/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/000316.MBX T R O U B L E D C O M P A N Y R E P O R T E R Thursday, March 16, 2000, Vol. 4, No. 53 Headlines ACME METALS: Alpha Tube Seeks To Extend Exclusivity A.G. FINANCIAL: Files For Chapter 11 Bankruptcy AMERICAN MOBILE SATELLITE: Motorola Sells Shares CLIMACHEM: Amends Revolving Credit Facility COSTILLA ENERGY: Disclosure Statement With Respect To Plan FILENE'S BASEMENT: Shareholders Report Divestiture FORCENERGY: Lehman Brothers Reports Holdings GANTOS: To Conduct Store Closing Sales; Appoints Kahn Consulting GENTIVA HEALTH: Moody's Assigns Ratings; Outlook Negative GEO: Reports Major Oil and Asphalt Reserves, Lawsuit Settlement HOMEMAKER INDUSTRIES: To Sell Substantially All of Its Assets HOUSING RETAILER: Seeks Appointment of Trustee INTERACTIVE NETWORK: Employees Marc Lumer & Co as Auditors JUMBOSPORTS: Orders Authorize Sales JUMBOSPORTS: Seeks To Sell Real Property in Dallas, Texas JUMBOSPORTS: Seeks To Sell Real Property in Lafeyette, Louisiana KCS ENERGY: Committee Taps Saul, Ewing as Co-counsel LAROCHE INDUSTRIES: To Miss Bond Interest Payment MASSACHUSETTS HEAVY: Files Chapter 11 Bankruptcy MERRY GO ROUND: Ernst & Young Hires Adversary RAINTREE: Omega Takes Possesion of Nursing Homes SHONEY INC.: Moody's Lowers Debt Ratings; Outlook Negative SUBMICRON: Liquidating Plan of Reorganization Approved TURBODYNE: Reports Further Sale of Light Metals Division VENCOR: Justice Department Claims $1 Billion Owed WORLDCORP: InteliData Announces WorldCorp No Longer Holds Shares WORLDCORP: Memorandum Regarding Joint Liquidating Plan ********* ACME METALS: Alpha Tube Seeks To Extend Exclusivity --------------------------------------------------- On March 1, 2000, Alpha Tube Corporation, debtor, filed a motion for an order further extending its exclusive periods within which to file a plan of reorganization and solicit acceptances thereto to and including May 30, 2000 and July 31, 2000, respectively. A hearing to consider the motion will be held on March 16, 2000 at 3:30 PM. The reorganization planning of the Acme Debtors and Alpha Tube is closely intertwined as a result of the contingent claims asserted against Alpha Tube's estate. Unless there is a further extension of the Alpha Tube's Exclusive periods, the Acme Debtors will not have a meaningful opportunity to utilize fully their previously extended exclusive periods. A.G. FINANCIAL: Files For Chapter 11 Bankruptcy ----------------------------------------------- A.G. Financial Service Center Inc. has filed for Chapter 11 bankruptcy protection in the Southern District of Indiana. Between 1992 and 1996, this subsidiary of Houston-based American General Corp., provided credit card financing for the purchase of more than 240,000 television satellite dishes in numerous states. Since 1994, approximately 600 lawsuits and attorney general investigations have been filed against AG Financial for damages relating to the satellite financing business. The litigation involves allegations of consumer fraud and the failure to comply with truth in lending laws. The Chapter 11 filing was prompted by a $168 million judgment, including $167.5 million in punitive damages, entered by a Mississippi state court against AG Financial in May 1999, on behalf of 27 consumers. Following entry of the judgment, AG Financial perfected its appeal, sold substantially all of its assets to a related company for 7 million, and filed Chapter 11. The schedules include the 240,000 consumers that financed their satellite purchases through the debtor. Immediately after the Chapter 11 filing, Judge Basih H. Lorch III approved the company's motion to enjoin all pending litigation against the debtor, its parent company and affiliates. The injunction remains in place while the parties attempt to negotiate a consensual plan that resolves the litigation. John Ames and Paul Porter of Greenebaum, Doll & McDonald in Louisville, Ind., represent the debtor. Bettina Whyte, of Jay Alix & Associates, is serving as the debtor's president, treasurer and chairman of the board. Josiah Daniel III of Vinson & Elkins in Dallas represents American General. David Kleiman and James Moloy of Dann, Pecar, Newman & Kleiman in Indianapolis represent the Official Unsecured Creditors' Committee. Kevin Dempsey of Indianapolis is the Assistant U.S. Trustee. AMERICAN MOBILE SATELLITE: Motorola Sells Shares ------------------------------------------------ Motorola sold 3,000,000 shares of American Mobile Satellite Corporation's common stock on February 29, 2000. The sale, made at $28. per share, was through a block trade in the open market, on the Nasdaq Stock Market by a broker. In connection with the sale of shares effected on February 29, 2000 Motorola has agreed with the broker who effected the sale not to dispose of or hedge any of its shares during the period from February 29, 2000 and continuing through the date 60 days after February 29, 2000, except with the prior written consent of the broker. As a consequence of the sale Motorola no longer holds more than a five percent interest in the company. Motorola, Inc. now beneficially owns 2,470,532 shares of the company's common stock, representing 4.99% of the outstanding common stock of American Mobile Satellite. Motorola does hold sole power to vote, or direct the vote of, dispose of, or direct the disposition of, the remaining 2,470,532 shares. CLIMACHEM: Amends Revolving Credit Facility ------------------------------------------- On March 1, 2000, ClimaChem, Inc. amended its revolving credit facility. The company had previously fallen below certain adjusted tangible net worth and debt ratio requirements under the Credit Facility between the lender and certain of the company's subsidiaries. ClimaChem's lender agreed to forbear from exercising its rights under the Credit Facility arising as a result of the financial covenants pending the amendment of the Credit Facility. The March 1, 2000, amendments to the Credit Facility eliminated the company's failure to meet the financial covenants under the Credit Facility. The amendment, among other things, increased the annual interest rate applicable to the company's revolving credit facility and letters of credit by one percent and reduced the company's net worth and interest coverage ratios. The amendment further provides that if new financial covenants for the fiscal year beginning in January 2001 are not agreed to by the lender by October 1, 2000, the Credit Facility will terminate automatically on December 31, 2000. COSTILLA ENERGY: Disclosure Statement With Respect To Plan ---------------------------------------------------------- The debtor, Costilla Energy, Inc., has filed a Disclosure Statement with respect to Debtor's plan of reorganization dated February 29, 2000. In general terms, the plan calls for the continued existence of Costilla Energy, Inc., with new ownership and an improved balance sheet. Under the plan, all existing common and preferred stock of the debtor, including any options and warrants to buy such stock are canceled. New common stock in the reorganized debtor will be issued to the general unsecured creditors of the debtor. As such, an estimated $189 million of unsecured debt will be eliminated from the debtor's balance sheet. The debtor will also be relieved of its ongoing obligations to pay interest and principal upon such debt. Under the terms of the plan, the debtor's senior secured debt will either be replaced by new exit financing or restructured. The debtor is currently seeking such new exit financing, however, the debtor cannot make any assurances that it will be obtained. In any event, the debtor expects to emerge with approximately $50 million of senior secured debt. The debtor's financial projections reflect an anticipated level of activity by the Reorganized Debtor that will maintain its properties and business, without significant growth or development. It is anticipated that the reorganized debtor will conduct a limited drilling and development program and participate in certain third-party proposals under joint operating agreements to maintain certain leasehold positions and avoid non-consent penalties. The loss of such leases due to a failure to drill and produce in accordance with the terms of the lease, or the penalties for failing to participate in such third- party proposals may have a material adverse effect on the reorganized debtor. The debtor continues to seek opportunities to merge its business or sell assets to obtain optimal value. It is anticipated that he business plan of the reorganized debtor will focus on these efforts to merge its business or sell its assets, subject to complying with the terms and conditions of applicable loan agreements and normal corporate governance. FILENE'S BASEMENT: Shareholders Report Divestiture -------------------------------------------------- FMR Corp., Edward C. Johnson 3d and Abigail P. Johnson no longer hold stock in Filenes Basement Corporation, having divested themselves of their former holdings. FORCENERGY: Lehman Brothers Reports Holdings -------------------------------------------- Lehman Brothers Holdings Inc. is reporting the beneficial ownership of 4,643,298 shares of the common stock of Forcenergy Inc. The subsidiary which acquired the security being reported on by Lehman Brothers Holdings Inc. (the parent company) is Lehman Brothers Inc., a Broker/Dealer. Sole voting and dispositive powers rest with the ownership of the stock, which represents 19.4% of the outstanding common stock of Forcenergy. GANTOS: To Conduct Store Closing Sales; Appoints Kahn Consulting ---------------------------------------------------------------- Gantos, Inc. announced that it has received approval from the Bankruptcy Court to sell all of its store inventories and other store assets and to enter into an agreement with Gordon Brothers Retail Partners, LLC and Ozer Group, LLC to conduct the store closing sales. Despite its efforts to reorganize, the Company was unable to satisfy the terms and conditions of its debtor-in- possession (DIP) credit facility. As a result, the Company held an auction to appoint agents to conduct store-closing sales as part of their proposed liquidation of the Company. The joint venture composed of Gordon Brothers Retail Partners, LLC and the Ozer Group LLC was the successful bidder at the auction. The store closing sales have begun and are expected to continue for approximately eight weeks. As the sales conclude in each store, the Company expects to close the store. The Company expects to wind up its business under the supervision of the bankruptcy court under Chapter 11 of the U.S. Bankruptcy Code with the assistance of various professionals approved by the bankruptcy court. Effective March 9, 2000, the Bankruptcy Court approved the retention of Kahn Consulting, Inc. (KCI) as Responsible Officer for the Company. The existing Gantos Senior Officers and most of the Board of Directors have resigned. KCI is highly experienced in reorganization matters and the obligations of a debtor-in-possession. KCI's duties include winding down the debtor, coordinating and managing the liquidating process, and administering of the estate and day to day operations. Gantos, Inc. is a specialty retailer of women's wear and accessories. The Company currently operates 114 stores in 24 states. GENTIVA HEALTH: Moody's Assigns Ratings; Outlook Negative --------------------------------------------------------- Moody's Investors Service assigned a (P)B2 rating to the senior secured credit facility of Gentiva Health Services ("Gentiva") and downgraded the rating of the convertible subordinated debentures of Gentiva's wholly owned subsidiary, Quantum Health Resources, Inc. ("Quantum"), from Ba3 to Caa1. Gentiva, formerly the Olsten Health Services subsidiary of Olsten Corporation ("Olsten"), is being split-off into an independent, publicly traded company in conjunction with Olsten's merger with Adecco, S.A. The ratings affected are as follows: Gentiva: ú $150MM senior secured credit facility: (P)B2 (Prospective rating pending review of final documentation.) ú Senior implied rating: B2 ú Senior unsecured issuer rating: B3 Quantum: ú $78.6 million convertible subordinated debentures due October 1, 2000: downgraded from Ba3 to Caa1. The rating outlook is negative. Gentiva is a provider of home health care and related services. The ratings reflect uncertainty regarding the refinancing of the Quantum subordinated debentures which mature on October 1, 2000, Gentiva's thin operating margins and negative pro forma cash flow from operations, and the potential for future impairment of goodwill given the company's low returns. The ratings also reflect the highly competitive and fragmented nature of the home health care industry, as well as the likelihood of continued reimbursement pressure from third party payors. Positive factors supporting the ratings include Gentiva's position as the leading provider of home health care services in the U.S., the company's modest pro forma leverage, and the favorable underlying demographics which should continue to support the company's business, particularly its specialty pharmaceutical services line. Gentiva's three primary lines of business are specialty pharmaceutical services, home care nursing, and staffing services. Moody's notes that on a pro forma basis for the nine months ended October 3, 1999, specialty pharmaceutical services represented roughly 48% of total revenue and contributed $33 million in operating income, while nursing services represented 45% of revenue yet contributed an operating loss of $36 million. Staffing services represented 7% of revenue with a modest operating profit. Moody's further notes that the company's accounts receivable have increased substantially in recent periods, stemming in part from a billing system conversion as well as growth in the slower- paying pharmaceutical services business. As of October 3, 1999 the company's pro forma average accounts receivable days outstanding were approximately 125, with a greater number of days outstanding attributable to specialty pharmaceutical services and fewer days attributable to nursing services. Structurally, the (P)B2 rating assigned to the senior revolving credit facility recognizes a security interest in all of the present and future tangible and intangible personal property of the company, other than equipment. The principle assets securing the facility are accounts receivable, with borrowings limited to 80% of eligible receivables under a borrowing base mechanism. While there appears to be adequate asset coverage, the rating on the credit facility is constrained by the company's limited financial flexibility given the pending maturity of the Quantum debentures. The Caa1 rating on the convertible subordinated notes of Quantum reflects their contractual subordination to all senior debt. Moody's will continue to monitor the company's progress in stabilizing its capital structure following the split-off transaction. Gentiva Health Services, headquartered in Melville, NY, is the largest provider of home health care services in the United States, providing specialty pharmaceutical, nursing, and staffing services. GEO: Reports Major Oil and Asphalt Reserves, Lawsuit Settlement ---------------------------------------------------------------- Dennis Timpe, chairman of the board and president of Geo Petroleum Inc. (Internet Pinksheets:GOPL), announced that independent petroleum engineers have evaluated the company's Oxnard Field leases in Ventura County, Calif. and reported that they contain net proved reserves of 33.3 million barrels of oil. They predicted that the property would yield future net revenues of $275.8 million, with a discounted present value of $160 million, using drilling technology presently in use. Geo plans to increase the recoverable reserves in the field by using new technology called Steam Assisted Gravity Drainage (SAGD). The engineering firm predicted that successful use of this process would add reserves of 15.3 million barrels, expected to yield future net revenues of $194.6 million with a present value of $83 million. Management estimates the total potential oil recovery for the field at 48.6 million barrels of oil. Previous estimates, based on the development of the field solely by SAGD methods, exceeded the currently predicted levels. Timpe estimated that capital of $18 million to $45 million, depending on the development method employed, would be required in order to develop Geo's holdings on 630 acres. The company will seek this capital using a combination of project financing, joint ventures and other investment sources. California's need for asphalt to construct new highways has resulted in a market expected to remain strong for the next decade. Geo's Oxnard crude oil is excellent feed stock for asphalt and can command a $3 per barrel premium over crude oil prices when used for asphalt production. Geo emerged from bankruptcy in December 1999, when it obtained a$500,000 capital investment from TD & Associates Inc., a firm managed by Timpe. He stated that the U.S. Bankruptcy Court on March 9, 2000 had approved the settlement of three lawsuits related to the bankruptcy, enabling Geo to proceed with its plans to develop the Oxnard Field, to resume oil field waste disposal operations, and to resume production in the Rosecrans Field in Los Angeles County. In the near term, Rosecrans production of light oil is expected to yield at the rate of about $600,000 in annual net revenues. Production can be increased as more capital becomes available to the company. Rosecrans reserves are in addition to those stated above, and are now being evaluated. The low oil prices of about $6 per barrel for Oxnard crude oil in 1998, which contributed to Geo's bankruptcy, have recently increased to more than $23 per barrel. Rosecrans oil is currently selling for about $30 per barrel. Timpe stated that the current expansion of oil industry activity will result in higher revenues from Geo's commercial waste disposal well. The company has added a second disposal well to meet the demand, and expects it to go online during April 2000. Geo has previously recorded gross revenues of up to $437,000 annually from its single waste disposal well. HOMEMAKER INDUSTRIES: To Sell Substantially All of Its Assets ------------------------------------------------------------- Homemaker Industries, Inc., a debtor and debtor in possession in a chapter 11 case, and a manufacturer and wholesaler of rugs and other home furnishings, today filed an application to sell substantially all of its assets, free and clear of the claims and liens of creditors. The prospective buyer is a A&M, Inc., a company formed by Arthur Miller, Homemaker's chief executive officer, for price of not more than $7.5 million. A hearing to consider the application, and an auction to consider higher and better bids will be held on April 4, 2000 at 11:00 a.m., before the Honorable Jeffry H. Gallet, United States Bankruptcy Judge, Alexander Hamilton United States Custom House, One Bowling Green, Courtroom 523, New York, New York 10004. Homemaker's largest customers include some of the leading retailers in the country. Its showroom is in New York City, and its executive offices and distribution center in North Charleston, South Carolina. Homemaker also operates a distribution center in Brownsville, Texas and a manufacturing plant in Matamoros, Mexico. The Bankruptcy Court for the Southern District of New York has issued an order dated March 14, 2000 (the "Order to Show Cause") approving the form, manner and notice of the Motion, approving certain bidding procedures, i.e., fixing certain Auction Procedures. Copies of the Motion and its exhibits and of the Order to Show Cause may be obtained electronically by accessing the Court's website at: http://www.nysb.uscourts.gov. Bidders interested in making higher and better bids must adhere to the Auction Procedures approved in the Order to Show Cause. All parties interested in making bids should contact the Debtor's investment bankers, Harvey Tepner, Loeb Partners Corporation, 61 Broadway, New York, New York 10006, 212-483-7086, the Debtor's counsel, Alec P. Ostrow, Esq., Salomon Green & Ostrow, P.C., 919 Third Avenue, New York, New York 10022, 212-319-8500 or the Chambers of the Honorable Jeffry H. Gallet, United States Bankruptcy Judge, United States Bankruptcy Court, One Bowling Green, New York, New York 10004, 212-668-2301. HOUSING RETAILER: Seeks Appointment of Trustee ---------------------------------------------- The debtors, Housing Retailer Holdings, Inc. and its debtor affiliates respond to the Creditor Committee's motion for appointment of a Chapter 11 Trustee. The debtors claim that there is no cause for appointing a Chapter 11 Trustee. The debtors claim that there is no fraud, dishonesty, incompetence, or gross mismanagement and in fact the Holding Companies have succeeded in securing post-petition financing in order to pursue litigation claims against Ted D. Parker and his affiliates. The appointment of a Chapter 11 trustee is an event of default under the terms of the DIP Financing. The Holding Companies' estates have proceeded on course and there are no developments which would justify the appointment of a Chapter 11 trustee. Ted Parker Home Sales Inc. and Carolina Home Sales Inc. also object to motion for appointment of a Chapter 11 Trustee. However, these debtors believe that the appointment of a chapter 7 Trustee and conversion of their cases would be in the best interests of the estates. INTERACTIVE NETWORK: Employes Marc Lumer & Co as Auditors --------------------------------------------------------- On March 3, 2000, Interactive Network Inc. engaged Marc Lumer & Company as its independent auditors and the principal accountant to audit the company's financial statements. Prior to March 3, Interactive Network had not engaged Lumer in any consultation. JUMBOSPORTS: Orders Authorize Sales ---------------------------------- The debtor's motion to sell real property located in North Charleston, South Carolina to John Derbyshire and Linda Derbyshire was granted by the US Bankruptcy Court, Middle District of Florida on February 28, 2000. On February 29, 2000, the court entered an order approving the sale of real property located in Ft. Worth, Texas to The Bruder Company, Inc. for $3.73 million. JUMBOSPORTS: Seeks To Sell Real Property in Dallas, Texas --------------------------------------------------------- The debtor, JumboSports Inc., seeks authority to sell real property located at 3500 Preston Road, Plano, Texas to Preston Parker Crossing Limited for a total purchase price of $3.85 Million. The debtor has completed the going-out-of-business sale at this location and no longer need s the real property. The debtor believes that the proposed sale price offered by the buyer is the highest and best offer received, and is reasonable. Any competing bid for the property must be submitted no later than March 24, 2000 and must start at $3.86 million (and all subsequent higher bids must be in incremental increases of at least $10,000). JUMBOSPORTS: Seeks To Sell Real Property in Lafeyette, Louisiana ---------------------------------------------------------------- The debtor, JumboSports Inc., seeks authority to sell real property located at 3814 Ambassador Caffery Parkway, Lafeyette, Louisiana to Michael G. Hamner for a total purchase price of $1.92 Million. The debtor has completed the going-out-of-business sale at this location and no longer need s the real property. The debtor believes that the proposed sale price offered by the buyer is the highest and best offer received, and is reasonable. Any competing bid for the property must be submitted no later than March 24, 2000 and must start at $1.93 million (and all subsequent higher bids must be in incremental increases of at least $10,000). KCS ENERGY: Committee Taps Saul, Ewing as Co-counsel ---------------------------------------------------- The Official Committee of Unsecured Creditors of KCS Energy Inc. seeks to retain Saul Ewing Remick & Saul LLP as co-counsel for the Official Committee of Unsecured Creditors. The Committee seeks to retain Saul Ewing as its co-counsel with Dunn & Crutcher LLP. The firm will provide the following services without duplicating the efforts of Dunn & Crutcher LLP: Provide legal advice with respect to the Committee's rights, powers and duties in these cases; The preparation on behalf of the Committee of all necessary applications, answers, forms of orders, reports and other legal papers; The representation of the Committee in any and all matters involving contests with the debtors, alleged secured creditors and other third parties; The negotiation of consensual plans of reorganization; Attorneys for the firm will charge current standard hourly rates, which range from $165 per hour for an associate to $325 per hour for a partner. LAROCHE INDUSTRIES: To Miss Bond Interest Payment ------------------------------------------------- LaRoche Industries' board of directors has approved a resolution that the company will not make the scheduled March 15, 2000 bond interest payment of $8.3 million on its 9 1/2% Senior Subordinated Notes due 2007, while it continues its efforts on the development of a financial restructuring plan. The notes provide for a grace period of 30 days in which to make the payment. The company has commenced and scheduled further discussions with its bank group, Senior Subordinated noteholders and their financial and legal advisors regarding a capital restructuring designed to de-leverage the company. The company's bank group continues its support of the company and its restructuring efforts by providing continued access to an existing credit facility and entering into a Forbearance Agreement despite noncompliance with certain requirements of the company's credit facility. "We are actively negotiating with our bondholders, focusing largely on an equitization strategy," said Gerald B. Curran, vice president and chief financial officer for LaRoche Industries. Chanin Capital Partners is leading the discussions for LaRoche. Curran stated that the company's operations and business activities will continue to function as usual throughout the negotiations and restructuring effort. LaRoche Industries is a privately held, global producer and distributor of nitrogen, chlor-alkali and fluorocarbon chemical products. MASSACHUSETTS HEAVY: Files Chapter 11 Bankruptcy ------------------------------------------------ According to a report in The Boston Herald on March 14, 2000, Massachusetts Heavy Industries, the company that was kicked out of the Fore River Shipyard in Quincy after it defaulted on millions of dollars in taxpayer-supported loans, sought Chapter 11 bankruptcy protection on March 13, 2000. According to the report MHI defaulted on nearly $ 80 million in various loans, including a $55 million MARAD-backed loan from Fleet National Bank. MHI also owes millions of dollars to the Massachusetts Development Finance Agency, the Massachusetts Water Resources Authority and the city of Quincy. MERRY GO ROUND: Ernst& Young Hires Adversary -------------------------------------------- Ernst & Young has turned to a former adversary to help the firm win back a $185 million settlement paid to a client last year. The small Pikesville law firm of Snyder, Weiner, Weltchek, Vogelstein & Brown was on the other side of the table when the Big Five accounting firm agreed last April to settle a lawsuit with the now-defunct Merry-Go-Round clothing chain. Now Ernst & Young has hired the firm to recover the $185 million from Swidler, Berlin, Shereff and Friedman LLP, the Washington, D.C., law firm that served as Merry-Go-Round's legal counsel in its efforts to reorganize under Chapter 11 bankruptcy. Merry-Go-Round, which was liquidated in 1996, had blamed Ernst & Young's accountants for its failed turnaround bid and said the firm concealed a business relationship with Swidler & Berlin that represented a conflict of interest. Ernst & Young filed a lawsuit Monday in Baltimore Circuit Court, blamed Swidler Berlin managing partner Roger Frankel for failing to disclose the ties between the law firm and the accounting firm when he recommended that Merry-Go-Round hire Ernst & Young. The law firm had received more than $4 million in fees from Ernst & Young, the suit contends, and Swidler Berlin was afraid the disclosure might prevent Ernst & Young from winning the Merry-Go- Round assignment, the suit claimed. When Ernst & Young agreed last year to settle claims it provided incompetent and fraudulent advice to Merry-Go-Round, the accounting firm said it believed "other parties bear substantial responsibility for the failure of Merry-Go-Round to survive" and that it would "look to these parties for contribution to the settlement." RAINTREE: Omega Takes Possesion of Nursing Homes ------------------------------------------------ Omega Healthcare Investors Inc., a real estate investment trustee investing in and providing financing to the long-term care industry, announced that it has taken possession of 30 nursing homes and assisted living properties operated by RainTree Healthcare Corp, Phoenix, which provides health care services to about 2,400 residents in Indiana, Alabama, Texas, Colorado and Arizona. RainTree filed for bankruptcy protection on Feb. 29 and moved to transition lease properties to Omega in connection with proceedings in bankruptcy court. RainTree operated 35 facilities, and 1999 revenues exceeded $100 million. Omega has contracted with Vencor Operating Inc., Louisville, Ky., to manage the properties and supervise direct patient care. SHONEY INC.: Moody's Lowers Debt Ratings; Outlook Negative ---------------------------------------------------------- Moody's Investors Service lowered the ratings of Shoney's $75 million revolving secured bank facility and $176.5 million secured bank term note, due 2002, to B2 from B1; $122.5 million convertible zero-coupon debentures, due 2004, to Caa2 from Caa1; and $51.6 million convertible subordinated debentures, due 2002, to Caa2 from Caa1. Moody's also lowered the senior implied rating to B3 from B2 and the senior unsecured issuer rating to Caa1 from B3. The outlook remains negative. The rating action was prompted by our belief that the company's enterprise value has declined in relation to its obligations due to the continuing decline in operating results at the company's flagship Shoney's unit. The negative outlook reflects our expectation that management's turnaround efforts will continue to face significant challenges, due to intense competition in the casual dining segment of the restaurant industry. The ratings reflect the continued weak operating performance of the company's core Shoney's concept restaurants, high financial leverage, low returns on assets and sales, and intense competition in the family dining segment of the restaurant industry. The company recently announced the engagement of financial advisors to help evaluate how it might reduce debt and associated financing costs. We believe Shoney's compliance with financial covenants will be tight going forward, and required cash debt service payments will consume a good portion of the company's free cash flow over the next several years. While the management team remains committed to revitalize the company's operations, we continue to believe that the turnaround will likely take an extended period of time and that the company's debt protection measures could weaken further in the intermediate term. The ratings recognize that the company owns a significant proportion of restaurant real estate, that the Shoney's unit maintains a fairly modern store base after several years of remodeling, and that the company has divested practically all extraneous restaurant concepts. The solid performance at Captain D's, with improving same store sales and margins, also support the ratings. The B2 rating on the bank credit facility recognizes that it is secured by substantially all of the company's assets, including real estate of about 427 restaurants. We believe that the collateral would provide good protection to the banks. The Caa2 ratings on the convertible zero-coupon debentures and the subordinated convertible debt recognize that these debts are contractually subordinate to the bank credit facility and that the company's common shares trade at a small fraction of the conversion price. We believe that the severity of loss in a distressed scenario would be at least partially mitigated by asset value in excess of the bank obligations. Beyond Shoney's, the family dining segment of the casual dining restaurant industry includes large chains such as Denny's, Perkins, Cracker Barrel, and Bob Evans competing with local restaurants and other meal solution providers. Customer traffic has fallen due to perceived declines in the price/value relationship. Same store sales at the Shoney's unit, which still accounts for over 50% of total revenue, have been declining since 1993. The most recently available year-over-year store traffic counts at the Shoney's unit are down almost 9%. Shoney's restaurants have been challenged for several years, as evidenced by declining revenue and restaurant operating margins, along with same store sales. Total revenue has decreased as the company has closed or sold to franchisees many of the under- performing stores, but 1999 average unit volume increased 6% to almost $1.5 million following closure or sale to franchisees of 142 stores. Same store sales have decreased for several years after menu price increases were more than offset by decreases in customers. To reverse the negative trends and attract more frequent visits, we expect that the company will maintain the emphasis on improved customer service through better training and more efficient staff utilization. However, we expect that future operating results will likely be dampened by absorption of at least some portion of higher labor costs stemming from expected increases in the minimum wage or probable increases in relatively low chicken, meat, and seafood prices. As the company's revenue has fallen for the past several years, debt has also decreased as the company has paid down the bank term loans with required principal amortization payments and asset sale proceeds. Given the high proportion of real estate that the company owns, rent expense is relatively minor. For the fiscal year ended September 1999, debt equaled about 4.4 times EBITDA while EBITDA coverage of cash interest was around 3.2 times. We anticipate moderate reductions in debt and cash interest going forward as the company continues to pay down the term loan. Shoney's, Inc., headquartered in Nashville, Tennessee, operates or franchises 525 Shoney's family dining restaurants, 567 Captain D's quick service seafood restaurants, and 3 Fifth Quarter steakhouses. SUBMICRON: Liquidating Plan of Reorganization Approved ------------------------------------------------------ SubMicron Systems Corporation (OTC Bulletin Board: SUBM), which filed its voluntary Petition under Chapter 11 of the Federal Bankruptcy Code on September 1, 1999 and consummated sale of substantially all of its assets pursuant to Bankruptcy Court Order in October 1999, has received approval from the United States Bankruptcy Court for the District of Delaware to mail its Liquidating Plan of Reorganization and Disclosure Statement. The Plan and voting materials will be mailed today. Ballots must be received by April 17, 2000 and hearing on confirmation of the Liquidating Plan of Reorganization will be May 3, 2000. Although the Liquidating Plan of Reorganization provides for no payment to, or other recovery by, the holders of SubMicron's common stock, there continues to be inexplicable activity in both the price and trading volume of SubMicron's common stock. TURBODYNE: Reports Further Sale of Light Metals Division -------------------------------------------------------- Turbodyne Technologies Inc. (EASDAQ:TRBD) announced the following update on the bankruptcy sale of substantially all of the assets of its subsidiaries, Pacific Baja Light Metals Corporation, Baja Pacific Light Metals Inc., and Optima Wheel Inc. (collectively, the "Debtor"). On December 14, 1999, the Bankruptcy Court entered an order authorizing the sale of substantially all of the assets of the Debtor to an assignee of Hawthorne Partners (the "Buyer"). The order provided that the Buyer shall assume up to $1.2 million of liabilities arising from the Debtor's obligations to Mexican governmental agencies and utility providers. Turbodyne believes that these Mexican obligations do not exceed $1.2 million. The order also provided that the Buyer would not be responsible for the Debtor's obligations under any equipment lease, except to the extent the Buyer assumed such lease. All equipment leases of the Debtor which Turbodyne guaranteed have been assumed by the Buyer, except for one. Turbodyne believes that the obligation of the Debtor and Turbodyne, as guarantor, will not exceed $40,000 under the equipment lease rejected by the Buyer. The order also provided that the Buyer would not be responsible for the Debtor's obligations in connection with any employment or labor agreements or any pension plan of the Debtor. After reasonable inquiry, the Company has been unable to determine the amount of the contingent liabilities but believes that they will not have an adverse impact on its ability to remain a going concern. Turbodyne Technologies Inc., a California-based high technology company, specializes in the development of charging technology for internal combustion engines plus the development and manufacturing of high-tech assemblies for electrically assisted turbochargers and superchargers. Turbodyne Technologies Inc.'s headquarters is located in Carpinteria; the European business location is Frankfurt, Germany. Additional information about the company is available on the Internet at http://www.turbodyne.com. VENCOR: Justice Department Claims $1 Billion Owed ------------------------------------------------- American Health Line reports on March 14, 2000 that Justice Department officials claimed that Vencor Inc., owes the government $1 billion as the result of a fraudulent Medicare billing scheme. ($1 billion including triple damages) Exactly how much money the agency will recoup remains uncertain, as Vencor filed for Chapter 11 bankruptcy protection last September, the Washington Post reports. WORLDCORP: InteliData Announces WorldCorp No Longer Holds Shares ---------------------------------------------------------------- InteliData Technologies Corp., Reston, Va., announced that WorldCorp Inc. no longer holds any shares of InteliData common stock, according to a newswire report. WorldCorp, one of the founding investors in InteliData, is in the process of liquidating under chapter 11. (ABI 15-Mar-00) WORLDCORP: Memorandum Regarding Joint Liquidating Plan ------------------------------------------------------ The debtors, WorldCorp, Inc. and WorldCorp Acquisition Corp. submitted a memorandum regarding the First Amended Joint Liquidating Plan of Reorganization. The amended plan and revised Disclosure Statement respond to comments from the Committee and the SEC and to events that have occurred since the original plan and original disclosure statement were filed on January 10, 2000. The changes in the plan are primarily procedural and do not affect the allocation of assets among creditors groups for purposes of distribution under the plan. The plan provides for all of the property of the debtors to be liquidated or distributed over time to the holders of allowed claims. ********* 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. Debra Brennan, Yvonne L. Metzler, Edem Alfeche and Ronald Ladia, Editors. Copyright 2000. All rights reserved. ISSN 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. 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