compared to 7.1% for the full year 2011. Operating loss was $62.2 million for the full year 2012, compared to operating loss of $41.7 million for the full year 2011. Net loss attributable to WSP Holdings was $84.2 million for the full year 2012, compared to net loss attributable to WSP Holdings of $68.5 million for the full year 2011. Basic and diluted loss per ADS for both was $4.12 for the full year 2012, compared to basic and diluted loss per ADS for both of $3.35 in the full year 2011. Financial Condition As of December 31, 2012, the Company had cash and cash equivalents of $26.1 million, compared to $27.7 million as of December 31, 2011. Restricted cash totaled $206.8 million as of December 31, 2012, compared to $249.8 million as of December 31, 2011. As of December 31, 2012, the Company had short-term borrowings of $787.0 million and long-term borrowings of $15.9 million, compared to $773.5 million and $79.4 million, respectively, as of December 31, 2011. As of December 31, 2012, one of the Company's major operating subsidiaries had drawn down approximately RMB2.7 billion ($424.4 million) out of a total approved syndicated loan facility of RMB2.86 billion (approximately $455.0 million as of December 31, 2012) entered into with eight commercial banks in late August 2011. The subsidiary is subject to continued compliance with certain bank loan covenants, including maintaining certain financial ratios and thresholds at the end of a one-year special observation period and at the end of 2012. As of December 31, 2012, the subsidiary did not meet certain financial covenants at the end of 2012. Additionally, two other subsidiaries of the Company were also in breach of their financial covenants under certain project loans. If and when the Company goes private, the covenant that one of its subsidiaries has with the bank would be breached, unless a waiver from the bank is obtained. The Company is now in discussion with the bank regarding the waiver. As of December 31, 2012, the Company's short-term borrowings include loans not due within one year of $210.9 million that were reclassified as short-term borrowings due to technical breaches of covenants of these loans. The Company's lenders have not accelerated the repayment of their loans under these credit facilities. In the event that the Company is unable to reach an agreement with these lenders, the lenders may accelerate the repayment of the loans and the Company's ability to draw down under these credit facilities may be adversely affected. Accounts receivable and inventory totaled $217.0 million and $205.2 million, respectively, as of December 31, 2012, compared to $260.1 million and $242.2 million, respectively, as of December 31, 2011. As of December 31, 2012, total assets were $1,390.3 million, total liabilities were $1,237.9 million and total equity was $152.4 million. Capital expenditures incurred for the full year ended December 31, 2012 were $39.0 million and were funded mainly through the Company's operating cash flow and bank loans. The Company has almost completed its major capital expenditure projects and will continue to reevaluate and revise its capital expenditure plan based on the prevailing economic conditions and future expectations, as well as the availability of funding. Recent Events On February 21, 2013, the Company announced that it entered into an Agreement and Plan of Merger with WSP OCTG GROUP Ltd., a company owned by H.D.S. Investments LLC, and JM OCTG GROUP Ltd., a company with limited liability and a direct wholly-owned subsidiary of Parent. Subject to satisfaction or waiver of the closing conditions in the Merger Agreement, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation. Pursuant to the Merger Agreement, each of the Company's ordinary shares issued and outstanding immediately prior to the effective time of the Merger will be cancelled and cease to exist in exchange for the right to receive $0.32 without interest, and each ADS, which represents ten ordinary shares, will represent the right to surrender the ADS in exchange for $3.20 in cash without interest, except for (a) Shares held of record by Expert Master Holdings Limited, a company wholly-owned by Mr. Longhua Piao, the Company's Chairman and Chief Executive Officer, and UMW China Ventures (L) Ltd. ("UMW"), which will be contributed to Parent immediately prior to the Merger in exchange for equity interests of Parent, and (b) Shares owned by shareholders who have validly exercised and have not effectively withdrawn or lost their rights to dissent from the Merger under the Cayman Islands Companies Law, which will be cancelled for the right to payment of fair value of the Dissenting Shares in accordance with the Cayman Islands Companies Law. The Merger, which is currently expected to close during the second quarter of 2013, is subject to the authorization and approval of the Merger Agreement by an affirmative vote of shareholders representing at least two-thirds of the Shares present and voting in person or by proxy as a single class at a meeting of the Company's shareholders, as well as certain other customary closing conditions. EMH and UMW collectively beneficially own sufficient Shares to approve the Merger Agreement and the Merger and have agreed to vote in favor of such approval. If completed, the Merger will result in the Company becoming a privately-held company and its ADSs will no longer be listed on the NYSE. Operational Environment and Business Outlook After falling from the $100 per barrel mark in mid-February 2013 amid concerns over sequestration cuts in the United States, by late March crude oil prices approached previous highs but subsequently fell below $90 per barrel in mid-April. Crude oil prices are expected to continue fluctuating due to the ongoing European debt crisis and heightened global economic uncertainty. On the international front, WSP Holdings continues to pursue new opportunities and broaden its customer base in South America, Russia, the Middle East, Central Asia and Africa and focus on sales of non-API premium connections, which provide opportunities for sales growth. On the domestic front, WSP Holdings continues to develop and launch new series of non-API products for commercial use and focus mainly on customers in areas such as Xinjiang Autonomous Region, Sichuan Province and Shaanxi Province, which provide opportunities for sales of higher-margin, non-API products. About WSP Holdings Limited Based in Xinqu, Wuxi, Jiangsu Province, People's Republic of China, WSP Holdings Limited is a Chinese manufacturer of seamless Oil Country Tubular Goods ("OCTG)", including casing, tubing and drill pipes used for oil and natural gas exploration, drilling and extraction. OCTG refers to pipes and other tubular products used in the exploration, drilling and extraction of oil, gas and other hydrocarbon products. WSP Holdings Limited reported a net loss of $76.80 million on $686.13 million of revenues for 2011, compared with a net loss of $132.75 million on $470.47 million of revenues for 2010. The Company's balance sheet at Dec. 31, 2011, showed $1.571 billion in total assets, $1.340 billion in total liabilities, and total equity of $231.38 million. Going Concern Doubt MaloneBailey LLP, in Houston, Texas, expressed substantial doubt about WSP Holdings Limited's ability to continue as a going concern, following the Company's results for the fiscal year ended Dec. 31, 2011. The independent auditors said: "As discussed in Note 2(a) to the consolidated financial statements, the fact that the Company suffered significant operating loss and had working capital deficiency while a significant amount of short-term borrowings is required to be refinanced raises substantial doubt about the Company's ability to continue as a going concern." * Capital One Accused of Understating Loan Losses ------------------------------------------------- Ben Protess, writing for The New York Times' DealBook, reported that federal regulators on Wednesday accused Capital One and two of its executives of understating millions of dollars in auto loan losses suffered during the financial crisis. According to the DealBook report, the case, which the Securities and Exchange Commission agreed to settle with Capital One and the executives, illustrated a common financial misdeed during the crisis. As losses mounted in 2007 and 2008, some Wall Street firms covered up the woes from the public, prompting a wave of federal actions against Countrywide Financial and other lending giants. In the case of Capital One's auto-lending business, according to the S.E.C., the bank "materially understated" its loan loss expenses and "failed to maintain effective internal controls," the DealBook related. The S.E.C. contended that Peter A. Schnall, who was Capital One's chief risk officer at the time, and David A. LaGassa, a lower-level executive, failed to prevent the improper statements. "Accurate financial reporting is a fundamental obligation for any public company, particularly a bank's accounting for its provision for loan losses during a time of severe financial distress," George Canellos, the co-chief of the S.E.C.'s enforcement unit, said in a statement, the DealBook cited. "Capital One failed in this responsibility." But the SEC could face questions over whether its penalties fit the crime, according to the report. Capital One, one of the nation's biggest banks, paid $3.5 million to settle the case, a minuscule amount for a company of its size. And like most banks accused of wrongdoing during the 2008 crisis, Capital One was not required to admit or deny wrongdoing. * Report: IRS Paid Billions in Improper Refunds ----------------------------------------------- Josh Hicks, writing for The Washington Post, reported that the Internal Revenue Service issued more than $11 billion in faulty refunds through its Earned Income Tax Credit last year, according to an inspector general's report released this week. According to the report, the Treasury Department's deputy inspector general, Michael McKenney, found that the IRS has failed for the past two years to comply with a federal law requiring agencies to reduce payment errors to a rate of less than 10 percent. President Barack Obama signed the statute in 2010. The Post related that the IRS estimates that at least 21 percent of its EITC payments in 2012 were faulty. That rate represented a decline compared with the previous nine years, but the total value for improper payments increased about 22 percent over that same period to at least $11.6 billion in 2012, according to the inspector general's report. The Earned Income Tax Credit awards tax refunds to low-income working individuals and families, especially those with children, the Post said. The report said the IRS uses unreliable processes to assess the risk of improper payments through the program. "Ineffective risk assessment processes can limit the government's ability to protect taxpayer dollars from waste, fraud and abuse," J. Russell George, the Treasury Department's inspector general for tax administration, told the Post. "In these difficult economic times, all efforts must be made to prevent improper payments in every program." The IRS said in a statement Tuesday that faulty payments result from a variety of causes, including the complex nature of the law, the shifting EITC-eligible population and the nature of the credit, the Post further related. * Hazy Future for Thriving SEC Whistle-Blower Effort ---------------------------------------------------- Ben Protess and Nathaniel Popper, writing for The New York Times' DealBook, reported that for years, Wall Street's top enforcers lacked the firepower to thwart financial misdeeds like Bernard L. Madoff's Ponzi scheme. But now that the Securities and Exchange Commission has turned to sophisticated statistical tools and financial experts, one of the most effective weapons in its new enforcement arsenal may be a more traditional one: whistle- blowers. Already, a whistle-blower program has bolstered an investigation into a trading blowup that nearly toppled Knight Capital, the largest stock trading firm on Wall Street, according to lawyers briefed on the case, the DealBook related. With help from another whistle-blower, the lawyers said, the government discovered that Oppenheimer & Company had overstated the performance of a private equity fund, the DealBook further related. And after pursuing a Texas Ponzi scheme for more than a year, a cold trail heated up in 2010 when a tipster emerged. The breakthroughs -- previously undisclosed -- show the promise of the agency's 20-month-old whistle-blower program. Yet, the program faces challenges on many fronts, the DealBook pointed out. The DealBook said some Wall Street firms are urging employees to report wrongdoing internally before running to the government, and one hedge fund, Paradigm Capital Management, was accused in a lawsuit of punishing an employee who had cooperated with the S.E.C., according to court and internal documents. Another financial firm, the documents show, pressured an employee to forfeit potential "bounties or awards" -- a possible violation of S.E.C. rules, the DealBook added. Some lawyers also complain that the agency takes weeks or months before it responds to a backlog of tips, while others question whether the S.E.C. overstates the power of the whistle-blower program, the DealBook further related. * Fitch Says U.S. High Yield Default Rate Slips to 1.6% in March ---------------------------------------------------------------- The U.S. high yield trailing 12-month default rate slipped to 1.6% in March, down from 1.9% at the end of 2012, according to a new report by Fitch Ratings. However, activity has been brisk in April, and Fitch projects that the rate will move back up to roughly 2% in the second quarter. Eight issuers defaulted on $3.4 billion in bonds in the first three months of this year compared with 12 issuers and $5.2 billion in first-quarter 2012. April has thus far added seven issuers and $2.8 billion to the year's tally (versus two and $0.5 billion last year). Public sources state that Energy Future Holdings (EFH) is considering a prepackaged bankruptcy. Such an event would propel the default rate to an estimated 3.5%. While EFH's troubles are well documented, the rate would nonetheless hit a three-year high. Shifting perceptions around default conditions could affect risk receptivity in an otherwise booming high yield market. Sectors that have produced multiple defaults this year include broadcasting and media, and gaming, lodging and restaurants. There has also been a strong representation of secured bonds in the default mix. Secured bonds comprise 72% of the estimated $6.2 billion in defaults including April activity. There is currently $262 billion of these issues outstanding (or 22% of high yield market volume). Issuance soared post-crisis to refinance maturing loans. Of this total, a revealing 39% is rated 'B-' or lower versus 31% for unsecured/subordinated issues. The rating mix data suggests that the average credit quality of companies carrying secured bonds is poor, which is supported by the concentration of secured bonds in this year's defaults. The weighted average recovery rate on defaults through March was 73.3% of par. This was mostly due to above-par recovery rates on EFH's senior secured distressed debt exchanges completed in January. Excluding EFH, the average recovery was a more moderate but above average 48.4%. * Moody's Notes Continued Rise of Dividend Payouts in Tech Sector ----------------------------------------------------------------- More US technology companies are initiating dividends, and increasing the size of existing ones, Moody's Investors Service says in a new report. Moody's-rated technology companies are expected to pay out $44.4 billion to shareholders this year, up 35% from last year. And after its recently announced 15% dividend increase, Apple will pay out more than $11 billion in 2013, the most of any company in the US non-financial sector. "The top 10 US tech companies will account for 84% of the sector's dividends this year, with Apple, Microsoft and Intel expected to comprise 54% of the total," says Senior Vice President Richard Lane in "US Technology Industry: Dividend Payments to Continue Climbing, but Payout Ratios to Remain Low." Apple will account for 48% of the sector's dividend growth, while Microsoft and Cisco combined will account for another 16%. In addition, more Moody's-rated technology companies are paying dividends. The number had increased to 31 at the end of 2012, from 29 in 2011 and 20 in 2007. "We believe the increasing number of dividend-paying tech companies reflects the strength of these firms' business models, management confidence in cash flow generation prospects and, in some cases, pressure to return capital to shareholders," Lane says. Rising dividend payments won't affect companies' credit ratings, Moody's notes. Although technology firms have been implementing and raising dividends slightly ahead of growth in cash flow generation, dividend payments relative to cash flow average a low 20%, compared with 50% for non-tech industries. And Moody's expects that most dividend-paying tech companies will keep payout ratios below 30% due to tax-inefficient access to overseas liquidity, operational requirements and company-specific strategic considerations. Many technology firms keep the bulk of their cash overseas and if this were used to pay common dividends, they would be subject to US repatriation taxes. Overall, US tech companies are well positioned to support dividend payments in the event of economic downturn, Lane says. "Stable cash flows and strong liquidity should enable the dividend-payers to weather potential financial or geopolitical shocks to the global economy." * Moody's Says Sequestration's Impact on Local Gov'ts. Limited -------------------------------------------------------------- Only a few, isolated local governments are likely to experience significant negative pressure on their finances because of the ongoing federal sequestration, says Moody's Investors Service in the report "The Sequester Series: Limited Impacts on Local Governments." Those vulnerable are in regions with economies heavily dependent on defense spending or health care. "Sequestration will strain the US economy to some extent, but any material impact on regional economies will be limited to areas with substantial dependence on defense spending or health care," says Rachel Cortez, a Moody's Vice President -- Senior Analyst. "In these regions, local governments relying on revenues from income taxes and sales taxes may face some budget pressures as layoffs, furloughs, and hiring freezes reduce disposable income and consumer spending." Direct government funding makes up only 5% of the general revenue of local governments taken together. Therefore the impact of the sequestration on local government budgets is mainly through its drag on the economy, which reduces local government income tax and sales tax revenues because of declines in disposable income and consumer spending. These tax sources make up about 10% of local government revenues. Defense spending cuts will moderately pressure several regional economies, as the sequestration requires a 7.8% cut in discretionary defense spending in federal fiscal year 2013. Areas with relatively high dependence on federal employment include the Georgia MSAs of Warner Robins and Hinesville-Fort Stewart. Areas with large exposures to federal procurement contracts include Oshkosh-Neenah WI, Idaho Falls, ID, and Amarillo, TX. Sequestration cuts also include a 2% reduction in Medicare reimbursement to hospitals and other healthcare providers. As hospitals cope with tighter operating margins, areas with significant healthcare employment may see some economic consequences. Such areas include Rochester, MN, McAllen-Edinburg- Mission, TX, and Brownsville-Harlingen, TX. * Regulators to Restrict Big Banks' Payday Lending -------------------------------------------------- Jessica Silver-Greenberg, writing for The New York Times' DealBook, reported that federal regulators are poised to crack down on payday loans -- the short-term, high-cost credit that can mire borrowers in debt. But instead of taking aim at storefront payday lenders, the banking authorities are focusing on the small operations' big bank rivals, like Wells Fargo and U.S. Bank, according to several people briefed on the matter. According to the DealBook report, a handful of banks offer the loans tied to checking accounts, with the understanding that the lender can automatically withdraw the loan amount, plus the origination fee, when it is due. The DealBook related that regulators from the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation are expected to clamp down on the loans, which carry interest rates that can soar above 300 percent, by the end of the week, these people said. The F.D.I.C. and the comptroller's office declined to comment, the DealBook noted. The regulators are expected to impose more stringent requirements on the loans, according to the DealBook. Before making a loan, for example, banks will have to assess a consumer's ability to repay the money. * Too-Big-to-Fail Bill Seen as Fix for Dodd-Frank Act's Flaws ------------------------------------------------------------- Cheyenne Hopkins, writing for Bloomberg News, reported that "too- big-to-fail" legislation unveiled in Washington is needed to rein in the biggest U.S. banks because the Dodd-Frank Act has failed to guard taxpayers against future bailouts, the bill's sponsors said. According to the Bloomberg report, the four largest banks -- JPMorgan Chase & Co. (JPM), Bank of America Corp., Citigroup Inc. and Wells Fargo & Co -- "are nearly $2 trillion larger than they were" before getting U.S. aid to help them weather the 2008 credit crisis, Senator Sherrod Brown said in a news conference. "If big banks want to continue risky practices, they should do so with their own assets," Brown, an Ohio Democrat, told Bloomberg. "Our bill will ensure a level playing field for all financial institutions by ending the subsidy for Wall Street megabanks and requiring banks to have adequate capital." Bloomberg related that Brown and Republican Senator David Vitter of Louisiana, whose plan is opposed by key lawmakers, are proposing a 15 percent capital requirement for so-called megabanks as a way to reduce risk and remove the perception that they would get bailouts in a crisis. Mid-size and regional banks, those between $500 billion and $50 billion in assets, would need to have 8 percent capital relative to assets. "It is our intent to have much more protection against a crisis and against a taxpayer bailout in a crisis, and it is our intent to level the playing field and take away a government policy subsidy, if you will, that exists in the market now favoring size," Vitter said during a roundtable meeting at the National Press Club on April 23, Bloomberg further related. * Watchdog: Banks Are Still Too Intertwined ------------------------------------------- Michael R. Crittenden, writing for The Wall Street Journal, reported that a government watchdog warned that regulators need to be more aggressive in reducing exposure among major Wall Street firms if they want to eliminate concerns about "too-big-to-fail" banks. According to WSJ, Christy Romero, special inspector general for the $700 billion Troubled Asset Relief Program, said in a report that not enough has been done by government overseers to address the interconnected nature of the largest and most complex financial companies. The ties among major Wall Street firms that posed a challenge at the height of the 2008 financial crisis remain a problem, she said. The report also took aim at the Treasury Department's efforts to provide assistance to troubled homeowners, which have fallen far short of initial expectations, WSJ related. The report called it "alarming" that 46% of borrowers who received a mortgage modification through the government's Home Affordable Modification Program in the third quarter of 2009 wound up re- defaulting on their loans, WSJ further related. A Treasury spokeswoman said those who received help "were among those who were struggling the most," and that borrowers aided by the modification program have fared better than those receiving private-sector loan modifications, WSJ added. Federal bank-regulator data show a default rate of about 14% for government modifications made in mid-2011, compared with a rate of about 31% for private-sector loan assistance in that same period, WSJ pointed out. * K&L Gates Adds 2 Partners From Jackson Walker, Haynes ------------------------------------------------------- The Houston office of global law firm K&L Gates LLP welcomes Bruce A. Blefeld and Trey A. Monsour as partners in the firm's antitrust and restructuring & bankruptcy practices, respectively. Blefeld joins K&L Gates from Jackson Walker L.L.P., while Monsour joins from Haynes and Boone, LLP. Blefeld advises health care providers, pharmaceutical companies, energy companies, and joint ventures on a variety of antitrust matters. He also represents clients in ERISA cases involving putative class action claims and in connection with complex commercial litigation matters concerning breach of contract, fraud, and tortious interference as well as patent infringement claims arising out of domestic and international transactions. Recently, Blefeld advised a global health care device and supply company in a $1 billion antitrust suit; defended the largest health group purchasing organization in a $600 million antitrust matter; and was part of a team that prevented a specialty chemical company from terminating a $6.5 billion purchase agreement. He also was among a trial team that represented several international insurers in an $850 million claim arising from the Exxon Valdez oil spill, one of the largest insurance coverage cases ever tried. With more than two decades of experience representing lenders, creditors, investment funds, debtors, committees, trustees, and directors both in pre-filing workouts and bankruptcy cases, Monsour brings to the firm a strong Texas presence in business restructurings and commercial bankruptcies. He advises clients in the energy, retail, restaurant, supplier, and manufacturing sectors. Monsour is national bankruptcy counsel to one of the Fortune Global 500 Top Companies as well as a court-appointed mediator in bankruptcy disputes. Additionally, he has served as on the boards of several not-for-profit organizations, including the Children's Advocacy Center. "With the addition of these two outstanding lawyers, we are pleased to grow our litigation and bankruptcy capabilities in this strategic market for our firm," said Eugene C. Pridgen, K&L Gates' Managing Partner, U.S. K&L Gates opened its Houston office in February with the hiring of corporate partner Charles Strauss, and has since added Steven Sparling as an energy partner in both the firm's Houston and Washington, D.C., offices and Arthur Howard as a corporate/M&A partner. K&L Gates practices out of 48 fully integrated offices located in the United States, Asia, Australia, Europe, the Middle East and South America and represents leading global corporations, growth and middle-market companies, capital markets participants and entrepreneurs in every major industry group as well as public sector entities, educational institutions, philanthropic organizations and individuals. * LPS March-End Data Shows Continued Delinquency Rate Decline ------------------------------------------------------------- Lender Processing Services, Inc. reports the following "first look" at March 2013 month-end mortgage performance statistics derived from its loan-level database representing approximately 70 percent of the overall market. Total U.S. loan delinquency rate (loans 30 or more days past due, but not in foreclosure): 6.59% Month-over-month change in delinquency rate: -3.13% Year-over-year change in delinquency rate: -3.03% Total U.S. foreclosure pre-sale inventory rate: 3.37% Month-over-month change in foreclosure presale inventory rate: -0.41% Year-over-year change in foreclosure presale inventory rate: -19.61% Number of properties that are 30 or more days past due, but not in foreclosure: (A) 3,308,000 Number of properties that are 90 or more days delinquent, but not in foreclosure: 1,466,000 Number of properties in foreclosure pre-sale inventory: (B) 1,689,000 Number of properties that are 30 or more days delinquent or in foreclosure: (A+B) 4,997,000 States with highest percentage of non-current* loans: FL, NJ, MS, NV, NY States with the lowest percentage of non-current* loans: MT, AK, WY, SD, ND *Non-current totals combine foreclosures and delinquencies as a percent of active loans in that state. Notes: (1) Totals are extrapolated based on LPS Applied Analytics' loan-level database of mortgage assets. (2) All whole numbers are rounded to the nearest thousand. The company will provide a more in-depth review of this data in its monthly Mortgage Monitor report, which includes an analysis of data supplemented by in-depth charts and graphs that reflect trend and point-in-time observations. About Lender Processing Services Lender Processing Services is a provider of integrated technology, data and analytics to the mortgage and real estate industries, * BOOK REVIEW: George Eastman: Founder of Kodak and the Photography Business ------------------------------------------------------- Author: Carl W. Ackerman Publisher: Beard Books Softcover: 522 Pages List Price: US$34.95 Review by Gail Owens Hoelscher George Eastman was a Bill Gates of his time. This biography of Eastman (1854-1932) provides a fascinating look at the inventions, management style, interests, causes, and philanthropies of one of America's finest scientistentrepreneurs. Eastman's inventions transformed photography into a relatively inexpensive and enormously popular leisure activity. His company, Eastman Kodak, was one of the first U.S. firms to mass-produce a standardized product. Along with Thomas Edison, he ushered in the age of cinematography. Eastman was born in Waterville, New York. At the age of 23, while working as a bank clerk, Eastman bought a camera and set in motion a revolution in photography. At the time, photographers themselves mixed chemicals to make light-sensitive emulsions and covered glass plates (called "wet plates") with the emulsions, taking photographs before the emulsions dried. It was an awkward, messy and time-sensitive undertaking. Eastman 274 developed a process using dry plates and in 1884 patented a machine to produce coated dry plates. He began selling photographic plates made using his machines, as well as leasing his patent to foreign manufacturers. With the goal of reducing the size and weight of photographic equipment, Eastman then began investigating possibilities for a flexible firm. He and William E. Walker developed the first such film, cut in narrow strips and wound on a roller device patented by Eastman. The Eastman Dry Plate and Film Co. began producing the film commercially in 1885. In 1888, Eastman patented the hand-held Kodak camera, designed specifically for roll film and initially priced at $25. (He made up the word "Kodak" using the first letter of his mother's maiden name, Kilbourne.) In 1889, Eastman began working with Thomas Edison, inventor of the motion picture camera. Edison's increasingly sophisticated models required a stronger, more flexible transparent film, which Eastman was able to deliver. He founded Eastman Kodak Co., in 1892 and began mass-producing a range of photographic equipment. Eastman was an astute businessman. He dealt shrewdly with competitors and sometimes fell out with former collaborators. Indeed, some of them filed and won patent infringement lawsuits against him. He was tireless in his inventing and entrepreneurial endeavors. In the early days, he often slept in a hammock at the factory and cooked his own food there. His mother regularly showed up and insisted that he go home for a good meal and full night's sleep! Eastman demanded much of his employees, but no more than de demanded of himself. "An organization," he said, "cannot be sound unless its spirit is. That is the lesson the man on top must learn. He must be a man of vision and progress who can understand that one can muddle along on a basis in which the human factor takes no part, but eventually there comes a fall." This book draws on the contents of 100,000 letters to and from Eastman's friends, family, investors, competitors, employees, and fellow inventors, along with Eastman's records and notes on his various inventions. The result is a meticulously detailed account of Eastman's myriad interests and hands-on management style, as well as the evolution of photography and a major 20th century corporation. ********* 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., Washington, D.C., USA. Jhonas Dampog, Marites Claro, Joy Agravante, Rousel Elaine Tumanda, Howard C. Tolentino, Joseph Medel C. Martirez, Carmel Paderog, Meriam Fernandez, Ronald C. Sy, Joel Anthony G. Lopez, Cecil R. Villacampa, Sheryl Joy P. Olano, Ivy B. Magdadaro, Carlo Fernandez, Christopher G. Patalinghug, and Peter A. Chapman, Editors. Copyright 2013. 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 $975 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 Peter A. Chapman at 215-945-7000 or Nina Novak at 202-241-8200. *** End of Transmission ***