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					                      MORGAN JOSEPH LLC                                         Restructuring Quarterly Newsletter: 3Q 2010




  Financial                   Mergers &               Capital Markets          Private Placements Dedicated Industry
Restructuring                Acquisitions                                                            Experience


                                           Financial Restructuring Quarterly Update
James D. Decker                                                                                        Third Quarter 2010
Managing Director and Group Head

Matthew B. Berk
Managing Director

Alex C. Fisch
Director

Jay C. Jacquin
Director                                   •      Morgan Joseph’s Financial Restructuring Group provides
                                                  comprehensive financial advice, capital solutions and investment
James S. Hadfield                                 banking services to financially stressed entities and their
Vice President
                                                  creditors.
                                           •      We are pleased to share with you our observations of the third
                                                  quarter 2010 capital and restructuring markets, which include:
                                                    –     Continued Momentum for High Yield Issues and Loans
                                                          Driving Looser Structures and Tighter Pricing Across the
                                                          Lending Spectrum
                                                    –     Will Banks Be the New Lending Source To Replace
Please contact any of the
                                                          Capital From Legacy CLOs As Their Reinvestment
above Morgan Joseph
                                                          Windows Begin to Close?
Financial Restructuring
Professionals for                                   –     Finding Points of Leverage In Restructurings: Focus on
commentary and detail                                     the Details Including Assignment Clauses and Tax
on the information                                        Consequences
provided in this                                    –     Call It a Comeback: Borrowers Report Revenue and
newsletter.                                               EBITDA Performance In Line With Pre-Crisis Levels


                                                               Joseph
                                                      MorganPage 0 LLC
600 Fifth Avenue, 19th Floor, New York, NY 10020-2302 • Telephone: 212.218.3700 • Facsimile: 212.218.3719 • www.morganjoseph.com
                Dedicated Industry Groups and Sector Level Expertise
Consumer &                                        Technology, Media                Business         Other Sector
                   Healthcare     Industrial                                                         Expertise
  Leisure                                        & Telecommunications              Services
                                                                                                     Oil & Gas / Energy
                                                                                                     Property & REITs
                                                                                                     Shipping & Marine Services
                                                                                                     Specialty Finance




      Combined With the Capabilities of a Full Service Investment Bank
 Capital Markets                                                                              Mergers & Acquisitions
    Equity and Debt                                                                             General Advisory
    Convertible Debt                                                                            Exclusive Sales
                                                    ets
    New & Follow-on Issues
                                                 ark                                            Buy-side Advisory
                                               lM
                                                                   M quis




    Distressed Debt Issues                                                                      Fairness Opinions
                                            ita
                                                                    Ac
                                                                    erg iti




                                        p
                                      Ca
                                                                       ers on




    Sales & Trading                                                                             Takeover Defense
                                                                          & s




    Research                                                                                    Special Committees
                                                                                                Going Private
                                                                                                SPAC Reverse Mergers
                                  Pla
                                  Pr men
                                    iva ts
                                      ce




                                                                               g
 Private Placements
                                                                         rin                  Restructuring
                                        te




    Equity (Privates and PIPEs)                                      uctu                       Companies and Creditors
                                                                 str
    High Yield Debt                                           Re                                Raising New Capital
    Second Lien Financings                                                                      M&A Solutions
    Mezzanine                                                                                   Exchange Offers
    Bridge                                                                                      Recapitalizations/
                                                                                                Restructurings
                                                                                                Workouts




                                                          i
           MORGAN JOSEPH LLC                                  Restructuring Quarterly Newsletter: 3Q 2010



                                        Contents


Chart of the Quarter                                                                            3

Third Quarter 2010 Highlights                                                                   4

Recent Financing and Restructuring Trends                                                       5

The Newest Lending Vehicle: Banks (and Hedge Funds)                                             6

DIP Financing Survey                                                                            7

Financing Market Snapshot                                                                       8

Sampling of Ongoing Financial Restructuring Group Engagements                                   10




      About Morgan Joseph LLC
      Headquartered in New York City, Morgan Joseph LLC is a full service investment
      banking firm with over 110 employees and nine offices across the United States
      dedicated to serving middle market companies. The firm’s primary focus is on
      providing financial advisory and capital raising services in the U.S., Asia and Europe.
      Our services include mergers and acquisitions advice, restructuring advice, private
      placements and public offerings of debt and equity. For its institutional investor
      clients, Morgan Joseph provides a full range of sales and execution services,
      including equity research and specialized reports.
      We differentiate ourselves by the depth and breadth of experience of our senior
      bankers. Taken together with the firm’s range of capabilities, Morgan Joseph is
      committed to delivering the highest standard of service available to middle market
      companies. Commitment to our clients is the cornerstone of our firm and our goal
      is to establish long-term relationships that help our clients reach new plateaus.



                                               ii
                   MORGAN JOSEPH LLC
                   MORGAN JOSEPH LLC                                                                                               Q3
                                                                                               Restructuring Quarterly Newsletter: 3Q 2010



                                                  Chart of the Quarter
                                                 (Possibly of Our Lifetime?)

The Picture of Intervention: Home Buyers A Better Credit Risk Than the US

                        30-Year Mortgage Rates vs. 30-Year US Treasury Yields
   7%




   5%




   3%

                                            Mortgage - Treasury Yield Gap
   2%


   1%


   0%
                      2006                         2007                        2008                           2009                       2010
( 1%)

              3 0 Y e a r M o rt g a g e R a t e s                       3 0 Y e a r U S Tre a s ury Y ie ld                            S p re a d
Source: CapitalIQ, Federal Home Loan Mortgage Corporation




        Legal Disclosure
        This newsletter is a periodic compilation of certain economic and corporate information, as well as completed and announced
        restructuring, capital markets, and bankruptcy activity. Information contained in this newsletter should not be construed as a
        recommendation to sell or buy any security. Any reference to or omission of any reference to any company in this newsletter
        should not be construed as a recommendation to buy, sell or take any other action with respect to any security of any such
        company. We are not soliciting any action with respect to any security or company based on this newsletter. This newsletter is
        published solely for the general information of clients and friends of Morgan Joseph LLC It does not take into account the
        particular investment objectives, financial situation, or needs of individual recipients. Certain transactions, including those
        involving early stage companies, give rise to substantial risk and are not suitable for all investors. Financial Restructuring Group
        transactions noted herein were led by current Morgan Joseph Restructuring professionals either at Morgan Joseph or while at
        their former employers. This newsletter is based on information that we consider reliable, but we do not represent that it is
        accurate or complete, and it should not be relied upon as such. Prediction of future events is inherently subject to both known
        and unknown risks, and other factors that may cause actual results to vary materially. We are under no obligation to update the
        information contained in this newsletter. We and our affiliates and related entities, partners, principals, directors, and employees,
        including persons involved in the preparation or issuance of this newsletter, may from time to time have long and short
        positions in, and buy and sell, the securities, derivatives (including options) thereof, of companies mentioned herein. The
        companies mentioned in this newsletter may be clients of Morgan Joseph LLC The decision to include any company in this
        newsletter is unrelated in all respects to any service Morgan Joseph LLC may provide to such company. This newsletter may not
        be copied or reproduced in any form, or redistributed without the prior written consent of Morgan Joseph LLC.




                                                                      Page 3
                                                                         iii
                                  MORGAN JOSEPH LLC                                                        Restructuring Quarterly Newsletter: 3Q 2010



                                                     Third Quarter 2010 Highlights
   With QE2 Looming, Credit Was In High Demand as Inflows to Loan and High Yield
          Funds Grew, Although the Supply of New Loans Actually Slipped…
                          Inflows/Outflows Into Funds                                                  New Leveraged Loan Issuance Volume
 $ 10 .0 B                                                                                    $80.0B
  $ 8 .0 B
                                                                                              $60.0B
  $ 6 .0 B
  $ 4 .0 B                                                                                    $40.0B
  $ 2 .0 B
       $0                                                                                     $20.0B
$ ( 2 .0 )B
                                                                                               $0.0B
                             09




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              08

                      08



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                                                                        3Q
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                     4Q



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                                                                                                                                     4Q
                     Loans                                     High Yield

 Banks’ Role in Loan Allocations Increased, Further Placing Demand Side Pressure On
                                  New Loan Prices...
                     Leveraged Loans by Investor Type                                                       Average YTM of New Loans
100%                                                                                           9%


75%
                                                                                               8%
50%

                                                                                               7%
25%


 0%                                                                                            6%
        2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 YTD 3Q10
                                                                                               Fe 0




                                                                                               Se 0
                                                                                                       10
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     US Banks                          Finance Co.                    Foreign Bank
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     Institutional Investor            Securities Firm


Increased Demand Drove More Borrower Friendly Structures, But Appetite For Deeper
                        Leverage Remained Tepid…
                       Cov-Lite and 2nd Lien Volume                                                              Average Leverage Multiples
40%                                                                                             6.0x
                                                                                                5.0x
30%
                                                                                                4.0x

20%                                                                                             3.0x
                                                                                                2.0x
10%                                                                                             1.0x
                                                                                                0.0x
 0%
              2005     2006    2007         2008    2009   YTD               9/1-                      FY 2006 FY 2007 FY 2008 FY 2009               1Q10-       3Q10
                                                                                                                                                     3Q10
                     Covenant Lite              Second Lien                 11/10
                                                                                                          EBITDA < $50MM               EBITDA > $50MM
Source: S&P LCD
                                                                                     Page 4
                             MORGAN JOSEPH LLC                                                     Restructuring Quarterly Newsletter: 3Q 2010


                             Recent Financing and Restructuring Trends
       It’s Back to Pre-Credit Crisis Levels for Borrower EBITDA and Default Levels – While millions of Americans
       remain out of work and nearly 1 in 4 homeowners are underwater on their mortgages, the corporate recovery - for those
       who survived - is nearly complete. Five consecutive quarters of EBITDA growth have completely erased all EBITDA
       losses for borrowers in the S&P/LCD index, a staggering achievement. Even more surprising is the degree to which the
       recovery has been fueled by revenue growth, which has demonstrated four straight quarters of year over year growth.
       Meanwhile, after a brief respite this summer, default rates have leveled off close to the ten-year average of between three
       and four percent. Considering the number of facilities restructured and amended in the last few years, one might expect a
       lower default rate, however the recovery has not extended to all sectors, and businesses tied to housing, automotive and
       publishing have yet to see the resurgence experienced in other industries.



          YoY Revenue and EBITDA Growth                                                             Default Rate by Principal
20%
                                                                                 12%
10%
                                                                                     8%
 0%
                                                                                     4%
-10%
                                                                                     0%
-20%




                                                                                                                                              0
                                                                                                                                0


                                                                                                                                      10
                                                                                                       09


                                                                                                                9
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       2Q

               3Q

                      4Q




                                   2Q

                                          3Q

                                                 4Q
  1Q




                             1Q




                                                                                 O




                                                                                                                    O
                       EBITDA               Revenue

  Source: S&P LCD


       Borrower Consent Rights to Assignments: Company Weapon and Lender Concern – Given the substantial climb in
       loan prices over the past quarter, some loan participants may now be looking to take advantage of selling their hold in the
       secondary market. Such a “sale” is typically structured as an assignment rather than a participation for a host of reasons
       that are important to both buyer and seller. Borrowers under 2004 to 2007 vintage credit agreements often negotiated for
       the right to consent to assignments, with consent to be not unreasonably withheld. Some borrowers have used these
       clauses as an attempt to block assignments to potential loan participants with more aggressive workout stances. The
       standards of reasonableness have not been firmly established through court cases and ultimately (although courts may not
       uphold the “reasonableness” of a borrower withholding consent based on the purchasing participant’s reputation) the mere
       ability for a borrower to delay such a transaction poses a risk to lenders seeking to exit a position. Accordingly, lenders
       may wish to seek to alter these assignment consent provisions when entering into the next amendment with their borrower,
       and in turn, borrowers may look to use such provisions as currency in creditor negotiations.

       Restructuring and Insolvency Tax Implications: When Equity is Truly Worth Less Than Nothing – Given the
       severity and magnitude of the “Great Recession”, some middle market business have found the value of their enterprise in
       a restructuring to be less than pre-petition debt balances. When these situations arise, equity owners must be aware of the
       characteristics of their legal organizational structure to ensure that if debt is forgiven in a restructuring or liquidation, they
       will not be left holding a tax bill for cancelation of debt income (“CODI”). Although there are special rules and insolvency
       tests that typically prevent corporations from bearing the burden of CODI, businesses organized as limited liability
       companies (“LLC”) pass taxable income to their members regardless of the bankruptcy or insolvency of the underlying
       business. Accordingly, the liquidation of an LLC for less than the face amount of its debt can result in serious tax
       implications for the equity members. In addition to CODI, there are other legacy taxes issues such as deferred revenue
       recognition that can also become the responsibility of equity holders even when equity is of little or no value. Although
       consultation of a tax professional would be required to assess actual liability levels under various scenarios, the
       identification of potential tax implications for equity holders can be used as an effective leverage tool between various
       restructuring constituents.
                                                                            Page 5
                         MORGAN JOSEPH LLC                                                    Restructuring Quarterly Newsletter: 3Q 2010



               The Newest Lending Vehicle: Banks (and Hedge Funds)

    President Obama and Main Street may have started getting what they have been asking for during the past two years. Banks
    began to genuinely increase lending in the third quarter, even in the leveraged loan sector. The spigot for lending has been
      .
    turned back on for some time at banks, but only for conservative forms of lending, such as agency backed mortgages or
    investment grade credits. However, it now appears that banks may have changed course by deploying capital into non-
    investment grade leveraged loans. In the third quarter, banks accounted for 35% of all leveraged loans issued, up more than
    three fold from first half 2010 levels of 11%, and surpassing levels not seen since 2001 when banks represented 45% of the
    market. While banks are sticking to the higher-rated end of the non-investment grade market, the magnitude of the banks’ re-
    entry into the marketplace represents a significant shift in lending practices.

                              Primary Market for Highly Levered Loans by Investor Type

                      2002                                             2006                                                3Q 2010
                                  2%
                                                                                        2%                                                4%

                                                                                                             57%
         60%
                                                     74%                                     18%
                                       31%

                                                                                                                                              36%
                                                                                       6%
                             8%                      Finance Co.              Institutional Investor
                                                                                                                           4%
                                                     Securities Firm          Banks


    For an explanation, consider the following: In 2009 and early 2010, when demand for capital was intense, bank deployment
    of funds into low risk investments could generate sufficient yield to produce year over year profit improvement, especially
    where profit was negative in the previous year. However, facing tougher comps from the prior year and a fiercely competitive
    lending market for highly secured loans, banks motivated to grow profits had no choice other than to invest in riskier forms
    of lending and grow investments by depleting excess reserves. Accordingly, banks have begun working down their over $1
    trillion in pre-QE2 excess reserves. Now the question becomes, with $600 billion more on the way thanks to QE2, will the
    banks accelerate their use of dry powder for either increased lending or monetization of currently distressed loans?
    In the non-bank segment of the leveraged loan market, CLO vehicles saw their share of new issues fall below 50% year-to-
    date. This is below the 50-55% range in the 2008 and 2009 time frame, and well shy of the pre-credit crisis range of 60-70%.
    Filling the gap left by CLOs are hedge funds, high yield accounts, distressed investors and non-traditional players. Demand
    exhibited by these alternative investors supports the argument that the loan demand hole left by legacy CLOs (when nearly
    one-third of $250 billion active CLOs role out of their allowable reinvestment window in 2011) will be sufficiently filled by the
    market.

        Depository Institution Excess Reserves                                New Issuance by Investor Class (ex Banks)

  $1,200B                                                                  80%


   $800B
                                                                           40%

   $400B
                                                                              0%
     $0B
                                                                                                                                                  10
                                                                                   02


                                                                                             03


                                                                                                   04


                                                                                                        05


                                                                                                                   06


                                                                                                                        07


                                                                                                                                08


                                                                                                                                         09

                                                                                                                                                 Q
                                                                                 20


                                                                                          20


                                                                                                   20


                                                                                                        20


                                                                                                               20


                                                                                                                        20


                                                                                                                                20


                                                                                                                                       20

                                                                                                                                               -3
              10
              06




              07




                8




                9
                5




                6




                7




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                                                                                   CLO                   Finance Co.                 Crossover investors
        O
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        O




        O




        O




                                                                                   Insurance Co.         Prime Rate Fund
Source: S&P LCD and US Federal Reserve
                                                                  Page 6
                               MORGAN JOSEPH LLC                                                                    Restructuring Quarterly Newsletter: 3Q 2010



                                                          DIP Financing Survey
        As yet another sign of lenders’ desire to flock to the highest quality and forgo premium yields in smaller, complex or
        unique situations, DIP facilities continue to lag in their recovery compared to their pre-petition funded peers. While the
        average first lien loan is today priced at premium spread of 30 to 40 bps versus 2007, comparable DIP facilities are
        .
        calling for between a 200 to 300 bps surcharge versus those inked in 2007.
        However, as a signal that the DIP financing market is generally improving, the percentage of DIP facilities being
        provided by pre-petition lenders rather than priming new-money DIP providers has continued to decline. That said,
        when pre-petition lenders find themselves as the most logical source of capital, they still look to use their position to
        maximum advantage.
        Pre-petition lenders have used a roll-over structure to re-prioritize some portion of their pre-petition debt as part of the
        DIP, allowing them to improve their overall position. However in recent months, DIP providers seeking to roll over a
        large portion of their pre-petition debt have been forced to renegotiate terms post-petition. Most recently, this occurred
        in the Blockbuster case as the rolled-over debt was reduced by half after the filing.


                                              Fifteen Most Recently Analyzed DIP Facilities
        ($ in millions)                                                                                                   LIBOR +                  Base +           Same as
                                             State                                      Effective                          Spread                  Spread          Prepetition
                   Company Name             Filed In             Tranche                 Date             Amount            (bps)                   (bps)            Agent?
        Schutt Sports                         DE           Revolver                       9/29/2010           $34.0          NA                     425                    Yes
        Lone Tree Investments LLC             AZ           Revolver                       9/28/2010            $1.0       15% fixed                 NA                     No
        OTC Holdings                          DE           Term Loan                      9/27/2010           $33.5          575                    475                    Yes
        OTC Holdings                          DE           Revolver                       9/27/2010            $6.5          575                    475                    Yes
        Victor Valley Community Hospi         CA           Revolver                       9/23/2010            $3.2        8% fixed                 NA                     No
        Innkeepers USA                        NY           Term Loan                       9/8/2010           $50.8          500                    NA                     No
        Innkeepers USA                        NY           Term Loan                       9/8/2010           $17.5          500                    NA                     No
        The Weck Corporation                  NY           Term Loan                       9/7/2010            $3.4          500                    400                    Yes
        RCLC Inc                              NJ           Revolver                        9/7/2010            $2.7          NA                     350                    Yes
        AirOcare                              VA           Revolver                       8/30/2010            $1.0          NA                     100                    NO
        American Safety Razor Co.             DE           Revolver                       8/27/2010           $25.0          550                    450                    Yes
        Caribbean Petroleum                   DE           Term Loan                      8/24/2010           $10.0      8.00% fixed                NA                     No
        Odyssey Properties                    FL           Revolver                       8/17/2010            $2.9        0% fixed                 NA                     No
        Aluminum Service                      FL           Term Loan                      8/11/2010            $1.4      12.00% fixed               NA                     No
        General Growth                        NY           Term Loan                      7/30/2010          $400.0      5.50% fixed                NA                     No


        As in the broader financing market, deal size has an inverse correlation to pricing and terms. Looking in detail at the
        difference between DIP facilities of over $100 million and those under $100 million demonstrates this point. Spreads on
        the smaller facilities have on average required a 150 to 250 bps premium yield over similarly structured credits in the over
        $100 million category.

                            DIP Statistics By Year                                                           DIP Statistics By Size YTD 2010
                                          LIBOR +      Base +     Unused                                                                LIBOR +      Base +     Unused
                                Amount    Spread       Spread     Line Fee      LC Fee                    DIP             Amount        Spread      Spread      Line Fee      LC Fee
                   Year         ($mm)      (bps)       (bps)       (bps)        (bps)                     Size             ($mm)         (bps)       (bps)       (bps)           (bps)

    LTM (9/30/10) Mean:              39        665         528             74       258       <$100m Mean:                         22        614          454            73          218
    LTM (9/30/10) Median:            20        575         475             75       100       <$100m Median:                       13        538          425            75              75

    2009 Mean:                      679        621         450             64       112       $101m-$500m Mean:                248           388          NA          100            100
    2009 Median:                     75        750         550         100          450       $101m-$500m Median:              205           388          NA          100            100

    2008 Mean:                      106        567         376             66       405       >$500m Mean:                     NA            NA           NA          NA             NA
    2008 Median:                     40        500         325             50       350       >$500m Median:                   NA            NA           NA          NA             NA

    2007 Mean:                       51        390         271             66       239
    2007 Median:                     35        350         250             50       263


Source: LCD stats, PACER, and Company websites
                                                                                        Page 7
                         MORGAN JOSEPH LLC                                               Restructuring Quarterly Newsletter: 3Q 2010


                                         Financing Market Snapshot
      Despite overall loan market activity declining during the third
      quarter, the trend towards a higher percentage of new issues                             Loan Volume By Type
      versus amend to extend and covenant amendment deals
      continued. Amend to extend volume was the lowest since              $100.0B
      coming into vogue in the first quarter of 2009 and only a
      third of the peak in volumes seen in the first quarter of this
      year.                                                               $50.0B

      Covenant amendments in the third quarter totaled less than
      one tenth of their credit crisis highs. Given flattening trend       $0.0B
      in defaults and the ever crumbling maturity wall, it is




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      doubtful that there will be a spike in amendment-related loan




                                                                                                                               1Q

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      activity for the foreseeable future.
                                                                            Covenant Amendments                A-to-E               New-Issue Volume
      The sag in overall loan volumes should not be taken as a
      precursor of the future. Rather, it is a sign of the over-hang
      caused by the pause in market activity due to the late spring Eurozone crisis. Given the market’s willingness to continue to
      loosen structures and pricing, and the unabashed return to favor of dividend recaps, Morgan Joseph expects that borrowers
      will fully take advantage of the new found ability to tap available credit. This may lead to the return of the $10 billion
      leveraged buyout, as predicted by Blackstone.

Asset Based Loans and Revolvers                                                                 Asset Based Loans
     The ABL market continues to be competitive as banks’
     desire for lower risk “in the box lending” is still strong.          L+500                                                              $6.0B
     Compounding the competition is the declining supply of
     ABL borrowers. Many traditional ABL borrowers with
                                                                                                                                             $4.0B
     strong cash flow are choosing to access a more robust cash
     flow loan and high yield market.                                     L+250
                                                                                                                                             $2.0B
     Price continues to be the main focus of competition among
     providers, with average spreads to LIBOR now just barely
     above 300 bps. LIBOR floors have become an out-dated                   L+0                                                              $0.0B
     concept and commitment fees are below 60 bps on average.
     Strong, larger credits can expect pricing as skinny as the 175
                                                                                           09

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                                                                                                                                 3Q
                                                                                                               2Q
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     to 225 bps range. However, structure is beginning to break
     some too, as most ABL providers are now willing to lend                    Avg. Pro Rata Spreads                 Asset-Based Deals Volume
     against fixed assets and even provide small “airball”
     advances, provided that the case for quick amortization of
     those “out of the box” portions of capital is evident.                              Second-Lien Issuance Volume
 Cash Flow Term and Second-Lien Loans                                     $30.0B
     The honeymoon of unsecured junior capital is officially over
     for ABL revolver and term loan lenders, as second lien               $20.0B
     lending has returned as a viable product. With ABL and
     senior lenders willing to advance against fixed assets or
     provide cash flow term loans, the first lien collateral for          $10.0B
     lending funds seeking high single-digit to low double-digit
     yields is no longer available. Accordingly, these providers are
                                                                           $0.0B
     now actively bidding to provide second lien facilities, and
     volumes year over year are up nearly 50%.
                                                                                                                                        10
                                                                                                                                 1Q 0 9
                                                                                 02

                                                                                        03

                                                                                                04

                                                                                                       05

                                                                                                              06

                                                                                                                     07

                                                                                                                            08

                                                                                                                                 1Q 0 9


                                                                                                                                      Q
                                                                                                                                      Q
                                                                               20

                                                                                      20

                                                                                              20

                                                                                                     20

                                                                                                            20

                                                                                                                   20

                                                                                                                          20

                                                                                                                                     20



                                                                                                                                   -3
                                                                                                                                   -3




Source: S&P LCD
                                                                 Page 8
                              MORGAN JOSEPH LLC                                              Restructuring Quarterly Newsletter: 3Q 2010


                                   Financing Market Snapshot (continued)
 Cash Flow Term and Second-Lien Loans (Continued)
    The move down the capital structure by these lending funds is beneficial to borrowers, as it allows for greater overall leverage
    and cheaper blended pricing. However, many ABL lenders have considerable heartburn when negotiating inter-creditor
    provisions with junior lien holders rather than unsecured parties. For borrowers with two-tiered secured structures, it will
    remain critically important to focus on the ability of their junior and senior lenders to work well together when crafting the
    inter-creditor agreement. Deal execution risk, and not just the best overall price and terms, has re-emerged as an important
    consideration for borrowers.

Syndicated Loan Markets
    The syndicated market has raged back from the Eurozone crisis which plagued the market in late spring and summer.
    Upsizing of facilities and downward pricing flexes are more common as demand continues to outpace supply. Investors
    desperate for yield and capital deployment are quickly gobbling up initial allocations that are now typically trading up one to
    two points only days after issuance.
      As bankers scramble to find viable borrowers to feed the demand, credit quality and size will continue to compress.
      Historical issuer floors of $100 million in issuance size and $25 to 30 million in EBITDA are actively being tested, and
      lending funds that have made their living off of borrowers not quite large enough for the syndicated market will continue to
      feel the squeeze. However, our experience suggests that opportunities for yield remain for lenders willing to dig into
      complex or storied situations less attractive to the broadly syndicated market.
      In the secondary market, all in yields for first lien paper are now less than four and a half percent, which is less than half of
      the December 2007 yield, and a mere quarter of yields in December of 2008.

High Yield Market
      The high yield market continued its impressive run in the third quarter. Inflows of capital in the quarter totaled
      approximately $7 billion, the highest levels since the second quarter 2009, when the market first opened back up.
      New issue yields have now fallen below the eight percent mark, enticing even those borrowers without the “need” for funds
      to rush to the high yield market. Its no wonder that equity holders of issuers such as HCA are choosing to tap the high yield
      market for monetization of their investment via dividend recaps.


           Average Spread of Leveraged Loans                                          Average Monthly Yield of High-Yield Bonds
  L+6000                                                                         13%

  L+4000                                                                         11%

  L+2000
                                                                                     9%
     L+0
                                                                                     7%
                               09



                                            9
             0




                                                               0
                    0




                                                                     0
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                                     9




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                                                    9
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                Second-Lien Loans                            First-Lien Loans

Mezzanine and Junior Capital
     With the return of second lien providers, mezzanine lenders have found their first dollar pushed farther up the leverage
     curve. Despite this decrease in downside protection, the increase in capital trying to find a home throughout the
     marketplace has put pressure on pricing and terms for mezzanine lenders.
       Mezzanine provider leniency on board of director seats and cash pay components is now expected by most borrowers, as
       added competition continues from traditional buyout investors willing to provide structured debt products at the upper end
       of typical mezzanine returns.
Source: S&P LCD
                                                                            Page 9
                 MORGAN JOSEPH LLC                                     Restructuring Quarterly Newsletter: 3Q 2010


                      Sampling of Ongoing Morgan Joseph
               Financial Restructuring Group Engagements
Morgan Joseph’s Financial Restructuring Group is actively engaged on a number of capital placements, distressed
M&A, creditor advisory, refinancing, and company/debtor advisory assignments. These engagements span a wide
variety of industries and involve companies with capitalizations ranging between $20 million to over $1 billion.
Below is sample of our current and recently completed engagements. Please feel free to contact any of the Morgan
Joseph financial restructuring professionals for more details on these or other engagements.

     Company                        Business Description                            Advisory Role


                                Owner and operator of casino                Financial Advisor to the Senior
                                 hotels in Mesquite, Nevada                          Noteholders
Black Gaming, LLC

                                       Business aircraft                 DIP Financing, Sale and Restructuring
Emivest Aerospace                 designer and manufacturer                           Advisory
  Corporation

                                                                           Refinancing and Recapitalization
   Project Sport                 Professional sports franchise
                                                                                      Advisory


   Project Food
                              Restaurant operator and franchisor                     Sale Advisory
     Services


 Project Oil Field           Provider of oil industry related rental
                                                                       Litigation Support and Expert Testimony
     Services                   equipment and oilfield services


                            Multimedia publisher of investment
   Project Print                                                              Secured Creditor Advisory
                             oriented periodical newsletters


                              Manufacturer of various envelopes             Financial Advisor to the Official
  NEC Holdings                and announcement products in the                       Committee of
     Corp.                            U.S. and Canada                            Unsecured Creditors

                            Commercial and residential developer
Project Real Estate                                                            Recapitalization Advisory
                                     and landholder

                                Designer and manufacturer of
   Project Signal                                                              Recapitalization Advisory
                            signs and corporate imaging products

                                     Provider of logistics
 Project Transport                                                              Restructuring Advisory
                                  and transportation services

                                                     Page 10
                     Morgan Joseph LLC - Financial Restructuring Group
Working together during the past decade, the principals who manage the Financial
Restructuring Group have completed more than 80 company and creditor
transactions and restructured approximately $25 billion of debt pursuant to both in-
court and out-of-court transactions…
Debtor Advisory                                 Creditor Advisory                               Debtor Advisory                            Debtor Advisory

Consolidated Resorts, Inc.                      Tropicana Entertainment, LLC                    Dixie Pellets, LLC                         Champion Enterprises, Inc.
Advised the Trustee in the sale of              Served as the exclusive financial advisor       Advised the Company in a sale              Advised the Company in the assessment
certain timeshare assets pursuant to            to the Senior Secured Lenders to                involving three distinct transactions      of its restructuring alternatives and in a
Section 363 of the United States                Tropicana Entertainment, LLC                    pursuant to Section 363 of the United      sale of the business pursuant to Section
Bankruptcy Code                                 $1.3 billion                                    States Bankruptcy Code                     363 of the United States Bankruptcy
$400 million                                                                                    $10 million
                                                                                                $147 million                               Code
                                                                                                                                           $325 million




                                                Financial Advisor                      2010     Company Advisory                    2010


Creditor Advisory                               Creditor Advisory                               Company Advisory                           Company Advisory
                                                                                                                                           Restructuring Advisory

Muzak Holdings LLC                              GPX International Tire Corporation              Lodgian, Inc.                              Undisclosed Planned
Acted as financial advisor to the               Served as the exclusive financial advisor       Advised the Company in developing          Community Developer
Represented Lenders of                          to the senior secured lenders of GPX            and implementing a restructuring of its    Advised the Company with respect to
Muzak Holdings LLC                              International Tire Corporation                  debt obligations                           restructuring alternatives and
$102 million                                    $120 million                                    $320 million                               negotiations with lenders
                                                                                                                                           $220 million


                                                                                                                                            Undisclosed Planned
                                                                                                                                            Community Developer
Creditor Advisory                       2010    Creditor Advisory                      2009     Company Advisory                    2009   Company Advisory                     2009


Debtor Advisory
Distressed M&A                                  Creditor Advisory                               Distressed M&A
                                                                                                Debtor Advisory                            Creditor Advisory
                                                                                                                                           CreditorAdvisory

Adventure Parks Group, LLC
            Parks Group, LLC                    Reliant Energy Channelview LP                   Pike Nursery Holding LLC                   Buffets Holdings, Inc.
                                                                                                                                                   Holdings, Inc.
has sold Cypress Gardens Adventure
has sold Cypress Gardens Adventure              Advised the Official Unsecured                  Advised the Company in a sale              Advised the ad-hoc committee of
                                                                                                                                           Advised the ad-hoc committee of
Park and Wild Adventures Valdosta,
Park and Wild Adventures Valdosta,              Creditors Committee during the                            five distinct transactions
                                                                                                involving fourdistinct transactions        bondholders in the development of an
                                                                                                                                           bondholders in the development of an
LLC pursuant to Section 363 of the              Company’s Chapter 11 bankruptcy                 pursuant to Section 363 of the United      out-of-court restructuring
LLC pursuant to section 363 of the                                                                                                         out-of-court restructuring
United States Bankruptcy Code                   $128 million                                    States Bankruptcy Code                     $300 million
United States
$51 million Bankruptcy Code
$90                                                                                             $8 million
                                                                                                $20 million                                $300 million
$51 million




Financial Advisor
Advisory                                2007
                                        2007    Financial Advisor                      2008     Company Advisory                    2008   Creditor Advisory                     2008


Company M&A
DistressedAdvisory
Debtor Advisory                                 Financing                                       Financing                                  Creditor Advisory

Nellson Nutraceutical, Inc.                     Comcar Industries, Inc.                         Duty Free Americas, Inc.                   Murray Energy Corporation
has been acquired by Nellson                    Advised the Company in a debt                   Advised the Company in a debt              Advised the senior lenders in a
Acquisition Co., LLC, pursuant to               refinancing transaction                         refinancing transaction                    restructuring
Section 363 of the United States                $230 million                                    $85 million                                $380 million
Bankruptcy Code
$153 million
$330 million




Company Advisory                        2007    Company Advisory                       2005     Company Advisory                    2005   Creditor Advisory                    2004




(1) Current Morgan Joseph professionals completed these transactions while at their former employers.

				
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