================================================================= INTEGRATED ELECTRICAL BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2006 (ISSN XXXX-XXXX) February 16, 2006 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 215-945-7000 FAX 215-945-7001 ----------------------------------------------------------------- INTEGRATED ELECTRICAL BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 572 Fernwood Lane, Fairless Hills, Pennsylvania 19030, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. New issues are prepared by Karen F. Garcia, Christopher G. Patalinghug, Frauline S. Abangan and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Any re-mailing of INTEGRATED ELECTRICAL BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO INTEGRATED ELECTRICAL BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF INTEGRATED ELECTRICAL [00002] INTEGRATED ELECTRICAL'S BALANCE SHEET AS OF DEC. 31, 2005 [00003] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING [00004] INTEGRATED ELECTRICAL'S CHAPTER 11 DATABASE [00005] LIST OF DEBTORS' 50 LARGEST UNSECURED CREDITORS [00006] LIST OF DEBTORS' LARGEST EQUITY SECURITY HOLDERS [00007] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES [00008] U.S. TRUSTEE APPOINTS UNSECURED CREDITORS COMMITTEE [00009] DISCLOSURE STATEMENT HEARING SCHEDULED FOR MARCH 10, 2006 [00010] FIRST MEETING OF CREDITORS SCHEDULED FOR MARCH 14, 2006 [00011] S&P LOWERS INTEGRATED ELECTRICAL SERVICES RATINGS TO 'D' KEY DATE CALENDAR ----------------- 02/14/06 Voluntary Petition Date 03/01/06 Deadline to File Schedules of Assets & Liabilities 03/01/06 Deadline to File Statements of Financial Affairs 03/01/06 Deadline to File Lists of Leases and Contracts 03/10/06 Disclosure Statement Hearing 03/14/06 First Meeting of Creditors under 11 USC Sec. 341 03/16/06 Deadline to Provide Utilities With Adequate Assurance 05/15/06 Deadline to remove actions under FRBP 9027 06/14/06 Deadline to make decisions about lease depositions 06/14/06 Expiration of Exclusive Plan Proposal Period 08/13/06 Expiration of Exclusive Solicitation Period 02/14/08 Deadline to Commence Avoidance Actions Bar Date for filing Proofs of Claim ----------------------------------------------------------------- [00000] HOW TO SUBSCRIBE TO INTEGRATED ELECTRICAL BANKRUPTCY NEWS ----------------------------------------------------------------- INTEGRATED ELECTRICAL BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. 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Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- (Distribution to multiple professionals at the same firm is provided at no additional cost.) INTEGRATED ELECTRICAL BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' chapter 11 proceedings. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of INTEGRATED ELECTRICAL BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF INTEGRATED ELECTRICAL ----------------------------------------------------------------- INTEGRATED ELECTRICAL SERVICES, INC. 1800 West Loop South, Suite 500 Houston, Texas 77027 Tel: (713) 860-1500 http://www.ielectric.com/ Integrated Electrical Services, Inc., provides electrical services in the United States, focusing primarily on competitive bid design and building, and maintaining and servicing of electrical data communications and utilities systems for commercial, industrial and residential customers. The Company provides services to a diverse customer base, including general contractors, property managers, developers, corporations, government agencies, municipalities, and homeowners. The Company employs 8,900 people. For the fiscal year ended September 30, 2005, Integrated Electrical's gross revenues reached $1.1 billion. Sanford R. Edlein, IES' chief restructuring officer, relates that the Company is what is commonly referred to as a business "roll- up". It was incorporated in 1997. It expanded its operations by acquiring other electrical contracting companies. IES now has 34 operating units. Since 2003, IES has continued to focus internally on integrating its information systems and establishing a regionally based management structure to enhance operating controls at all levels of the organization, as well as integrating a consolidated procurement program and structure to manage customers and vendors on a national basis, Mr. Edlein relates. IES, at its corporate headquarters in Houston, is responsible for a significant portion of the Company's overhead and centralized administrative functions, including providing corporate staff, managing insurance programs, performing all SEC reporting functions, managing network services, and performing many other administrative functions. Road to Bankruptcy Like so many business roll-ups, Mr. Edlein says, the Company suffers in part from certain operational difficulties. "The underlying problem, however, is a financial structure that simply places too much debt on the [Company's] operations." Mr. Edlein relates that most of IES' contracts require surety bonds. In mid-2004, given the change in the surety market and the Company's operating performance, Federal Insurance Company, the Company's primary surety provider, began restricting the IES' bonding capacity. According to Mr. Edlein, this restriction in bonding capacity limited IES' ability to bid on and retain higher margin jobs and has significantly affected revenues. IES' specific financial and operational difficulties have been further complicated by a downturn in commercial construction, which has been depressed since 2001, Mr. Edlein adds. Over the past year, IES has worked diligently to solve its financial and operational difficulties. The Company and its affiliates have worked to divest themselves of certain commercial operations, including some that were not as profitable as retained operations and some that were heavily dependent on bonding, either through asset sales or by shutting down operations. During fiscal year 2005, IES sold 13 units and closed two others. Negotiations With Noteholders In November 2005, IES commenced negotiations with some holders of approximately $173 million in 9-3/8% senior subordinated notes due 2009 in an effort to formulate a consensual restructuring. On February 13, 2006, the Company and the members of the Ad Hoc Committee entered into a Plan Support Agreement, which provides for IES' financial restructuring to be effectuated through a pre- arranged Chapter 11 plan of reorganization for which certain holders of approximately $50 million in 6.5% senior convertible notes due 2014 have agreed to support and vote. The Supporting Senior Subordinated Noteholders are: Principal Amount of Notes ------------------------- Tontine Capital Partners, L.P. $65,822,000 Southpoint Capital Advisors L.P. $24,800,000 Fidelity Management & Research Co. $12,416,000 Flagg Street Capital LLC $3,627,000 A full-text copy of the Plan Support and Lock-Up Agreement is available for free at: http://www.sec.gov/Archives/edgar/data/1048268/000095012906001537/h33084exv10w2.htm ----------------------------------------------------------------- [00002] INTEGRATED ELECTRICAL'S BALANCE SHEET AS OF DEC. 31, 2005 ----------------------------------------------------------------- INTEGRATED ELECTRICAL SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET As of December 31, 2005 ASSETS CURRENT ASSETS: Cash and cash equivalents $24,879,000 Restricted cash 19,090,000 Accounts receivable: Trade, net of allowance 177,252,000 Retainage 41,883,000 Costs and estimated earnings in excess of billings on uncompleted contracts 23,482,000 Inventories 23,300,000 Prepaid expenses and other current assets 26,403,000 Assets held for sale associated with discontinued operations 262,000 -------------- Total current assets $336,551,000 -------------- PROPERTY AND EQUIPMENT, net 23,708,000 GOODWILL 24,343,000 OTHER NON-CURRENT ASSETS 15,601,000 -------------- Total assets $400,203,000 ============== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $26,000 Accounts payable and accrued expenses 114,084,000 Billings in excess of costs and estimated earnings on uncompleted contracts 32,053,000 Liabilities related to assets held for sale associated with discontinued operations 51,000 Senior convertible notes, net 50,711,000 Senior subordinated notes, net 173,115,000 -------------- Total current liabilities $370,040,000 -------------- LONG-TERM DEBT, net of current maturities 139,000 OTHER NON-CURRENT LIABILITIES 15,522,000 -------------- Total liabilities $385,701,000 -------------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock - Common stock $390,000 Restricted voting common stock 26,000 Treasury stock, at cost (12,544,000) Unearned restricted stock - Additional paid-in capital 429,776,000 Retained deficit (403,146,000) -------------- Total stockholders' equity $14,502,000 -------------- Total liabilities and stockholders' equity $400,203,000 ============== ----------------------------------------------------------------- [00003] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING ----------------------------------------------------------------- Integrated Electrical Services Reaches Consensual Restructuring Agreement With Senior Subordinated Noteholders, Arranges DIP Financing, Obtains Dismissal of Shareholder Derivative Suit, and Commences Pre-Arranged Chapter 11 HOUSTON, Texas -- February 14, 2006 -- Integrated Electrical Services, Inc. (OTC Pink Sheets: IESR) today announced that it and all of its domestic subsidiaries have filed for Chapter 11 reorganization in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. The case was filed pursuant to an agreement with institutions that hold approximately 61% of the company's approximately $173 million outstanding, 9 3/8% senior subordinated notes due 2009 to support a consensual financial restructuring of the company through a pre-arranged chapter 11 plan of reorganization that was also filed with the Bankruptcy Court today, together with a disclosure statement. Based on this agreement, the company believes it will ultimately receive the support of the requisite body of holders of the senior subordinated notes to implement the restructuring contemplated by its Chapter 11 plan. The 61% holders include all three members of the ad hoc committee, formed to negotiate a transaction with IES. The company has requested an expedited hearing schedule from the Court to approve the disclosure statement and confirm the plan of reorganization. The company expects to continue normal operations throughout the restructuring process. All services provided to customers and payments to vendors are expected to continue on a "business as usual" basis. Based on the high degree of support for the pre- arranged plan from the holders of its senior subordinated notes, the company believes that it will complete its restructuring quickly. "After working with several of our creditor groups over the last several months, we are pleased to move to the next stage of our restructuring. During that time, we have made the necessary preparations to make sure that our restructuring does not interfere with the services we provide to our customers," announced Byron Snyder, IES' chairman, president and chief executive officer. "The economic terms of the proposed plan of reorganization are unchanged from the previously announced agreement in principle with the ad hoc committee, although the financial restructuring will be accomplished through a pre-arranged chapter 11 plan instead of the previously discussed prepackaged plan of reorganization. This will allow earlier access to the $80 million debtor-in-possession financing facility that we have successfully negotiated, increasing our liquidity. It will also give us the ability to provide more assurance and protection to our vendors and customers and to obtain additional surety bonding." Debtor-in-Possession Financing In connection with the commencement of its bankruptcy case, IES is seeking Bankruptcy Court approval for its $80 million debtor-in-possession financing ("DIP") facility with Bank of America. Subject to the approval of the Bankruptcy Court, the DIP facility will be comprised of an $80 million revolving credit facility, with a $72 million sub-limit for letters of credit, and will supplement the company's existing liquidity and allow IES to meet its obligations related to the operation of its businesses, fulfill its payroll obligations and pay vendors for goods and services. The company has also reached an agreement with its primary surety bond provider, Federal Insurance Company, to obtain additional surety bonding during the Chapter 11 cases, subject to Bankruptcy Court approval. "IES' operating cash, together with the amounts obtained under its DIP facility and its additional bonding capacity, will enable it to operate its business and emerge from bankruptcy stronger, more streamlined, and in a better position to achieve its business goals," said Snyder. "I am deeply appreciative of the continued support of Bank of America and Federal Insurance Company." The IES Plan Under IES' proposed plan of reorganization: -- the holders of the company's senior convertible notes will be refinanced from the proceeds of a term exit facility; -- the holders of the company's senior subordinated notes will receive, in exchange for their total claims (including principal and accrued and unpaid interest), an aggregate of approximately 82% of the fully diluted new common stock of the reorganized IES (before giving effect to a new employee stock option plan); -- the company's existing common stockholders will receive, in exchange for their existing shares, an aggregate of approximately 15% of the fully diluted new common stock of the reorganized IES (before giving effect to a new employee stock option plan); -- the company's management and employees will receive grants of an aggregate of approximately 3% of the fully diluted new common stock of the reorganized IES (before giving effect to a new employee stock option plan), in the form of restricted stock grants that will vest over time; and -- the company's other obligations under trade credit extended to the company by its vendors and suppliers will be unimpaired and will all be paid in full, on regular terms, whether such obligations relate to pre- or post- filing periods. On the effective date of a plan of reorganization, the sole equity interests in reorganized IES will consist of new common stock issued to the holders of the senior subordinated notes and the existing holders of common stock, and the restricted stock grants that can be earned over time to be issued to management and employees. In addition, a new employee stock option plan will be adopted on the effective date that will provide for the future issuance, as and when determined by the board of directors, of options that may be issued to employees, to purchase up to 10% of the new common stock of the reorganized IES. Snyder noted, "This plan of reorganization is positive news for all of IES' employees, customers and vendors. By allowing IES to exchange 100% of the senior subordinated notes for new equity, our plan will reduce the company's debt balance by approximately $173 million and allow IES to emerge as a financially stronger, more efficient company." Following approval of IES' disclosure statement by the Bankruptcy Court, the company will formally solicit approval of its plan of reorganization from the holders of its senior subordinated notes, common stock and senior convertible debt. Solicited parties will receive a disclosure statement and a copy of the IES plan of reorganization. Continued Payments During Chapter 11 In addition to the filing of the chapter 11 petitions and the plan of reorganization, IES asked the Bankruptcy Court to consider several "first day" motions on an expedited basis benefiting its employees, vendors, service providers, customers, and other stakeholders. The company has asked for the Bankruptcy Court's permission to continue paying its employees' salaries and benefits, and its vendors; to maintain its cash management systems; and to obtain DIP financing with Bank of America. With respect to its vendors, the company has requested authority from the Bankruptcy Court to pay all of its vendors in the ordinary course of business, whether their claims arose prior to or after the filing of the Chapter 11 cases. Management and Advisors Under the terms of the plan, Byron Snyder will continue as the company's chairman, president and chief executive officer until a successor is selected or as otherwise determined by the board of directors. The company's board of directors will begin a search for a successor shortly. Mr. Snyder said, "Over the past few quarters, we have accomplished the necessary actions for this company to truly succeed both now and into the future. These are the actions I committed to accomplish when I agreed to assume the position of president and CEO last June. We have refinanced the senior secured credit facility and renegotiated certain leases where prudent. In addition, although subject to appeal, we have obtained the dismissal at the trial level of the shareholder class action and derivative lawsuits. The final item I committed to accomplish was the restructuring and strengthening of the company's balance sheet for our success going forward, and today's pre-arranged chapter 11 filing is the next step in achieving that goal." "I will continue as IES' chairman, president and chief executive officer for the near term, but with the end of my mission in sight, I have agreed that IES should begin a search for a new CEO to lead the company in the future. Accordingly, the IES board of directors will begin this search shortly." Mr. Donald P. Hodel resigned from the board of directors on Monday, February 13, 2006. "Don has been a valued director since the beginning of IES, and it was with much regret that the board accepted his resignation. Don's other business activities were taking an increasing amount of his time and the board understood his wishes. He will be missed as a board member," added Mr. Snyder. The board determined to remain at six members with a vacancy for Mr. Hodel's position. The board of directors will review its committees and make a determination on size of the board at a later meeting. In addition, Sanford R. Edlein of Glass & Associates will continue as the Chief Restructuring Officer of IES through the end of the bankruptcy, and the company's other senior officers have agreed to remain in place. In connection with the financial restructuring of the company, the company has been represented by Gordian Group LLC as financial advisors and Vinson & Elkins L.L.P. as legal advisors. The ad hoc committee of senior subordinated noteholders has been represented by Conway Del Genio Gries & Co. LLC as financial advisors and by Weil, Gotshal & Manges LLP as legal advisors. Dismissal of Lawsuit IES is also pleased to announce the dismissal of the shareholder derivative action styled Radek v. Allen, et al., No. 2004-48577, in the 113th Judicial District Court, Harris County, Texas, on Friday, February 10, 2006. For more information regarding this release, visit the company's Web site at http://www.ies-co.com or call (713) 860- 8001. Integrated Electrical Services, Inc. is a national provider of electrical solutions to the commercial and industrial, residential and service markets. The company offers electrical system design and installation, contract maintenance and service to large and small customers, including general contractors, developers and corporations of all sizes. ----------------------------------------------------------------- [00004] INTEGRATED ELECTRICAL'S CHAPTER 11 DATABASE ----------------------------------------------------------------- Lead Debtor: Integrated Electrical Services, Inc. 1800 West Loop South, Suite 500 Houston, Texas 77027 Bankruptcy Case No.: 06-30602 Debtor-affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Aladdin-Ward Electric & Air, Inc. 06-30604 Amber Electric, Inc. 06-30607 ARC Electric, Incorporated 06-30613 Bachofner Electric, Inc. 06-30616 Bear Acquisition Corporation 06-30620 Bexar Electric Company, Ltd. 06-30625 Bexar Electric II LLC 06-30629 Bryant Electric Company, Inc. 06-30633 BW/BEC, Inc. 06-30641 BW/BEC II LLC 06-30638 BW/BEC, L.L.C. 06-30645 BW Consolidated, Inc. 06-30635 Charles P. Bagby Co., Inc. 06-30648 Collier Electric Company, Inc. 06-30653 Commercial Electrical Contractors, Inc. 06-30657 Cross State Electric, Inc. 06-30665 Cypress Electrical Contractors, Inc. 06-30668 Daniel Electrical Contractors, Inc. 06-30673 Daniel Electrical of Treasure Coast, Inc. 06-30676 Daniel Integrated Technologies, Inc. 06-30680 Davis Electrical Constructors, Inc. 06-30683 Electro-Tech, Inc. 06-30686 EMC Acquisition Corporation 06-30690 Federal Communications Group, Inc. 06-30693 General Partner, Inc. 06-60697 Hatfield Reynolds Electric Company 06-30701 Haymaker Electric, Ltd. 06-30705 Holland Electrical Systems, Inc. 06-30708 Houston-Stafford Electric Holdings III, Inc. 06-30712 Houston-Stafford Electrical Contractors LP 06-30714 Houston-Stafford Holdings II LLC 06-30721 Houston Stafford Holdings LLC 06-30723 Houston-Stafford Management LLC 06-30726 ICS Holdings LLC 06-30727 IES Albuquerque, Inc. 06-30603 IES Austin, Inc. 06-30619 IES Austin Holding LP 06-30606 IES Austin Holdings II LLC 06-30610 IES Austin Holdings LLC 06-30611 IES Austin Management LLC 06-30615 IES Charleston, Inc. 06-30622 IES Charlotte, Inc. 06-30626 IES College Station, Inc. 06-30644 IES College Station Holdings II LLC 06-30630 IES College Station Holdings LLC 06-30634 IES College Station Holdings, LP 06-30636 IES College Station Management LLC 06-30640 IES Communications, Inc. 06-30646 IES Contractors Holdings LLC 06-30649 IES Contractors, Inc. 06-30656 IES Contractors Management LLC 06-30652 IES Decatur, Inc. 06-30660 IES East McKeesport, Inc. 06-30661 IES ENC, Inc. 06-30670 IES ENC Management, Inc. 06-30664 IES Federal Contract Group, L.P. 06-30672 IES Holdings II LLC 06-30677 IES Holdings LLC 06-30679 IES Management, LP 06-30687 IES Management ROO, LP 06-30682 IES Meridian, Inc. 06-30689 IES New Iberia, Inc. 06-30692 IES Oklahoma City, Inc. 06-30696 IES Operations Group, Inc. 06-30698 IES Properties Holdings II LLC 06-30702 IES Properties Holdings, Inc. 06-30703 IES Properties, Inc. 06-30609 IES Properties, LP 06-30614 IES Properties Management, Inc. 06-30706 IES Raleigh, Inc. 06-30617 IES Rapid City, Inc. 06-30621 IES Residential Group, Inc. 06-30624 IES Specialty Lighting, Inc. 06-30628 IES Valdosta, Inc. 06-30632 IES Ventures Inc. 06-30642 IES Wilson, Inc. 06-30651 Integrated Electrical Finance, Inc. 06-30654 Intelligent Building Solutions, Inc. 06-30659 J.W. Gray Electric Co., Inc. 06-30662 J.W. Gray Electrical Contractors LP 06-30666 J.W. Gray Holdings II LLC 06-30671 J.W. Gray Holdings, LLC 06-30674 J.W. Gray Management LLC 06-30684 Kayton Electric, Inc. 06-30688 Key Electrical Supply, Inc. 06-30694 Linemen, Inc. 06-30700 Mark Henderson, Incorporated 06-30707 Menninga Electric, Inc. 06-30711 Mid-States Electric Company, Inc. 06-30715 Mills Electrical Contractors, Inc. 06-30598 Mills Electric Holdings II LLC 06-30601 Mills Electrical Holdings LLC 06-30600 Mills Electric, LP 06-30597 Mills Management LLC 06-30599 Mitchell Electric Company, Inc. 06-30718 M-S Systems, Inc. 06-30720 Murray Electrical Contractors, Inc. 06-30725 NBH Holding Co., Inc. 06-30728 Neal Electric LP 06-30729 Neal Electric Management LLC 06-30605 New Technology Electrical Contractors, Inc. 06-30608 Newcomb Electric Company, Inc. 06-30612 Pan American Electric Company, Inc. 06-30618 Pan American Electric, Inc. 06-30623 Paulin Electric Company, Inc. 06-30627 Pollock Electric, Inc. 06-30631 Pollock Summit Electric LP 06-30637 Pollock Summit Holdings II LLC 06-30639 Pollock Summit Holdings, Inc. 06-30643 PrimeNet, Inc. 06-30647 Primo Electric Company 06-30650 Raines Electric Co., Inc. 06-30655 Raines Electric LP 06-30658 Raines Holdings II LLC 06-30663 Raines Holdings LLC 06-30667 Raines Management LLC 06-30669 Riviera Electric, LLC 06-30675 RKT Electric, Inc. 06-30678 Rockwell Electric, Inc. 06-30681 Rodgers Electric Company, Inc. 06-30685 Ron's Electric, Inc. 06-30691 SEI Electrical Contractor, Inc. 06-30695 Spectrol, Inc. 06-30699 Summit Electric of Texas, Inc. 06-30704 Tesla Power and Automation, L.P. 06-30713 Tesla Power GP, Inc. 06-30716 Tesla Power Properties, L.P. 06-30717 Tesla Power (Nevada) II LLC 06-30709 Tesla Power (Nevada), Inc. 06-30710 Thomas Popp & Company 06-30719 Valentine Electrical, Inc. 06-30722 Wright Electrical Contracting, Inc. 06-30724 Debtors' Financial Advisor: Gordian Group LLC Debtors' Chief Restructuring Officer: Sanford R. Edlein Glass & Associates Ad Hoc Committee of Senior Subordinated Noteholders' Legal Counsel: Weil, Gotshal & Manges LLP Ad Hoc Committee of Senior Subordinated Noteholders' Financial Advisor: Conway Del Genio Gries & Co. LLC Chapter 11 Petition Date: February 14, 2006 Court: Northern District of Texas (Dallas) Judge: Harlin DeWayne Hale Debtors' Counsel: Daniel C. Stewart, Esq. Michaela C. Crocker, Esq. Vinson & Elkins, L.L.P. 2001 Ross Avenue Dallas, Texas 75201 Tel: (214) 220-7761 Fax: (214) 999-7761 Financial Condition as of December 31, 2005: Total Assets: $400,827,000 Total Debts: $385,540,000 ----------------------------------------------------------------- [00005] LIST OF DEBTORS' 50 LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Creditor Nature of Claim Claim Amount -------- --------------- ------------ U.S. Bank Michael M. Hopkins, CCTS Corporate Trust Services 23rd Floor, 225 Asylum Street Goodwin Square Hartford, CT 06103 9-3/8% Indenture $172.9 Million Bank of New York Corporate Trust Services 101 Barclay Street 8th Floor West New York, NY 10286 6.5% Indenture $50.0 Million Graybar Electric Co. 34 N. Meramec Avenue Clayton, MO 63105 Jon Reed - Treasurer (314) 573-9251 Trade Debt $3.9 Million Rexel Inc. P.O. Box 9085 Addison, TX 75001-9085 Trade Debt $1.9 Million General Electric Supply Co. 400 Technology Court Suite R Smyrna, GA 30082 Trade Debt $1.9 Million Crawford Electric Supply - Houston 1295 N. Post Oak Road Houston, TX 77055 Trade Debt $1.1 Million Mayer Electric Financial Corp. Trade Debt $985,000 United Copper Industries Inc. Trade Debt $819,000 Anixter Inc. Trade Debt $773,000 WESCO Distribution Inc. Trade Debt $640,000 Cooper Wiring Devices-Eagle El Trade Debt $619,000 Border States Electric Supply Trade Debt $541,000 Simplex Grinnell LP Trade Debt $485,000 Chickasaw Electrical Corp. Inc. Trade Debt $449,000 Liebert Corporation Trade Debt $446,000 United Electric Supply Co. Trade Debt $441,000 Platt Electric Supply Company Trade Debt $411,000 Senator Wire & Cable-Southwire Company Trade Debt $356,000 Electrical Engineering & Equipment (3E) Trade Debt $338,000 Wright Express Trade Debt $330,000 Norcross Electric Supply Co. Trade Debt $309,000 Thomas & Betts Corporation Trade Debt $293,000 Dealers Electrical Supply Trade Debt $275,000 Bloom Electric Supply Trade Debt $267,000 Custom Controls Company Trade Debt $247,000 Hughes Supply, Inc. Trade Debt $247,000 Advanced Engineered Systems Trade Debt $244,000 Sunbelt Rentals Trade Debt $240,000 Siemens Building Technologies Trade Debt $228,000 Eaton/Cutler-Hammer Trade Debt $218,000 Shepherd Electric Supply Trade Debt $217,000 Shealy Electrical Wholesalers Trade Debt $210,000 Alcan Cable Trade Debt $205,000 Summit Electric Supply Trade Debt $201,000 Circle/CerroWire Trade Debt $188,000 Pass & Seymour/Legrand Trade Debt $184,000 Reynolds Inc. Trade Debt $179,000 Jetco, Inc. Trade Debt $177,000 Three-G Electrical Supply, Inc. Trade Debt $176,000 North Coast Electric Co. Trade Debt $169,000 Electric Suppliers Inc. Trade Debt $167,000 Communications Supply Corp. Trade Debt $163,000 Crescent Electric Supply Company Trade Debt $148,000 Jacksonville Sound & Communications, Inc. Trade Debt $146,000 Thompson Machinery Trade Debt $138,000 Beacon Communications Trade Debt $133,000 Sound & Signal Systems of New Mexico Inc. Trade Debt $130,000 Day-Brite Lighting Trade Debt $129,000 Yancey Power Systems Trade Debt $123,000 Elliott Electric Supply Inc. Trade Debt $121,000 ----------------------------------------------------------------- [00006] LIST OF DEBTORS' LARGEST EQUITY SECURITY HOLDERS ----------------------------------------------------------------- Integrated Electrical Services, Inc., discloses its equity security holders holding a 5% or greater interest: Name Security Class No. of Securities ---- -------------- ----------------- Fidelity Management & Research Company Common Stock 4,740,500 Jeffrey A. Gendell Common Stock 3,696,200 Dimensional Fund Advisors Common Stock 3,172,456 State Street Management & Research Co. Common Stock 2,758,810 C. Byron Snyder Common Stock 2,605,079 Barclays Global Investors, N.A. Common Stock 2,073,631 Ardsley Advisory Partners Common Stock 2,000,000 Flagg Street Capital LLC Common Stock 1,999,000 IES has approximately 1,300 shareholders. The number of shares outstanding as of February 6, 2006, of IES' common stock was 36,876,929 and of IES' restricted voting common stock was 2,605,709. ----------------------------------------------------------------- [00007] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES ----------------------------------------------------------------- Rule 1015(b) of the Federal Rules of Bankruptcy Procedure provides, in relevant part, that "[i]f two or more petitions are pending in the same court by or against a debtor and an affiliate, the court may order joint administration of the estates." The Debtors filed 133 voluntary petitions under Chapter 11 of the Bankruptcy Code. Sanford R. Edlein, IES' chief restructuring officer, notes that the procedural burdens that might be placed on the Debtors and other creditors having to file multiple pleadings in each of the 133 Cases necessitates their joint administration. Furthermore, Mr. Edlein says, administration under the name of the parent company should help avoid confusion among the creditors and interest holders. Thus, the Debtors ask the Court to jointly administer -- for procedural purposes only -- their chapter 11 cases under In re Integrated Electrical Systems, Inc., et al., Case No. 06-30602- BJH-11 (Jointly Administered). According to Mr. Edlein, the joint administration of the 133 Cases, including the combining of notices to creditors of the estates, as well as calling and hearing all matters at the same time, will promote economic, efficient, and convenient administration of the estates. Supervision of the administrative aspects of the Debtors' cases by the Office of the United States Trustee will also be simplified, Mr. Edlein adds. The Debtors clarify that they are not seeking substantive consolidation of their estates. ----------------------------------------------------------------- [00008] U.S. TRUSTEE APPOINTS UNSECURED CREDITORS COMMITTEE ----------------------------------------------------------------- Pursuant to Section 1102(a) of the Bankruptcy Code, William T. Neary, the United States Trustee for Region 6, appoints three creditors to the Official Committee of Unsecured Creditors in Integrated Electrical Services, Inc., and its debtor-affiliates' chapter 11 cases: 1. Tontine Capital Partners, L.P. 55 Railroad Avenue, 3rd Floor Greenwich, CT 06830 Tel: (203) 769-2015 Fax: (203) 769-2010 Attn: Joe Lash jlash@tontinepartners.com 2. Southpoint Capital Advisors, L.P. 623 Fifth Avenue, 25th Floor New York, NY 10022 Tel: (212) 692-6350 Fax: (212) 692-6355 Attn: Rob Butts rob@southpoint-capital.com 3. Fidelity Management & Research Co. 82 Devonshire Street E31C Boston, MA 02109-3614 Tel: (617) 392-8129 Fax: (617) 476-5174 Attn: Nate Van Duzer nate.vanduzer@fmr.com ----------------------------------------------------------------- [00009] DISCLOSURE STATEMENT HEARING SCHEDULED FOR MARCH 10, 2006 ----------------------------------------------------------------- The Honorable Barbara J. Houser scheduled a hearing for March 10, 2006, at 9:00 a.m. (CST) to consider the adequacy of the information contained in the Debtors' Disclosure Statement. Disclosure Statement Objections, if any, must: (i) be in writing, (ii) comply with the Bankruptcy Rules and the Local Rules of the Court, (iii) set forth the name of the objector, and the nature and amount of any claim or interest asserted against the estates or property of the Debtors, (iv) state with particularity the legal and factual basis for that objection, and (v) be filed with the Clerk of the United States Bankruptcy Court for the Northern District of Texas, Dallas Division, so as to be actually received no later than 12:00 (noon) on March 8, 2006, by the Court and by: (a) Counsel to the Debtors: Paul E. Heath, Esq. Courtney S. Lauer, Esq. Vinson & Elkins L.L.P. Trammell Crow Center 2001 Ross Avenue, Suite 3700 Dallas, Texas 75201 Fax: (214) 999-7960 (b) Proposed Counsel to the Official Committee of Unsecured Creditors: Weil, Gotshal & Manges LLP Attn: Marcia Goldstein, Esq. 767 Fifth Avenue New York, NY 10153 Fax: (212) 735-4919 Weil, Gotshal & Manges LLP Attn: Alfredo R. Perez, Esq. 100 Louisiana, Suite 1600 Houston, Texas 77002 Fax: (713) 224-9510 (c) United States Trustee: Office of the United States Trustee 1100 Commerce Street, Room 9C60 Dallas, Texas 75242 Fax: (214) 767-6530 (d) all other parties requesting notice The principal economic terms of the Plan of Reorganization filed by Integrated Electrical Services, Inc., and its debtor- affiliates, provide for the Company's balance sheet to be restructured on the effective date of the Plan in this manner: (a) the allowed Class 5 claims (Senior Convertible Note Claims) will be refinanced from the proceeds of the term exit facility; (b) the allowed Class 6 claims (Senior Subordinated Note Claims) will be converted into 82% of the new IES common stock to be issued pursuant to the Plan, before giving effect to new options to be issued pursuant to a long term incentive plan; (c) all outstanding shares of prepetition IES common stock will be cancelled and the holders of allowed interests in Class 8 (IES Common Stock Interests) will receive a pro rata share of 15% of the new IES common stock to be issued pursuant to the Plan, before giving effect to new options to be issued pursuant to a long term incentive plan; (d) all prepetition, outstanding stock options, warrants, stock rights, and other rights to purchase or acquire prepetition IES common stock in Class 9 will be cancelled; and (e) all undisputed claims, including Class 1 (Priority Claims), Class 2 (Credit Agreement Claims), Class 3 (Secured Claims), Class 4 (Unsecured Claims), Class 7 (Subordinated Claims), and Class 10 (IES Subsidiary Debtor Interests) will either be reinstated or paid in full on the effective date of the Plan, to the extent that the Bankruptcy Court does not permit the Debtors to pay them in the ordinary course of business during the pendency of the Chapter 11 Cases. Under the Plan, there are four classes of impaired claims or equity interests, three of which are entitled to vote: (i) Class 5 (Senior Convertible Note Claims); (ii) Class 6 (Senior Subordinated Note Claims); and (iii) Class 8 (IES Common Stock Interests). Holders of equity interests in Class 9 (IES Other Equity Interests) are not entitled to receive a distribution on account of their interests and are therefore deemed to have rejected the Plan. The Plan is supported by holders who hold approximately 61% of the Senior Subordinated Notes, and it is expected that the Debtors will easily obtain sufficient votes from Class 6 claimants to confirm the Plan pursuant to Section 1129(b) of the Bankruptcy Code. Furthermore, the Debtors have commitment letters from Bank of America to provide both debtor-in-possession financing and exit financing on a senior secured basis. A full-text copy of the Disclosure Statement is available for free at: http://www.sec.gov/Archives/edgar/data/1048268/000095012906001537/h33084exv99w2.htm A full-text copy of the Plan of Reorganization is available for free at: http://www.sec.gov/Archives/edgar/data/1048268/000095012906001537/h33084exv99w3.htm ----------------------------------------------------------------- [00010] FIRST MEETING OF CREDITORS SCHEDULED FOR MARCH 14, 2006 ----------------------------------------------------------------- The U.S. Trustee for Region 6 will convene a meeting of Integrated Electrical Services, Inc., and its debtor-affiliates' creditors at 2:00 p.m., on March 14, 2006, in Room 976, at 1100 Commerce Street, in Dallas, Texas 75242. This is the first meeting of creditors required under U.S.C. Sec 341(a) in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the 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. ----------------------------------------------------------------- [00011] S&P LOWERS INTEGRATED ELECTRICAL SERVICES RATINGS TO 'D' ----------------------------------------------------------------- NEW YORK, New York -- February 14, 2006 -- Standard & Poor's Ratings Services said today that it lowered its corporate credit rating on Houston, Texas-based Integrated Electrical Services Inc. to 'D' from 'CC'. At the same time, the rating on the company's senior subordinated notes was lowered to 'D' from 'C'. IES, one of the larger electrical contractors in the U.S., had total debt of about $223 million as of Dec. 31, 2005. "The downgrade reflects the company's decision to file for reorganization under Chapter 11 of the U.S. Bankruptcy Code," said Standard & Poor's analyst James Siahaan. The company said that it has successfully negotiated an $80 million debtor-in-possession financing facility. To execute the financial restructuring through a plan of reorganization, the company has also come to an agreement with institutions controlling 61% of the dollar value on IES' $173 million in senior subordinated notes. *** End of Issue No. 1 ***