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/raid1/www/Hosts/bankrupt/TCR_Public/000117.MBX T R O U B L E D C O M P A N Y R E P O R T E R Monday, January 17, 2000, Vol. 4, No. 11 Headlines ACME METALS: Creditors' Committee Objects To Equity Committee AMERICAN PAD & PAPER: Files Voluntary Petition in Chapter 11 BUSH LEASING: Files Chapter 11 Petition EXCELSIOR-HENDERSON: Meeting of Creditors Set for January 31 FRUIT OF THE LOOM: Files Petition in the Cayman Islands FRUIT OF THE LOOM: Worldtex Resumes Product Shipments GRAEME LIMITED: Seeks Time To Assume/Reject Leases GULF STATES STEEL: Additional Noteholders Appointed HEDSTROM: Moody's Lowers Debt Ratings INTERNATIONAL HERITAGE: $1.48M Judgement Against Former Officer JUST FOR FEET: Announces Third Quarter Sales KAMPEN & ASSOC: Motion For Relief From Stay LAMONTS: Promotes E.H. Bulen to President LOEWEN: Motion To Sell Undeveloped Real Property in Palm Beach MEDPARTNERS: Applies To Set Hearing Date For Disclosure Statement MOBILE ENERGY: Joint Motion For Approval of K-C Settlement NEXTWAVE: Says FCC Rejects $4.3 Billion Payment PICO MACOM INC: Last Date To File Proofs of Claim PSI INDUSTRIES: Motion To Sell Assets SERVICE CORP: To Lay Off 1,141 Employees SHOE CORP: Seeks Approval of Agreement with ZCMI and The May Co. THORN APPLE: Private Sale of Real Estate TULTEX CORP: US Bank Seeks Adequate Protection UNIFORET: Moody's Downgrades Ratings USTEL: Completes Asset Sale to Unity Communications, Inc. ******** ACME METALS: Creditors' Committee Objects To Equity Committee ------------------------------------------------------------- The Official Committee of Unsecured Creditors of Acme Metals Incorporated and four of its direct and indirect subsidiaries objects and opposes the motion of certain shareholders to appoint an official committee of equity security holders of Acme. The creditors' committee states that no equity committee should be appointed because of the cost of an additional committee, the likelihood that the debtor is insolvent, and that it shareholders are adequately represented by the current Board of Directors, elected by the shareholders post-petition. AMERICAN PAD & PAPER: Files Voluntary Petition in Chapter 11 ------------------------------------------------------------ American Pad & Paper Company (OTCBB:AMPP) (AP&P) announced that it has filed a petition in the United States Bankruptcy Court in Delaware to convert the involuntary Chapter 11 petition filed by its bondholders on January 10, 2000 to a voluntary Chapter 11 proceeding under the Federal Bankruptcy Code. AP&P is seeking protection under Chapter 11 to ensure that day-to-day operations continue normally. The Company plans to pursue various strategic and financial alternatives, including asset sales and restructuring the Company's debt. As previously announced, the Company has retained Lazard Freres & Co. LLC as advisors to assist it in this process. To ensure liquidity throughout this period, AP&P has received a commitment for $65 million of debtor-in-possession (DIP) financing from a group of its current bank lenders. This commitment of DIP financing exhibits the continuing support of the Company's existing bank group. The Company expects the DIP financing to be approved by the court at a hearing early next week. Funds will then be available to the Company to fulfill future obligations associated with operating its business during the bankruptcy. "Our focus throughout this process has been to try to maximize value for all of the Company's stakeholders," stated James W. Swent III, Chief Executive Officer. "While we initially felt that progress was being made in the negotiations with the bank group and bondholders, unfortunately these discussions did not yield a consensual solution. After exploring all available alternatives, we believe that converting the bondholders' involuntary Chapter 11 petition to a voluntary Chapter 11 proceeding presents the most effective means to restructure our debt while safeguarding the interests of all involved. The DIP financing agreement will provide liquidity for our daily operations during the reorganization period and will help to ensure that our customers continue to receive the products and level of service they have come to expect from AP&P." American Pad & Paper Co., which invented the legal pad in 1888, is a leading manufacturer and marketer of paper-based office products in North America. Product offerings include envelopes, writing pads, file folders, machine papers, greeting cards and other office products. The key operating divisions of the Company are Williamhouse, AMPAD, and Creative Card. Company revenues in 1998 were $662 million, additional information is available on the Company's Website at http://www.americanpad.com. BUSH LEASING: Files Chapter 11 Petition --------------------------------------- Bush Leasing Inc., a commercial truck leasing company, has filed for Chapter 11 bankruptcy protection. Bush Leasing has more than 1,000 creditors, with both assets and liabilities in excess of $100 million, according to a preliminary filing. The company filed for Chapter 11 in the federal bankruptcy court in Dayton on Monday. The filing lists 20 of the company's largest unsecured creditors, a group owed some $1.3 million as of November. Among them: RPS Inc., Goodyear Tire & Rubber, Nissan Diesel America Inc., Western Ohio Freightliner and Fleetmasters Inc. Filing Chapter 11 under federal laws lets a company hold creditors at bay while reorganizing the business. The company believes it can pay something to its unsecured creditors, according to court documents. Chairman and Founder George F. Bush said the company tried to change the terms of $310 million in secured debt because of cash- flow problems but was forced to seek Chapter 11 protection when talks fell through. "Many of our lenders cooperated, but some refused," Bush said. "As a result, and to preserve value, we decided to file." He said the company is looking into the possible sale of some or all of its lease portfolio. Bush Leasing is a privately held commercial fleet leasing company that leases or rents vehicles in 48 states and employs 200 people. Truck leasing accounts for more than 60 percent of the business, with rentals and complete delivery service making up the rest. Other offices are in Atlanta, Los Angeles, Chicago, Cincinnati, Toronto and Philadelphia. EXCELSIOR-HENDERSON: Meeting of Creditors Set for January 31 ------------------------------------------------------------ In the case of Excelsior-Henderson Motorcycle Manufacturing Company, a meeting of creditors is set for January 31, 2000 at 9:00 AM, US Courthouse, Room 1017, 300 S. 4th St., Minneapolis, MN. Proofs of claim must be filed by April 25, 2000. Attorney for the debtor is Michael L. Meyer, Ravich Meyer Kirkman & McGrath, 80 S. 8th Street, Room 4545, Minneapolis, Mn. FRUIT OF THE LOOM: Files Petition in the Cayman Islands ------------------------------------------------------- Fruit of the Loom Ltd., which moved to the Cayman Islands last year, has filed a petition in the Caymans to bring a further bankruptcy application, according to Reuters. The company which had been based in Chicago for years, filed for bankruptcy protection in December after hurriedly shifting much of its production out of the United States. The new bankruptcy petition in the Grand Court of the British overseas territory was filed on Dec. 20, and if approved, would allow the company to wind up its affairs largely in public. Unlike the U.S. bankruptcy system, assets and liabilities of a company being "wound up" or liquidated are not in the public record under the Cayman Islands bankruptcy law. In the U.S. filing, the company listed $2.4 billion in liabilities, at least $60 million more than its assets. A hearing has not been scheduled yet to hear the Caymans application to liquidate, and offices of the company in the Caymans were closed and phone calls diverted to an El Salvador plant--one of 60 facilities where Fruit of the Loom employs about 40,000 people worldwide. (ABI 14-Jan-00) FRUIT OF THE LOOM: Worldtex Resumes Product Shipments ----------------------------------------------------- Worldtex, Inc. (NYSE: WTX) announced that it has resumed product shipments to Fruit of the Loom (FTL). FTL filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code on December 29, 1999. Worldtex acquired a manufacturing facility from FTL in December, 1998 and entered into an long-term supply agreement at that time. Barry D. Setzer, Chairman and Chief Executive Officer of Worldtex stated, "We have a good relationship with Fruit of the Loom as their principal supplier of narrow elastic fabric. They were our largest customer in 1999 at just over 14% of total revenues. We believe that this restructuring will serve FTL well as they capitalize on their brand and market share strengths in the consumer apparel industry. We anticipate that they will continue as a significant customer in 2000." Allan W. Hall, Vice President, Purchasing of Fruit of the Loom, stated that, "We are appreciative of the support shown by our customers and suppliers during this process. We believe that our relationship with Worldtex has been very successful and anticipate ongoing benefits in the future." Worldtex indicated that its accounts receivable balance with FTL was approximately $4.4 million at December 31, 1999. Barry D. Setzer, concluded that, "This receivable will be subject to the terms of FTL's reorganization plan, which has yet to be proposed. While we are evaluating the proper accounting treatment for this receivable, we are pleased to resume shipping and anticipate any new receivables will be paid on a current basis, given the new debtor-in-possession financing FTL has arranged." Worldtex also disclosed that its representative, Mitchell R. Setzer, Treasurer and Secretary, has been selected as one of seven members of FTL's official committee of unsecured creditors. This committee will represent all unsecured creditors during FTL's reorganization process. With current annual revenues of nearly $300 million, Worldtex is a market leader in the covered elastic yarn and narrow elastic fabric markets throughout the Americas and Europe. Worldtex supplies a broad range of component products to the apparel, textile, medical and specialty end-use markets. GRAEME LIMITED: Seeks Time To Assume/Reject Leases -------------------------------------------------- Graeme Limited, Semi-Tech Corporation, ISTM Investments (Barbados) Inc., debtors, seek a 90-day extension of the time within which the debtors must assume, assume and assign, or reject the offer to lease dated October 14, 1998, between Semi- Tech and Valecon Developments Inc. for the premises located at 2800 14th Avenue, Markham, Ontario, Canada. The Offer to Lease, the only lease of nonresidential real property of which the debtors are aware, is a lease for the premises from which the debtors conduct their operations. At this point, it is unclear how long the debtors will need to utilize the space leased pursuant to the Offer To Lease. Semi-Tech is current on its post-petition rental obligations under the Offer to Lease and intends to timely perform all post-petition obligations under the Offer to lease as required by the Bankruptcy Code. GULF STATES STEEL: Additional Noteholders Appointed -------------------------------------------------------------- The United States Bankruptcy Administrator appoints Ronald E. Bew, 5208 Fox Ridge Road, Roanoke, Virginia 24014 to the Official Committee of Noteholders of Gulf States Steel, Inc. of Alabama HEDSTROM: Moody's Lowers Debt Ratings ------------------------------------- Approximately $330 Million of Long-Term Debt Affected New York, January 13, 2000 -- Moody's Investors Service lowered the rating of Hedstrom Corporation's (Hedstrom) $110 million of 10% senior subordinated notes, due 2007, to Caa3 from B3 and lowered the rating of its secured credit facility, which includes $121 million of term loans and a $70 million revolving credit, to Caa1 from B1. Concurrently, the rating of Hedstrom Holdings, Inc.'s (Holdings) $29 million of 12% senior discount notes (face amount $44.6 million), due 2009, was lowered to C from Caa1. Hedstrom's senior implied rating was dropped to Caa1 from B1. The ratings outlook remains negative. The company's senior unsecured issuer rating is C. The downgrades reflect Hedstrom's disappointing operating results for the first nine months of fiscal 1999, especially the third quarter ended September 30th. Based on its year-to-date performance, the company's full-year earnings will likely fall substantially short of original expectations. Weak sales, profitability and cash flow, combined with a heavy debt burden, continues to raise concerns over the company's ongoing ability to meet its debt service obligations in a timely fashion. In addition, liquidity concerns have been heightened as result of the company's poor cash flow and the recent announcement that it may not be able to meet the fourth quarter 1999 financial covenants contained in its bank credit agreement. The latter is especially concerning due to the fact that Hedstrom entered into its Fifth Amendment to its secured credit facility on September 30, 1999. This amendment provided for less restrictive financial covenants for the third and fourth quarters. Although Moody's believes some covenant relief will be provided for the fourth quarter, there are questions concerning the company's ability to borrow under the secured credit facility in the future, the amount available to be borrowed, as well as the company's ongoing ability to meet the financial covenants contained in its bank credit agreement. The company had no unused borrowing availability as of September 30, 1999; however, its cash balance was nearly $15 million. Unused availability was approximately $8 million at December 31, 1999. For the third quarter ended September 30, 1999, Hedstrom reported an 11% drop in sales to $57 million from $64 million in the third quarter 1998. Sales from the company's Montreal Division, which accounted for approximately 20% of total sales in 1998 and principally manufacturers and markets art and crafts, game tables, and battery-operated ride-on vehicles, declined 30% period over period. The Bedford (outdoor gym sets and activity products) and ERO (licensed indoor sleeping bags, play tents and wall decorations) Divisions, which accounted for 36% and 24% of 1998 sales, respectively, also reported declining sales in the quarter. Among other things, unfavorable product sales mix, negative manufacturing variances, close out sales of certain products, and high material costs and employee-related expenses, all contributed to substantial declines in third quarter gross profit and operating income (EBIT). Third quarter 1999 EBITDA of approximately $700 thousand failed to cover total interest expense of $9 million. LTM EBITDA of approximately $33 million ($25 million of EBITA) covered Hedstrom's interest expense a mere 1.1 times (.9 times EBITA), while Holdings' interest expense was covered slightly less than 1 times (.7 times EBITA). The $29 million of senior discount notes at Holdings commence cash interest payments on June 1, 2002. Thus, Moody's has heightened its focus on the consolidated financial position of Hedstrom and its parent. Total consolidated debt at Holdings and Hedstrom was approximately $324 million at September 30, 1999, which was approximately the same as the company's LTM sales. Outstandings under the secured credit facility was approximately $175 million, or 54% of total funded debt. Based on LTM EBITDA of $33 million, Holdings' leverage is very high at nearly 10 times (13 times EBITA) while Hedstrom's is approximately 9 times (12 times EBITA). The company's balance sheet is weakened by $185 million of goodwill, which represents almost 50% of its total assets, as well as high inventory and negative retained earnings. LTM EBITA return on assets was a low 6%. Although Hedstrom's operating performance was showing some improvement during the first and second quarters of 1999, its extremely weak third quarter operating results has renewed Moody's concerns over the company's ability to generate positive earnings and sufficient cash flow to meet its debt obligations. Also, with nearly 50% of its sales to its top four accounts, Wal- Mart, Toys R Us, K-Mart and Target, the company has significant revenue concentration risk. Hedstrom reported net losses in fiscal 1998 and 1996. Notwithstanding an improvement in the company's cash flow, its debt may ultimately need to be restructured. The next coupon payment on the senior subordinated notes is due on June 1, 2000. Headquartered in Mount Prospect, Illinois, Hedstrom Corporation is a leading North American manufacturer and marketer of children's leisure and activity products. Its offerings include, among other things, outdoor gym sets, wood gym kits and slides, spring horses, playballs, arts and crafts kits, game tables and licensed indoor sleeping bags, play tents and wall decorations. INTERNATIONAL HERITAGE: $1.48M Judgement Against Former Officer --------------------------------------------------------------- A judge entered a $1.48 million default judgment against Larry G. Smith, an International Heritage Inc. officer accused of participating in one of the largest pyramid schemes ever, a Securities and Exchange Commission lawyer said today. Smith's whereabouts are unknown, Bill Hicks, an attorney at the SEC's Atlanta office, said. The SEC asked a federal judge to issue the default judgment for restitution and fines when Smith dropped from sight, said Hicks. Hicks said Smith was the last defendant in the SEC's case against Raleigh-based IHI. Atlanta U.S. District Judge Richard W. Story had ordered him to pay back $1.37 million and pay a fine of $110,000. Last August, Claude W. Savage of Charlotte, who founded IHI with Smith and Stan Van Etten, agreed to pay $50,000 to settle civil fraud charges filed by the SEC. Van Etten settled the SEC's complaint against him in June by paying $150,000 and surrendering his legal claim to $3.5 million in cash he had put toward a bond IHI posted last year. None of the former IHI officers admitted wrongdoing. IHI, which has closed, filed for Chapter 11 bankruptcy reorganization. The SEC reached agreement in June on its complaint against IHI. The complaint, filed in March 1998 in Atlanta, alleged IHI defrauded investors and generated more than $150 million in revenue by promoting merchandise with snob appeal, but said it profited mostly by drawing new entrants. About 12,600 creditors initially filed claims against IHI totaling more than $30 million. JUST FOR FEET: Announces Third Quarter Sales -------------------------------------------- Just For Feet, Inc. announced consolidated net sales of $246,570,000 for the third quarter ended October 30, 1999, representing a 9.1% increase over the third quarter consolidated net sales in the prior year of $226,008,000. For the nine months ended October 30, 1999, consolidated net sales were $693,323,000, an increase of 25.3% over consolidated net sales of $553,258,000 for the first nine months of the prior year. Just For Feet, Inc.'s consolidated comparable store sales for the third quarter of the current year declined 4.7%, as compared to an increase of 3.1% for the third quarter of the prior year. Comparable store sales in the superstore division declined 3.2% for the third quarter of the current year as compared to the third quarter of the prior year. Comparable store sales in the specialty store division declined 14.6% for the third quarter of the current year as compared to the third quarter of the prior year. For the first nine months of this year, the Company's consolidated comparable store sales declined 0.7%, as compared to an increase of 2.8% in consolidated comparable store sales for the first nine months of the prior year. There were 94 superstores and 70 specialty stores (which reduced from 118 specialty stores on October 3, 1999, in anticipation of the planned liquidation of certain specialty stores discussed below) in the comparable store sales base at October 30, 1999. As previously announced, on November 4, 1999, the Company filed a petition for relief under Chapter 11 of the Bankruptcy Code. The sales information presented above does not reflect the closure and liquidation of many of the Company's stores, as discussed below, which process was commenced after the end of the third quarter. As a result, these sales numbers are not indicative of the current status of the Company's business. In addition, the Company previously announced that Deloitte & Touche LLP had resigned as the Company's independent auditors. The Company is continuing its search for a new auditing firm. The Company expects to make major adjustments to its financial statements that will have a significant negative impact on the Company's third quarter operating results due in part to the bankruptcy filing. The Company does not intend to report operating results for the third quarter or the fiscal year ending January 29, 2000 until a new auditor has been engaged and it has reviewed such results. In addition to the adjustments resulting from the bankruptcy filing, operating results for the third quarter and the fiscal year have been and will be negatively impacted by declining gross margins resulting from the inventory liquidation initiative and the overall decrease in comparable store sales. In September 1999, the Company announced a moratorium on the signing of new store leases while it evaluated the profitability of all locations. On October 27, 1999, the Company announced that it planned to close 85 stores from the specialty store division, operated as Athletic Attic, Athletic Lady and Imperial Sports stores. On November 24, 1999, the Company entered into an agreement with Universal Capital Group to liquidate the inventory of 37 of the Company's superstores (26 of which were former Sneaker Stadium Stores acquired by the Company in July 1998 and converted to the Just For Feet format) and elected to close the two superstores located in Puerto Rico in a Company- operated liquidation. These store closures will take place in controlled liquidation processes over the next three to four months and will leave 113 superstores, 87 specialty stores and the web site www.FEET.com in the Just for Feet family. On November 8, 1999, the Company entered into a Debtor-In- Possession financing arrangement (the "DIP Agreement") with Bank of America through its Business Credit group. Borrowings under this agreement are limited to the lesser of $200.0 million or a calculated borrowing base that is a percentage of eligible inventory as defined in the agreement. As a result of the planned inventory liquidations and the store closings discussed above, the Company's eligible inventory has been greatly reduced, thereby reducing the maximum borrowing base under the DIP Agreement. This decreased availability has resulted in a critical cash flow situation for the Company and the possibility that cash on hand, cash generated from operations and funds available under the DIP Agreement will not be sufficient to meet the current obligations of the Company, which include, but are not limited to, the purchase of new product for the remaining stores. As previously announced, in September 1999, the Company engaged Wasserstein, Perella & Co. to evaluate strategic alternatives available to the Company. Wasserstein Perella has evaluated various alternatives over the past five months and continues to do so. Among the alternatives presently being considered by the Company and Wasserstein Perella are the sale of the Company or certain of its assets or the liquidation of the Company. The Company has received indications of interest with respect to the sale of all and certain of the Company's assets. The Company does not anticipate that either of the alternatives presently being considered will result in the holders of the Company's common stock realizing any value for those holdings. On January 7, 2000, the Company's common stock ceased trading on the Nasdaq Stock Market. The common stock may continue to trade in the over-the-counter market and real time quotations may become available on the OTC Bulletin Board if any of the Company's market makers file the appropriate forms and the OTC Bulletin Board authorizes such quotation. The Company has not filed its Quarterly Report on Form 10-Q for the quarter ending October 30, 1999 and there is no assurance as to when or whether the Company will file such report. Following the filing of the Company's bankruptcy petition, three separate lawsuits were filed against various current and former members of the Board of Directors, current and former officers of the Company, the Company's former auditors and various other parties. The lawsuits, which are currently pending in the United States District Court for the Northern District of Alabama, each contain different allegations generally including violations of Section 10(b) of the Securities Exchange Act of 1934 (the " Exchange Act") and Rule 10b-5 promulgated thereunder, Section 20(a) of the Exchange Act, professional negligence, insider trading, breach of fiduciary duty, common law fraud and deceit. The Company believes that each of the named defendants denies the allegations and intends to vigorously defend himself. In addition, the Company is aware of an investigation commenced by the Alabama Securities Commission, which has subpoenaed documents from the Company and its former auditors. The Company has not been informed of the subject matter or scope of the investigation. Just For Feet, Inc. operates both large format superstores and smaller specialty stores that specialize in brand-name athletic and outdoor footwear and apparel. The Just For Feet superstores feature a full line of sports related apparel, a high level of customer service and a distinctive combination of entertainment elements creating an exciting shopping experience. KAMPEN & ASSOC: Motion For Relief From Stay ------------------------------------------- Shoalwater Bay Indian Tribe d/b/a Cascade Land Depository seek relief from the stay to enable it to proceed with foreclosure of certain real property belonging to the debtor. Shoalwater Bay Indian Tribe is the holder of a Deed of Trust securing a Promissory Note executed by the debtor in favor of the Tribe for the principal amount of $1.55 million with interest. The Note fully matured on May 1, 1998 and the debtor failed to make payment. The Tribe seeks to conduct the foreclosure sale on March 3, 2000. LAMONTS: Promotes E.H. Bulen to President ----------------------------------------- Lamonts Apparel, Inc. (OTCBB:LMNTE), which operates 38 casual lifestyle and apparel stores in five Northwestern states, announced today that its board of directors had approved the appointment of E.H. Bulen, executive vice president and general merchandise manager, to president of Lamonts, effective immediately. Alan Schlesinger will continue to serve as chairman of the board. Mr. Bulen, age 49, will be responsible for all merchandising. "Ed has been part of our team for the past four years, and his talents have been underutilized," Mr. Schlesinger stated. "We need a more strategic focus in our merchandising, and Ed is the right person for the job. I will continue to maintain a leadership role in the company with an emphasis on short- and long-range strategic planning." Mr. Bulen has a 24-year career in retail merchandising and an industry reputation in accessories, men's wear, and children's wear. Prior to joining Lamonts in 1996, Mr. Bulen served as vice president of retailing for VANS, Inc. in Southern California with responsibility for managing 80 retail footwear and accessories stores. He also spent 17 years with The May Company-California, beginning as an area sales manager and rising to the position of senior vice president and general merchandise manager. Mr. Bulen holds an MBA degree and resides in Bellevue, Wash. with his family. Founded in 1967, Lamonts Apparel, Inc. operates 38 stores in Alaska, Idaho, Oregon, Utah, and Washington. The company is well- known in the Northwest as a retailer of brand name apparel, accessories and home decor from such manufacturers as Alfred Dunner, Byer of California, Jockey, Lee, Levi, Liz Claiborne, Mikasa, OshKosh, Pacific Trail, Rafaella, and Woolrich. Lamonts is headquartered in Kirkland, Wash. in the greater Seattle area and employs approximately 1,500 people. The company voluntarily filed to reorganize under Chapter 11 on Jan. 4. Additional corporate information is available at the company's web site at www.lamonts.com. LOEWEN: Motion To Sell Undeveloped Real Property in Palm Beach --------------------------------------------------------------- The Debtors ask the Court's approval to sell 37.33 acres of undeveloped real property in Palm Beach County, Florida, for $1,000,000 less a $60,000 broker commission and other closing costs. The buyers are Thien T. Mai and Mien T. Neuyen. (Loewen Bankruptcy News Issue 17; Bankruptcy Creditors' Service Inc.) MEDPARTNERS: Applies To Set Hearing Date For Disclosure Statement ----------------------------------------------------------------- The debtor, Medpartners Provider Network, Inc. requests that the court schedule a hearing on or about February 24, 2000 to consider the Disclosure Statement to accompany the Chapter 11 plan of MedPartners Provider Network, Inc. dated November 5, 1999. The date is particularly important to the debtor due to a Confirmation Deadline of March 31, 2000 provided for in the Supplemental Plan Agreement. Due to the fragile timing balance, the debtor requests that the court set any of February 23, 24 or 25 for the Disclosure Statement hearing. MOBILE ENERGY: Joint Motion For Approval of K-C Settlement ---------------------------------------------------------- Mobile Energy Services Company LLC and its affiliated debtor and the Steering Committee for the taxable bondholders and the tax exempt bondholders jointly move the court for approval of a settlement and compromise with Kimberly-Clark Tissue Company. Pursuant to the settlement, Kimberly Clark Tissue Company ("KCTC") agrees to pay the debtor a settlement payment in the amount of $3 million subject to certain adjustments. KCTC shall enter into a new Energy Services Agreement with the debtor. Among other provisions, KCTC will grant the debtor an assignable option to purchase from the existing assets constituting its pulp mill in Mobile, Alabama, those assets necessary to operate an 800 short-ton per day pulp mill as such assets have been identified by the debtors. KCTC will convey and grant certain property interests, including rights of way to be used to construct and operate the Cogen Project. The parties agree that on or before February 29, 2000, the property conveyances shall be consummated; On or before July 31, 2000, the debtors shall file a plan of reorganization. Mobile Energy's revenue was estimated at $84.6 million in 1997, the last year for which figures are available NEXTWAVE: Says FCC Rejects $4.3 Billion Payment ----------------------------------------------- According to NextWave Telecom, the actions taken by the FCC, purporting to revoke licenses granted to NextWave and seeking to put these licenses up for re-auction in July 2000, are null and void under the bankruptcy laws. In purporting to take this action, the FCC inexplicably rejected NextWave's written offer to make an immediate payment to the FCC of$4.3 billion. This represents full payment of NextWave's bid in the FCC's auctions, a bid that the FCC had earlier accepted. The FCC thus abandons the largest payment ever tendered for any spectrum licenses and an opportunity to provide the benefit of these licenses to the American public immediately. Unfortunately, the action taken by the FCC will inevitably lead to lengthy delays in the utilization of this PCS spectrum and will entail further rounds of time- consuming litigation. NextWave Telecom has done everything in its power to avert further litigation with the FCC and place its licenses into productive use immediately. The FCC has repeatedly acknowledged that NextWave's payment obligations are suspended by operation of the Bankruptcy Code. The FCC's action is a radical departure from established law and agency conduct, and an unwarranted blow to the reasonable reliance that the Company and its creditors placed on the agency's own statements in various courts. The FCC has violated the legal rights of NextWave and its creditors and investors. The Commission's action forces the Company to take all legal steps necessary to protect its rights and those of the many people and companies who have invested in its licenses. The Company has over 3000 creditors and shareholders, the majority of whom are small businesses and individuals, and it intends to defend their assets against arbitrary and illegal actions by others, including the FCC. In addition to NextWave, there are approximately twenty other small business C-block auction participants (along with all of their creditors and shareholders) that are in various bankruptcy courts across the nation fighting a similar battle. They will also be severely impacted and irreparably harmed by this Commission action. The ultimate price paid by these small businesses, which were invited by the United States Congress and the FCC to participate in the federal auctions, is incalculable. NextWave Offers to Make Full Payment in Single Lump Sum On December 16, 1999, with the overwhelming support of its creditors and equity investors, NextWave filed a modified plan of reorganization with the Bankruptcy Court which provided full payment of its bid price to the FCC, together with all accrued interest to date, under the terms of the FCC's installment payment notes. Earlier this week, in an effort to avert any legitimate rationale for further litigation, the Company proposed to satisfy its entire financial obligation to the FCC by making a lump sum payment of over$4.3 billion to the U.S. Treasury upon confirmation of its modified plan, currently scheduled for January 21, 2000. That payment, together with the $505 million of license payments already made by the Company, would total in excess of $4.8 billion and would be the largest payment ever made by a company to the United States government for any spectrum auction held to date. In addition to the full payment, NextWave has offered to provide $1 billion in free internet access to underserved populations across the United States. Unaccountably, the FCC rejected that proposal, even though it would have served the public interest by ensuring prompt utilization of the PCS spectrum covered by NextWave's licenses while providing for an immediate and complete payment in full of any amounts due. Under the FCC rules, NextWave had no obligation to pay any of the principal amounts of the C-block notes until the first quarter of 2003. Throughout NextWave's reorganization proceeding and other C-block litigation, the FCC's position has always been the same - the FCC must be paid in full or else its "auction integrity" will suffer. NextWave's offer to immediately pay the FCC the full amount of its bid price under the modified plan both protects the integrity of the auction process, and puts the C, D, E and F block licenses held by NextWave to immediate commercial use. Against this backdrop, the FCC's rejection of NextWave's offer to immediately pay the FCC the full amount of its bid price is inexplicable and arbitrary. In June of 1998, NextWave sought protection under the bankruptcy code to reorganize its business. Consistent with the purposes of the bankruptcy laws, which are designed to facilitate and support the rehabilitation of businesses, NextWave was able to prepare and finance a plan of reorganization that paid the FCC and its creditors in full and would put its spectrum into immediate use for the public benefit. The Commission's rejection of NextWave's tender of $4.3 billion is contrary to law, and amounts to an impermissible attempt to punish the Company for asserting the statutory rights made available to it by Congress. The FCC acknowledged early on that NextWave has enjoyed "bankruptcy protection from collection of C-block license payments pending reorganization of its business affairs." This position was reiterated numerous times in pleadings throughout NextWave's Chapter 11 proceedings. Now, eighteen months after giving NextWave, its creditors and investors such assurances, the FCC seeks to ignore its previously acknowledged application of the bankruptcy laws in order to revoke and reauction the Company's licenses, alleging that Next Wave missed interest payments while in bankruptcy. The FCC's action yesterday is untenable under the bankruptcy laws and unsupported by any rulings in the current proceedings between the Company and the Commission. As the FCC well knows, numerous provisions of the federal Bankruptcy Code, the Communications Act, and the Administrative Procedure Act prevent the Commission from rescinding or reclaiming NextWave's licenses in the manner it proposes. The FCC had also acknowledged throughout all the court proceedings that NextWave never defaulted on any of its payments to the FCC. NextWave paid $505 million in full compliance with its initial payment obligations, and under the Bankruptcy Code NextWave's Chapter 11 filing had the effect of automatically staying any further payment obligations during the pendency of the reorganization proceeding. The FCC now asserts that the automatic stay of the Bankruptcy Court no longer applies to it, but federal law does not authorize such a dramatic departure from fundamental bankruptcy principles. Moreover, the FCC has taken this position without any guidance on the application of the automatic stay from the courts. The FCC's attempted action seeks to bring into question the applicability of the Bankruptcy Code to federal agencies in general. Companies in other regulated industries, such as the airlines industry, have sought protection under the bankruptcy laws while they reorganize, later emerging as stronger competitors. These companies were not deterred or intimidated by federal regulators from exercising their statutorily provided rights, and consumers have benefited. NextWave's plan of reorganization is supported by $5 billion of new capital, $4.3 billion of which would be paid to the government, and vendor financing commitments that support the immediate build-out of the network. Confirmation of this plan was set for the end of January, enabling the immediate deployment of a new wireless network. Contrary to the implications of the FCC, NextWave's reorganization and business plan complies fully with the Commission's rules and timetable for build out of the spectrum. Over $100 million has been invested to date toward the build out of NextWave's network and activities have continued at a pace well within the requirements of the FCC's rules. The FCC's efforts to block the commercialization of NextWave's licenses and its election to pursue unlawful actions to punish NextWave for exercising statutorily granted rights are at odds with federal laws and with the Commission's own statements regarding the need for prompt utilization of NextWave's spectrum. In addition to thwarting the policy objectives mandated by Congress, the FCC's action callously harms other creditors and the investors, including numerous private and state pension funds, in a manner that the bankruptcy laws were specifically designed to prevent. We are confident that the courts will respond appropriately to the FCC's unlawful action and that NextWave's rights will be vindicated. PICO MACOM INC: Last Date To File Proofs of Claim ------------------------------------------------- The US Bankruptcy Court for the Central District of California, Los Angeles Division, set the last date to file proofs of claim or interest. Any person or entity that asserts a claim against or interest in the debtor must file a proof of claim on or before March 1, 2000. PSI INDUSTRIES: Motion To Sell Assets ------------------------------------- The US Bankruptcy Court for the Southern District of Florida, West Palm Beach Division entered an order finding that the terms and conditions of the Asset Purchase Agreement are approved, and the debtor is authorized to sell the assets to M Group USA Inc. SERVICE CORP: To Lay Off 1,141 Employees ------------------------------------------------------------------------- 13-Jan-2000-HOUSTON (AP) - Service Corp. International said it will lay off 1,141 employees and take a $273 million restructuring charge, causing the world's largest funeral and cemetery company to miss its earnings estimate for the current quarter. Houston-based SCI said it will fall short of its previous earnings estimate of 14 to 18 cents per share for its fiscal fourth quarter. Quarterly and fiscal year-end results are due out in February. SCI's stock has lost about four-fifths of its value in the past 12 months after a series of earnings warnings and shortfalls. Analysts say SCI and other funeral companies expanded too aggressively by buying up independent operations. The layoffs, announced Wednesday night, will cost SCI $151 million in severance pay. Of the workers to be fired, 385 are based in North America. Many of them are former owners of independent funeral homes and cemeteries bought out by the company. They had been kept on as employees, hired as consultants or signed to noncompete contracts. Another 715 international operations employees will be released, many of those from the company's offices in France. The company said the corporate office in Houston will lose 33 workers, and eight executives will be laid off. SCI plans to sell about 50 funeral homes or cemeteries and approximately 45 parcels of undeveloped cemetery property or excess land. The reduction of assets and loans to their estimated value, lease terminations and technology costs account for the rest of the restructuring costs. In addition to the $273 million restructuring charge, SCI said it would post other one-time charges of about $39 million. The company said the changes would result in before-tax savings of $45 to $50 million this year and $60 to $65 million a year after 2000. SHOE CORP: Seeks Approval of Agreement with ZCMI and The May Co. ---------------------------------------------------------------- Shoe Corporation of America, Inc. and SCOA License, Inc., debtors seek approval of SCOA's and SLI's execution of a Memorandum Agreement with Zion's Co-Operative Mercantile Institution ("ZCMI")and The May Department Stores Company for the sale of certain fixtures and equipment and the compromise and settlement of claims between the parties. The debtors shall cease operations of the ZCMI Shoe Departments as of the close of business on January 15, 2000. SCOA Will sell to May and May will purchase all fixtures for $591,055 and all supplies for $37,777. In exchange for the sale of the fixtures and supplies, SCOA will receive total cash consideration of $628,832. This agreement represents a compromise of claims, and the debtors seek court approval of the agreement. SYSTEMSOFT CORP: Notice of Hearing On Disclosure Statement ---------------------------------------------------------- A hearing will be held on January 21, 2000 at 9:30 AM at the Harold Donohue Federal Building and Courthouse, 595 Main Street, Worcester in Courtroom 3. The purpose of the hearing will be to consider and rule on the adequacy of the information contained in the Second Amended Disclosure statement of Systemsoft Corporation. THORN APPLE: Private Sale of Real Estate ---------------------------------------- When the debtor sold substantially all of its assets to IBP, Inc. in August 1999, it did not sell the parcels of real estate related to the Frederick Fresh Meats plant located in Detroit, Michigan. The highest offer it has received for the real estate was from Metropolitan Marketplace for $1.5 million. The debtor states that there is a sound business reason for the sale of the real estate and the price to be received was the result of arms length good faith negotiations on behalf of the debtor. The debtor now seeks court approval of the sale. TULTEX CORP: US Bank Seeks Adequate Protection ---------------------------------------------- US Bank NA in its capacity as Indenture Trustee, as the debtors' largest creditor, states that it is entitled to have its interests protected and not to bear disproportionately the risk that the debtors' reorganization will fail. According to the Bank, the DIP order does not adequately protect the Trustee's interest in its collateral in that it fails to protect the Trustee from the certain decline in the value of such collateral. The equipment has and will continue to depreciate and the real estate is declining in value. The Trustee seeks further adequate protection in the Collateral. The Trustee states that it is clearly entitled to adequate protection, including periodic payments. The value of the Noteholder Priority Collateral is declining and there is no adequate provision in the DIP Order to protect the Trustee from the economic risk. Further, the Bank states that the Noteholders' junior lien on the remaining Collateral is also being eroded as increasing amounts of debt are piled on top of the Noteholders' lien and the assets of the estates are depleted toward the end of reducing the Banks' debt. The Trustee seeks adequate protection payments, payment of interest, professionals' fees, payment of proceeds of notheholder priority collateral, a replacement lien for Noteholders, and maintenance of collateral, reporting of notices, access to collateral, obligations in respect of noteholder priority collateral and the right to exercise remedies. UNIFORET: Moody's Downgrades Ratings ------------------------------------ Approximately $125.0 Million of Debt Securities Affected. New York, January 13, 2000 -- Moody's Investors Service lowered the debt ratings on Uniforet's senior secured notes to Caa1 from B3. The ratings downgrade reflects the worsening liquidity position of the company, exacerbated by ongoing losses stemming from the high operating cost of one of the company's major facilities and a weak pricing environment in uncoated groundwood and lumber. Ratings downgraded are: Backed Senior secured notes, from B3 to Caa1 Senior implied rating: from B3 to Caa1 Issuer rating: from Caa2 to Caa3 Low groundwood paper prices and poor financial performance at the company's Tripap mill have contributed to a weakening in results and the use of most of the Tripap available liquidity. Two of Uniforet's four uncoated groundwood machines at its Tripap mill have been shut down for over six months due to a weak order file. This has caused a related buildup in inventory at the Port Cartier pulp mill, resulting in utilization of most of the availability under the company's existing credit facilities. The company has engaged Tembec as a sales agent for its market pulp, but progress has been slow, and the company has not been able to capitalize on higher pulp prices. Despite some recent positive movement in groundwood paper prices, we believe the company may have difficulty in meeting its scheduled April coupon payment. The company has announced that it has engaged Banc of America Securities LLC as a financial advisor. However, because of the company's current weak liquidity, the company may be constrained in building its winter log inventory, which could restrict operations and cash generation in the spring. Uniforet is a Montreal, Quebec based manufacturer of lumber, pulp, and groundwood papers. USTEL: Completes Asset Sale to Unity Communications, Inc. --------------------------------------------------------- UStel, Inc. (OTC:USTL) (OTC:USTLW) UStel, Inc. has completed the sale of its cellular retail telecommunications assets. Under the terms of the Asset Purchase Agreement, Unity Communications, Inc. purchased all of the cellular retail telecommunications assets of UStel for approximately $1.9 million in cash, subject to certain adjustments. The sale of the assets to Unity, completes UStel's efforts to sell its operating assets which are subject to the protection of Chapter 11 of the United States Bankruptcy Code. All of the proceeds from the sale of such assets will be applied toward partial payment of a term loan, revolving credit facility, equipment loan and debtor-in-possession loan from UStel's secured lenders, Goldman Sachs Credit Partners L.P. and Coast Business Credit. As a result, the Company believes that no proceeds from the sale to Unity will be available to satisfy claims of the unsecured creditors and shareholders. UStel continues to evaluate whether any other claims either exist or should be pursued on behalf of the unsecured creditors and shareholders. UStel will continue the process of winding down its operations and at an appropriate time may consider converting the Bankruptcy case into a Chapter 7 liquidation. ********* A listing of Meetings, Conferences and Seminars appears each Tuesday in the TCR. 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