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/raid1/www/Hosts/bankrupt/TCR_Public/000221.MBX T R O U B L E D C O M P A N Y R E P O R T E R Friday, February 18, 2000, Vol. 4, No. 35 Headlines ABCO: Peerless Acquires ABCO Industries' Assets AMERICAN LAMINATES: Files Chapter 11 Petition BIG SMITH BRANDS: Order Authorizes Committee Counsel BOSTON CHICKEN: Stockholders form Independent Committee CHARTER BEHAVIORAL: Magellan Comments on Sale CHARTER BEHAVIORAL: To Sell Assets Through Bankruptcy EAGLE GEOPHYSICAL: Hearing To Consider Confirmation of Plan GUY'S: Judge OKs Plan To Fund Payroll HARVARD INDUSTRIES: Announces Sales and EBITDA For Quarter IMPERIAL HOME DECOR: Seeks To Retain Deloitte & Touche INCOMNET: Joint Chapter 11 Plan INCOMNET: Seeks Extension of DIP Financing IRIDIUM: Conflicting Reports About Japanese Company's Interest MEDPARTNERS PROVIDER: First Amended Chapter 11 Plan MONDI OF AMERICA: Seeks Approval of Lease Termination Agreements NATIONAL HEALTH & SAFETY: First Amended Disclosure Statement PARACELSUS HEALTHCARE: Moody's Says Outlook is Bleak PHYSICIAN COMPUTER: Summary of Second Modified Joint Plan PREMIER SALONS: Seeks Authority to Employ and Retain PwC PRIMARY HEALTH: Seeks Extension of Exclusivity PRINCETON HOSPITAL: Court Approves Accountants RHYTHMS NETCONNECTIONS: Affirms CCC-Plus Senior Unsecured Debt SINGER: Claims Bar Date THIS END UP: Announces Chapter 11 Filings BOND PRICING FOR WEEK OF February 14, 2000 ********* ABCO: Peerless Acquires ABCO Industries' Assets ----------------------------------------------- On February 16, 2000, the United States Bankruptcy Court in Lubbock, Texas approved the sale of substantially all the assets of ABCO Industries, Inc. to a wholly owned subsidiary of Peerless Mfg. Co. (Nasdaq: PMFG). ABCO Industries, which is in Chapter 11 bankruptcy, is a manufacturer of packaged boilers for industrial use located in Abilene, Texas. Peerless Mfg. Co. is a designer and manufacturer of environmental protection equipment and separation and filtration equipment used in the electric utility, petroleum, natural gas and petrochemical industries. ABCO reported $23 million in sales for 1997 and $16.5 million for 1998. ABCO sales for 1999 were not disclosed. The parties intend to close the asset sale in the next several weeks. AMERICAN LAMINATES: Files Chapter 11 Petition --------------------------------------------- According to a report in The Kansas City Star on February 15, 2000, American Laminates Inc., a Kansas City, Kan.-based fixtures and countertop manufacturer, filed for Chapter 11 protection Friday, apparently after running into difficulties with its principal lender. Documents filed with the bankruptcy petition show that Wells Fargo is owed $2.5 million. According to the report, the company's bankruptcy attorney, John Lewis Jr. of Levy & Craig, said Lewis said, American Laminates had obtained a $350,000 line of credit from its main lender, enabling it to continue operating. The closely held company was founded 30 years ago and is owned by members of the Barksdale family. Credit records show that the company had as many as 170 employees a couple of years ago and sales of between $10 million and $20 million annually. The company makes display and storage products, custom-made countertops and other store fixtures. In addition to Wells Fargo, creditors of the company and the amount American Laminates says it owes them include Rugby Building Products in Kansas City, $441,652; Pyramid Products in Kansas City, $87,480; Case Supply Inc. in Kansas City, $80,574; and the Unified Government of Wyandotte County and Kansas City, Kan., $77,248. BIG SMITH BRANDS: Order Authorizes Committee Counsel ---------------------------------------------------- The US Bankruptcy Court for the Southern District of Florida entered an order on February 3, 2000 granting the Official Committee of Unsecured Creditors of Big Smith Brands, Inc. authority to employ Brian K. Gart and Greenberg Traurig, PA as its counsel. BOSTON CHICKEN: Stockholders form Independent Committee ------------------------------------------------------- Stockholders of Boston Chicken Inc., listed on the National Quotation Board under the symbol BOSTQ, Golden, Colorado, are joining together to form an independent stockholders committee. The committee will promote the interests of the stockholders during the company's current chapter 11 reorganization process. The committee has created a web site at www.chicken-stock.com to distribute information and assist with stockholder registration. "We feel that the Boston Chicken/Boston Market(R) concept has great potential and we want to be involved as that potential is fully realized," said committee spokesperson Neal Nelson. Stockholders that do not have access to the world wide web may contact the committee spokesperson directly at: Neal Nelson & Associates, 330 North Wabash, Chicago, Illinois 60611, Phone: 312-755-1000, Fax: 312-755-1010. This stockholder committee is totally independent and is not sponsored by, associated with or endorsed by Boston Chicken, Inc., any of its officers or affiliated companies. Boston Chicken and Boston Market are trademarks of Boston Chicken, Inc. Golden, Colorado. CHARTER BEHAVIORAL: Magellan Comments on Sale --------------------------------------------- Magellan Health Services, Inc., (NYSE:MGL) issued the following statement in response to the bankruptcy filing by Charter Behavioral Health Systems: "While Magellan Health Services holds a 10 percent stake in Charter Behavioral Health Systems, it is important to emphasize that Magellan's financial statements reflect no book value related to such investment and we anticipate no material financial or operational impact on Magellan as a result of this event. "Nonetheless, we are following the news of the bankruptcy to ensure no disruption to services to our members. Charter facilities represent a small part of the provider network serving Magellan Behavioral Health's managed care members. As standard practice, Magellan staff monitor the progress and medical needs of members being treated in any behavioral health facility to see that each and every patient receives quality care. Since psychiatric facilities may have difficulties from time to time, we have standard procedures in place to address the needs of patients when these circumstances occur. Magellan staff work closely with the medical and administrative leadership of any facility to continue care for members with no disruption. "As part of this standard practice, Magellan Behavioral Health's local management have been working with affected Charter facilities in their regions to make treatment arrangements that meet the individual needs of patients who may be affected. We are very confident of our ability to serve members through other providers, should that be necessary. "We anticipate that we will continue to use Charter facilities as they continue to demonstrate that they can provide quality care to patients. We are hopeful and confident that Charter's planned reorganization will achieve their goal of being a strengthened organization and provider." CHARTER BEHAVIORAL: To Sell Assets Through Bankruptcy ----------------------------------------------------- Charter Behavioral Health Systems, LLC announced that in order to ensure continued services to patients in its core facilities, the company has filed for a voluntary Chapter 11 reorganization under which it intends to sell its core business in the Delaware Bankruptcy Court. Charter, which recently announced the closure of 33 of its facilities, said that, after a thorough analysis of all options to enhance profitability in operations, it concluded that the only alternative was to seek a buyer for its core business as part of its overall plan to reorganize its operations at these facilities. The core business consists of the operating assets which reside with Charter's 37 hospitals that are currently open and admitting patients. The sale will be achieved through a Chapter 11 bankruptcy. The sale is subject to court approval and is expected to be the subject of a bankruptcy bidding process in Delaware. COPI Healthcare, a wholly owned subsidiary of Crescent Operating, Inc. (Nasdaq: COPI) ("COPI"), has entered into an agreement with Charter to purchase the core business. Although Charter is unable to fully fund all benefits to its staff who were the subject of the pre-petition closures and layoffs, the budget for the bankruptcy case does provide for full salary and benefits to all who are employed by the ongoing core business. Charter has secured confirmation of its existing credit facility through the sale process. Charter noted that it has sufficient cash on hand for it to continue normal operations. The budget for the bankruptcy provides for current payment of all post- petition interest to the banks, rent to the landlord for the core facilities and all invoices for goods and services delivered after the filing. Charter said that its Chapter 11 filing would not affect the quality of Charter's clinical programs and operations, and the payment of employee salaries, wages and benefits for employees at core facilities. Charter will continue to operate its remaining 37 facilities on a business as usual basis and there will be no disruption of care for the over 2,000 inpatients and thousands of outpatients currently being cared for daily by Charter. Charter has authorized Crescent Real Estate Equities Company and its affiliates (NYSE: CEI) ("Crescent"), the landlord and owner of the healthcare facilities, to continue to market and sell the closed health care properties which are subject to the master lease with Crescent. Crescent has also indicated a willingness to lease the real estate comprising the core facilities to a new purchaser of such facilities. As part of the operational restructuring previously announced on January 27, 2000, Charter closed or consolidated 33 behavioral health facilities throughout the country in addition to a corporate office reduction in overhead and staff. The operational restructuring left Charter with 37 operating health facilities and approximately 5,000 employees on a full-time equivalent basis. Charter will continue to remain the largest private provider of behavioral health services nationwide. "Today's action is a critical step in allowing our core business to continue to develop and provide innovative programs and services and lead the industry in meeting the changing needs in behavioral health care," stated Mike French, president and CEO of Charter. He further added, "These decisions have been very difficult as they have resulted in the loss of jobs for some of our staff and the loss of care to some of the communities that we have served for many years." In September 1999, Charter completed an ownership transaction in which Magellan Health Services (NYSE: MGL) transferred its remaining hospital-based assets to Charter and Crescent Operating, Inc. increased to 90% its economic interest in Charter. Charter Behavioral Health Systems is the largest private provider of behavioral health care services with 37 facilities in 21 states. EAGLE GEOPHYSICAL: Hearing To Consider Confirmation of Plan ----------------------------------------------------------- On March 10, 2000 at 9:30 AM a hearing will commence before the Honorable Mary F. Walrath, US Bankruptcy Court for the District of Delaware, 824 North Market Street, 6th Floor, Wilmington, Delaware 19801 to consider confirmation of the first debtor's plan of liquidation amended dated February 10, 2000. GUY'S: Judge OKs Plan To Fund Payroll ------------------------------------- THE KANSAS CITY STAR reports on February 16, 2000, That a bankruptcy judge approved an order funding last week's payroll for Guy's Foods, which sought Chapter 11 bankruptcy protection Monday. The order authorizes LaSalle National Bank of Chicago, the company's principal lender, to advance $528,455 to Guy's to pay salaried employees, who didn't get paid Friday. Guy's shut down Friday after the bank refused to continue financing the operation unless the Liberty company finds a buyer. Family Snacks Inc., the company that operates Guy's, has lost $5.75 million in the last 16 months and projects at least $1 million in losses over the next 30 days, according to documents filed in U.S. Bankruptcy Court in Kansas City. Guy's has been in default under its revolving credit agreement with LaSalle since Sept. 24 and owes the bank $14 million in principal and interest. LaSalle has a security interest in virtually all of the snack food company's assets. Guy's has about 1,000 employees, including 600 at its 325,000-square-foot plant in Liberty. Most of those employees, including several hundred members of United Food and Commercial Workers Local 211, have been idle since the shutdown. At a hearing Tuesday on Guy's payroll motion, attorneys for Guy's and LaSalle told U.S. Bankruptcy Judge Frank Koger that the company had been looking for a buyer since July and that at least one party had expressed interest. The attorneys did not identify the party, nor did a Guy's official. LaSalle has indicated that it might provide additional financing for Guy's beyond Friday's payroll, but only if the prospect shows a strong interest in buying the company's assets. Unless a buyer is found soon, Guy's is almost certain to close permanently, throwing 1,000 employees out of work and ending a business founded more than 60 years ago by Guy Caldwell. Company officials have been mum about what led to the financial impasse. But industry insiders have speculated that the executives who bought Guy's from Borden Inc. in November 1994 may have paid too much for it. Borden, which acquired Guy's in 1979, decided to get out of the snack food business and sold Guy's to a group led by Guy's current president and chief executive officer, Victor R. Sabatino. Also, Guy's and other regional snack food producers face stiff competition from industry juggernaut Frito-Lay Inc., a Pepsico unit that dominates the market in most of the country. "There's a behemoth out there, and it just rolls and rolls and makes it tough for the little guy," said industry consultant Don Petty, a former Frito-Lay research scientist. "They manage their business well, they make quality (products) and they distribute them right." Petty, based near Dallas, said Frito-Lay owned about 75 percent of the Dallas salty snack market "and probably around 50 to 60 percent in the rest of the country." "The only way the little guy can stay in business is to make a chip as good as theirs, price it better and, most important, tell people about it," Petty said. "And Frito-Lay has money out the ears to tell people about their product." Another factor hurting smaller players such as Guy's is the "slotting" fee that food producers pay to supermarkets to ensure that their products are carried. "Obviously, the larger companies have more leverage than the smaller ones," said Laurie Gorton, executive editor of Baking and Snack, a Kansas City-based publication. "When you have fixed costs like slotting fees to deal with, that comes right off the bottom line of a company like Guy's. And then there are the costs of direct-store delivery, the drivers who stock the shelves. That's an added cost of doing business." HARVARD INDUSTRIES: Announces Sales and EBITDA For Quarter ---------------------------------------------------------- Harvard Industries, Inc. (NASDAQ:HAVA), a manufacturing company which emerged from Chapter 11 bankruptcy in November, 1998, announced sales and EBITDA for the three months ended December 31, 1999, of $83.6 million and $4.2 million respectively. As a result of its emergence from Chapter 11 and the prospective effects of "Fresh Start Reporting", the Company does not believe that its historical results from operations are necessarily indicative of its results as an on-going entity. However, for comparative purposes the two-month period ended November 29, 1998 (pre-emergence) has been combined with the one-month period ended January 3, 1999 (post-emergence) into a pro-forma three-month period. On a pro forma basis for the corresponding three-month period a year earlier, the Company had sales and EBITDA of $80.7 million and$1.2 million, respectively, after adjusting the prior period sales and EDITDA by $48.5 million and $6.3 million respectively for operations divested in the twelve-month period ended September 30, 1999. These divestitures were made to enable the Company to advance its diversification. Harvard believes that EBITDA, defined as earnings before interest, income taxes, depreciation, amortization, reorganization items, extraordinary items and one-time items such as the gain or loss on the sale of operations, is the best benchmark of its performance since it bears a closer relationship to real cash earnings than earnings per share. Roger Pollazzi, Chairman and Chief Executive Officer, noted, "The Company is making excellent progress in its renewal effort. We are on plan in developing our higher value added business. Our operating margins are improving and our balance sheet is debt- free - and thus interest expense declined $2.4 million year-to-year." Harvard Industries, Inc. designs, develops, and manufactures a broad range of components for OEM manufactures and the automotive aftermarket, as well as aerospace and industrial and construction equipment applications worldwide. The Company has approximately 2,500 employees at 10 plants in the United States and Canada. IMPERIAL HOME DECOR: Seeks To Retain Deloitte & Touche ------------------------------------------------------ The debtors, The Imperial Home D�cor Group Inc., et al., see to retain Deloitte & Touche LLP as auditors, accountants and tax, business information system and compensation consultants. Some of the services that the firm will provide include: Provide advice concerning key employee retention and incentive compensation issues and plans; Perform audits of the annual consolidated financial statements of the debtors and of certain of the debtor's employee benefit plans' Perform limited reviews of the debtors' quarterly financial statements; Provide various tax services; Assist with such other accounting and tax matters as the debtors request; Render business information system consulting services as requested by the debtors; Assist the debtors with reports, statement and schedules of financial affairs and monthly reports. The debtors also filed an application to retain Conway, Del Genio, Gries & Co. LLC as financial advisors. However, the firms will not duplicate services. The firm has agreed to waive its rights to assert or collect a $2 million prepetition claims. The firm was paid approximately $2.2 million by the debtors during 1999 for professional services. The hourly rates of partners of the firm range from $400 to $650 per hour. Professional fees for this engagement are estimated to be $60,000 to $80,000. INCOMNET: Joint Chapter 11 Plan ------------------------------- To remedy the problems that led to the debtors' Chapter 11 filings, the debtors focused on improving operations, meeting post-petition obligations and seeking a capital infusion. ICC has already measurably improved its operations. ICC outperformed its operating budget by approximately $1.1 million. Its positive performance stems from $500,000 in unanticipated income relating to ICC's MLM program; administrative expense reductions of $250,000 per month; and $173,000 in monthly payroll reductions. ICC expects that its performance will continue improving as the company continues restructuring its operations. A new long- distance rate agreement with WorldCom should result in a monthly savings of approximately $200,000. This rate reduction is a major operational achievement and should materially contribute to ICC's reorganization. ICC show that it should begin to generate positive income by December 2000. Because nearly all of ICC's cash is derived from subscriber collections, ICC's most valuable asset is, without question, its subscriber base. ICC has approximately 82,000 subscribers who are parties to service contracts. These subscriber contracts generate between $2.2 and $2.4 million per month in revenues. ICC estimates that it had approximately $3.9 million in accounts receivable as of November 30, 19999. The debtor estimate that on May 1, 2000 the balance on their financing from Ironwood will be $4 million. Under certain agreements, Gold & Appel asserts a $1.5 million secured Claim against the debtors. Ironwood asserts a $16.8 million in secured claims against ICC. A brief summary of Treatment of Claims follows: Class 1 - Ironwood's Secured Claims Under the DIP Financing - Impaired Class 2 - Gold & Appel's Secured Claims - Impaired Class 3 - Secured Tax Claims - Unimpaired Class 4 - Ironwood's Secured Claims against ICC's Parent - Impaired Class 5 - Other Secured Claims - Unimpaired Class 6 - Ironwood's Remaining Claims against ICC - Impaired Class 7 - ICC Unsecured Claims - Impaired Class 8 - ICC's Parent Unsecured Claims - Impaired Class 9 - ICC Administrative - Convenience Claims - Impaired Class 10 - ICC's Parent Administrative - Convenience Claims - Impaired Class 11 - Priority Claims - Unimpaired Class 12 - Section 510(b) Claims Impaired Class 13 - ICC's Existing Common Stock IMpaired Class 14 - ICC's Parent's Existing Preferred Stock - Impaired Class 15 - ICC's Parent's Existing Common Stock - Impaired INCOMNET: Seeks Extension of DIP Financing ------------------------------------------ The debtor, Incomnet, Inc., Incomnet Communications Corporation f/k/a National Telephone & Communications Inc. seeks approval of an extension of DIP Financing until April 21, 2000. ICC does not expect to emerge from bankruptcy substantially before May 1, 2000. Ironwood Telecom LLC, provider of the financing is now negotiating the terms of such extension with ICC. IRIDIUM: Conflicting Reports About Japanese Company's Interest --------------------------------------------------------------- DDI Corp., Japan's third largest telecommunications company, said today it may dissolve struggling satellite phone operator Nippon Iridium Corp., the Japanese arm of U.S.-based Iridium LLC, which is in chapter 11, according to a newswire report. This report, however, conflicts with another report from Nippon Iridium shareholder, Kyocera Corp., which said it has no plans to pull out of the Iridium business. DDI is Nippon Iridium's largest shareholder with a 35.7 percent stake, and Kyocera has a 10 percent stake. DDI has not said when it would dissolve Nippon Iridium, which as 4,000 Japanese subscribers. Kyocera said that the "media report was incorrect" that it would pull out of the business. A spokesperson for the company said, "We expect Iridium LLC's restructuring to be successful." (ABI 17-Feb-00) MEDPARTNERS PROVIDER: First Amended Chapter 11 Plan ----------------------------------------------------------------- MedPartners Provider Network, Inc., a California corporation propses a First Amended Chapter 11 plan of MedPartners Provider Network, Inc. dated February 3, 2000. The plan is a liquidating plan pursuant to which all of the assets of the debtor are to be distributed to creditors in accordance with priorities established by the Bankruptcy Code. The plan is designed a s a means for implementation of the Settlement agreement and the Supplemental Plan Agreement, which, in general terms, are intended to combine to provide for, among other things, supplemental funds to be made available from MPN's parent company, Caremark Rx, Inc., f/k/a MedPartners, Inc. for additional payments to the holders of eligible Allowed Claims that elect to participate in the benefits of the Settlement Agreement by executing and returning the applicable release documents that accompany this plan. MONDI OF AMERICA: Seeks Approval of Lease Termination Agreements ---------------------------------------------------------------- The debtor, Mondi of America, Inc. seeks authority to enter into lease termination agreements at the following locations: Beverly Center 131 North La Cienega Boulevard, #726 Los Angeles, CA Cedarhurst Cedarhurst Center 445 Central Avenue Suite 102 Cedarhurst, NY La Jolla 7874 Girard Avenue La Jolla, CA Palm Beach 238 Worth Avenue Palm Beach, Florida Sarasota St. Armands Circle 362 John Ringling Boulevard, suite B Sarasota, Florida Short Hills The Mall at Short Hills 1200 Morris Turnpike, Suite A216 Short Hills, NJ Stamford Stamford Town Center 100 Greyrock Place Stamford, CT White Plains Promenade Mall The Westchester 125 Westchester Avenue, Space #1015 White Plains, NY Woodland Hills Promenade Mall 6100 Topanga Canyon, Blvd. 2120 Woodland Hills, CA Oklahoma City 50 Penn Place, suite R213 Oklahoma City, OK The Borgata 6166 North Scottsdale Road Suite 700 Scottsdale, Arizona In an effort to maximize value for their creditors and estates, the debtors have determined that the disposition of the leases will be subject to higher and better offers. To solicit such offers, if any, the debtors will ask interested parties to submit bids for any or all of the leases no later than February 18, 2000 at 4:00 PM. Bids must be accompanied by an earnest money deposit of at least $10,000. NATIONAL HEALTH & SAFETY: First Amended Disclosure Statement ------------------------------------------------------------ AS of the petition date, the debtor was losing cash at the rate of approximately $100,000 a month from the expenses necessary to support the operations of the POWERx Network and the other business operations of the debtor. Through its negotiations with the co-plan proponents, the debtor has negotiated an arrangement whereby approximately $2.8 million in new tangible assets will be infused into the debtor which generates positive cash flow to fund the continuing development actions of the debtor and its product lines other than the POWERx Network. The tangible assets consist of $675,000 in cash, real estate valued ant $1.046 million and a shopping center valued at $1.03 million. These assets would also be available to pay unsecured creditors in the event of liquidation of the company. In exchange for such new capital infusion, the co-plan proponents will receive newly issued stock consisting approximately 73% of the outstanding equity capital ownership of the reorganized debtor. The following briefly summarizes the treatment of allowed claims under the plan. Class 1 - Secured Tax Claims (ad valorem) approx. $0 Class 2A - Secured Claims of Management approx. $300,000 secured & $671,000 deficiency - Demand Note at 10% (12% default) Class 2B - Secured Claims of Royal Bank (approx. $35,281 fully secured - Matured September 30, 1990 - Prime plus 2% Class 2C - Other Secured Claims approx. $15,000 Class 3 - Priority Non-Tax Claims - approx. $13,808 - generally paid in full Class 4A - Convenience Claims approx. $5,308 paid in full Class 4B - General Unsecured Claims approx. $2,597,609 - pro rata share of 980,000 Equity units less 1 equity unit for each $3 in claims treated in Classes 1,2B, 2C, 3 and 4A. Equity units consist of one Series A preferred share and one class A warrant. Class 4C - Unsecured claims of management - subordinated to Class 4B and paid only to the extent the equity units issued to Class 4B are not exhausted. Class 5A Preferred Shareholders - Receive one Series B Preferred Share for every $3 in liquidation preference in preferred shares (not to exceed a total of 200,000 series B preferred shares. Class 6A Common shareholders - 1 for 10 split (Not to exceed 6 million New Common shares) Class 6B Common Warrant Holders - Receive nothing under plan. Class 6C - Common Option Holders - Receive nothing under plan. Class 7 - Other Interests - Receive nothing under plan. Class 8 - Disallowed claims, subordinated claims, securities law claims and Penalty claims - Receive nothing under plan. PARACELSUS HEALTHCARE: Moody's Says Outlook is Bleak ---------------------------------------------------- Moody's Investors Service downgraded the ratings of Paracelsus Healthcare Corporation ("Paracelsus"). The ratings affected are as follows: $325 million senior 10% senior subordinated notes due 2006 from B3 to Caa3 Senior implied rating from B1 to Caa1 Senior unsecured issuer rating from B2 to Caa2 The rating outlook remains negative. Paracelsus is an owner and operator of acute care hospitals. The rating action follows the company's announcement that it would not be making its scheduled interest payment of $16.25 million on its $325 million 10% senior subordinated notes due February 15, 2000. The interest payment is subject to a 30 day grace period that expires on March 16, 2000. The company has retained Chase Securities Inc. as a financial advisor to explore capital structure alternates and plans on engaging in discussions with the subordinated note holders in the near term. Despite the company's significant restructuring efforts in recent months, which have included substantial asset dispositions and the repayment of all amounts under its senior credit facilities, Paracelsus remains highly leveraged. Currently, estimated total debt (adjusted to include off balance sheet financings and lease obligations) is in excess of 7 times estimated run rate EBITDAR. In addition, the company's liquidity position is extremely tight, as it currently has no revolving credit facility and is reliant on cash on hand and cash from operations to fund its working capital needs. Moody's further notes that given its significant debt burden, the enterprise value of the company may not be sufficient to repay bondholders in full in a distressed scenario. The negative outlook reflects uncertainty regarding both the company's ability to successfully reorganize its capital structure, as well as its longer term strategies now that its divestiture program is completed. In addition, while trends at the company's remaining facilities appear relatively stable, the company will continue to face a challenging operating and reimbursement environment in the acute-care hospital sector. Paracelsus Healthcare Corporation, headquartered, headquartered in Houston, TX, owns or operates 10 hospitals in seven states. PHYSICIAN COMPUTER: Summary of Second Modified Joint Plan --------------------------------------------------------- The plan is a plan of reorganization proposed by the debtors. Under the plan, substantially all of the debtors' assets will be sold to the purchaser pursuant tot he Agreement. The proceeds of the sale will be used to satisfy Allowed Claims of unsubordinated creditors in full. The debtors estimate that after payment to unsubordinated creditors and preferred stock interests, and after satisfaction of administrative expenses and priority tax claims, payment of the class action settlement, and establishment of certain reserves for the wind-down and liquidation of debtors, depending upon the purchase price adjustment to be performed under the purchase agreement, approximately $1 million to $1.5 million may remain for distribution to Class 7A and 7B. Class 7A consists of the Claims statutorily subordinated under section 510 of the Bankruptcy Code. Class 7B consists of Equity Interests, which will be deemed canceled and of no further force and effect as of the Effective Date. However holders of Class 7B interests shall receive their pro rata share of the equity interests percentage of the Balance. The debtors also will retain Causes of Action. PREMIER SALONS: Seeks Authority to Employ and Retain PwC ----------------------------------------------------------------- The debtors, Premier Salons International Inc., et al. seek court authority to employ and retain PricewaterhouseCoopers LLP as accountants and tax advisors for the debtors. The firm will provide the following services: Render tax services related to the annual corporate tax returns; Assist and consult on all tax compliance matters' Prepare for, attend and participate in meetings, and appear before the court, as requested by the debtors; Provide such other accounting and tax advisory services as may be required by the debtors' and Perform a diagnostic analysis of the debtors' books and records to ascertain if the debtors have overpaid any creditor or are entitled to any refunds of rebates. PwC has agreed to be compensated generally on an hourly basis and the debtors have agreed to pay the firm of a commission equal to 50% of any overpayments, refunds or rebates recovered by the debtors as a result of the firm's free diagnostic analysis of the debtors' books and records. The firm's hourly rates for partners range from $475 to $580. PRIMARY HEALTH: Seeks Extension of Exclusivity ---------------------------------------------- Primary Health Systems, Inc. and its affiliated debtors seek an extension of time during which only the debtors may propose and file a plan of reorganization and solicit acceptances thereof. Since obtaining the last extension of the exclusive periods, the debtors continued their discussions with their bank lenders concerning the terms of a Chapter 11 plan. Because of the complexity of the issues underlying the cases, the debtors claim that they have not yet had an opportunity to complete those negotiations much less begin tri-partite negotiations with the banks and the Creditor's Committee. Accordingly the debtors request approximately 90-day extensions of each of the exclusive periods, through and including May 15, 2000 and July 15, 2000 respectively. PRINCETON HOSPITAL: Court Approves Accountants ---------------------------------------------- The application of the debtor, Princeton Hospital, Inc. f/k/a RHA/Princeton Hospital, Inc. to employ Horne CPA Group and Roger D. Greenup as accountants was approved on January 31, 2000. RHYTHMS NETCONNECTIONS: Affirms CCC-Plus Senior Unsecured Debt ------------------------------------------------------------- Ratings reflect Standard & Poor's expectation that the company's negative operating cash flow may continue over the next three years as Rhythms endeavors to compete for the relatively new and evolving market of high-speed local communications access. Moreover, Rhythms' plan to target businesses that need to network with work-at-home employees is an untested business model that will require significant capital resources to complete. Although the $300 million bond offering, along with an expected additional $250 million from a convertible preferred stock transaction, will provide Rhythms with the capital to accelerate their DSL infrastructure plans, the company may need additional funding over the long term to complete its business plan. Rhythms is one of several small companies that plan to take advantage of the growing demand for high-speed access to the Internet by offering DSL network solutions to the business market. The company currently serves 39 markets around the U.S. and had about 12,500 installed access lines as of Dec. 31, 1999. However, as a start-up company, Rhythms faces significant challenges in implementing its business plan in a manner that will enable it to eventually compete with large firms, such as the regional Bell operating companies. The company focuses mainly on businesses that require high- performance networks that can link to branch offices and to employees who work from their homes. Rhythms will offer these companies DSL services that are often 25 times faster than standard modems and 10 times faster than ISDN lines, at prices that are less than about twice what an ISDN line costs today. In addition, a DSL can offers communication speeds of 1.5 megabits per second (Mbps), as fast as a high-speed T1 line, for about half the price. Despite the strong demand for high-speed Internet connections and the relatively attractive pricing of DSLs, Rhythms will be challenged to make this business profitable. Even with significant contracts with MCI WorldCom Inc. and Qwest Communications International Inc. to deliver up to 200,000 lines over a five to seven year period, Rhythms may have negative cash flows for several years. Standard & Poor's outlook for the company is stable. Funds provided by the senior notes and preferred stock will allow Rhythms to accelerate its business plan and ensure that necessary capital is available for about two years. Nevertheless, Rhythms will face significant competition in securing the customers it will need to make its business plan successful. SINGER: Claims Bar Date ----------------------- The US Bankruptcy Court for the Southern District of New York entered an order dated December 21, 1999 requiring all persons and entities that assert a claim against The Singer Company N.V., et al., debtors, which arose prior to the commencement of these Cases submit a written proof of claim so that it is actually received on or before 4:00 PM on March 1, 2000. Certain exceptions and exclusions are included in the notice. THIS END UP: Announces Chapter 11 Filings ----------------------------------------- TEU Holdings, Inc. announced today that it and 122 affiliated companies filed Chapter 11 petitions in the Wilmington, Delaware Bankruptcy Court. The cases have not yet been assigned to a Judge. The Companies operate under the primary trade name of "This End Up" retail furniture stores throughout the United States. TEU is an integrated manufacturer and retailer of furniture and accessories for residential, commercial and institutional customers. The Companies have over 2,000 employees and operate in 137 retail locations. The Companies also operate 9 distribution centers and 4 manufacturing facilities. TEU is privately owned. The Chapter 11 filings were precipitated by a combination of many events, all of which resulted in substantial demands on the Companies' limited cash flow. There were diversification, acquisition and vertical integration decisions which did not turn out to add the value which had been anticipated. Further, and most significantly, the Companies undertook the development and implementation of a new centralized distribution system which failed, substantially increasing fixed costs and causing deterioration of delivery lead times. Notwithstanding the cash flow pressures, the Companies have been improving in their operations. For the fiscal year ended May 31, 1999, the Companies had net sales of $149 million and net losses of $22 million. For the 7 months ended December 25, 1999, net sales were $80 million and net losses were $3 million. Congress Financial Corp., the Companies' lender, has agreed, subject to Court approval, to fund operations in Chapter 11. The Companies listed assets of $59 million and liabilities of $75 million in their initial Chapter 11 filings. According to Stephen Marotta, the Companies' interim Chief Executive Officer, "We see the Chapter 11 filings as part of a long-term restructuring which has been on-going for over a year. With the support of all constituencies, we are optimistic that the Companies will emerge as viable businesses. Our demographics are strong - the product continues to be very well received - and upon strengthening of our delivery systems, we should be in good shape." BOND PRICING FOR WEEK OF February 14, 2000 ========================================== DLS Capital Partners, Inc., bond pricing for week of February 14, 2000 Following are indicated prices for selected issues: Acme Metal 10 7/8 '07 18 - 20 (f) Ameriserve 8 7/8 '06 17 - 20 (f) Asia Pulp & Paper 11 3/4 '05 86 - 87 E & S Holdings 10 3/8 '06 37 - 40 Fruit of the Loom 8 7/8 '06 5 - 7 (f) Genesis Health 9 3/4 '05 14 - 16 Geneva Steel 11 1/8 '01 20 - 22 Globalstar 11 1/4 '04 56 - 58 Hechinger 9.45 '12 6 - 9 (f) Integrated Health 9 1/4 '08 4 - 6 (f) Iridium 14 '05 2 - 3 (f) Loewen 7.20 '03 50 - 52 (f) Paging Network 10 1/8 '07 64 - 66 (f) Pathmark 11 5/8 '02 31 - 33 Pillowtex 10 '06 42 - 44 Revlon 8 5/8 '08 40 - 42 Rite Aid 6.70 '01 81 - 83 Service Merchandise 9 '04 12 - 13 (f) Sunbeam 0 '18 14 - 15 TWA 11 3/8 '06 35 - 37 United Artists 9 3/4 '08 2 - 5 Vencor 9 7/8 '08 18 - 20 (f) ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter, co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ, and Beard Group, Inc., Washington, DC. 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