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/raid1/www/Hosts/bankrupt/TCR_Public/000622.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, June 22, 2000, Vol. 4, No. 122 Headlines AMERITEL COMMUNICATIONS: Court Okays Settlement With USCI, Tandy and Foothill AUTO ADMINISTRATOR: Ontario Court Approves Asset Sale to United Systems BMJ MEDICAL: Plan Progress Earns Extension of Key Deadlines to September 15 BREED TECHNOLOGIES: Exclusive Period to File Plan Extended to September 30 CERPLEX GROUP: 7 Bondholders Present Involuntary Petition to Delaware Court CHECKERS DRIVE-IN: Sale of 16 Rally's Locations in Florida Pulls $1,725,000 CITY BREWING: Lack of Financing Leads to Substantial Cost-Cutting Measures CLARIDGE HOTEL: US Trustee Opposes Noteholders' Bid to Retain CIBC as Advisor COMMERCIAL FINANCIAL: Judge Rasure Approves Settlement with Former Employees CREDITRUST CORP.: Seven Accountholders Allege Consumer Protection Violations DATAPOINT CORP.: Requests August 10 General Claims Bar Date DATAPOINT CORP.: Court Approves Sale of European Operations & Name Change DIGITAL ENTERTAINMENT: Files Chapter 7 Petition, Owing $10MM to 200 Creditors FURNITURE.COM: Receives $27 Million in New Financing, Averting Shutdown GENCOR INDUSTRIES: Creditors Charge Elliotts Runs Company as Personal Fiefdom GLOBAL OCEAN: Exclusive Period Extended to September 11 GST TELECOM: Committee Selects Milbank Tweed & Morris Nichols as Counsel GST TELECOM: Offers Employees $6.1 Million Retention Incentive Package GULF STATES: Noteholders' Committee Objects to Disclosure Statement HARVARD PILGRIM: Massachusetts Regulators Appoint New Board of Directors HOUSING RETAILER: Chapter 7 Trustee Objects to Debtors' Disclosure Statement INACOM: Business As Usual At Inacom Canada INACOM: PC Helps Ready to Pick-Up its Share of Inacom Customers JITNEY JUNGLE: Creditors' Committee Asks for Lessors' Committee to Disband JUMBOSPORTS, INC.: Selling Greenville Store to Bob Jones Univ. for $1.25 Mil. JUST FOR FEET: Shareholders Allege Advertising Rebate Scheme Inflated Profits LAIDLAW, INC.: Moody's Downgrades Ratings on $3.4 Billion of Securities MARQUIP, INC.: Obtains DIP Financing and Company Outlines Business Plan NATIONAL HEALTHCARE: Negotiates Covenant Waivers NUTRAMAX PRODUCTS: Committee Retains Otterbourg, Pepper Hamilton & M.R. Weiser NUTRAMAX PRODUCTS: $48,000,000 DIP Facility Now in Place PAGING NETWORK: Landenburg Recommends Notes to Get Arch Stock via Prepack Plan PATHMARK STORES: Grocery Chain's Total Enterprise Value Fixed at $1.3 Billion PENNCORP FINANCIAL: Plan's Effective Date Was June 13, 2000 QUAKER COAL: Files for Chapter 11 Protection in Kentucky RANCHO LA COSTA: Case Summary and Largest Unsecured Creditor RENCO METAL: Moody's Downgrades Sr. Notes To Caa2; Outlook Is Negative RIDGE RUN: Case Summary and 6 Largest Unsecured Creditors RITE-AID: Refinancing Completed and S&P Adjusts Ratings to Reflect Changes SERVICE MERCHANDISE: Downsizes Outlet Near Headquarters SILVER CINEMAS: Committee Voices Concerns About Terms of Jefferies Engagement SILVER CINEMAS: Committee Troubled by Aggressive DIP Financing Terms SUNTERRA CORP.: Abelco Finance Offers $53 Million DIP Financing Arrangement TRANSCOASTAL MARINE: Files Voluntary Chapter 7 Petition in Houston UNITED STATES ENRICHMENT: Plant Closure May Be Imminent VIVAX MEDICAL: Settles Dispute with Vail Products, Inc. WESTERN FERTILIZER: Case Summary ********* AMERITEL COMMUNICATIONS: Court Okays Settlement With USCI, Tandy and Foothill ----------------------------------------------------------------------------- The United States Bankruptcy Court in Manhattan approved the final version of a settlement agreement among bankrupt Ameritel Communications Inc., USCI Inc., Ameritel's parent, Tandy Corp. and lender Foothill Capital Corp. The Compromise Settlement Agreement and Mutual Release also settles on-going litigation between USCI and Tandy pending before the 67th Judicial District Court of Tarrant County, Texas. Under the terms of the settlement, each party to the suit has, among other things, released the other from all asserted and unasserted claims between the parties. Foothill Capital, the former secured creditor of Ameritel, has also joined in the settlement. No payment in cash or other consideration, outside the commitments in the settlement agreement, are required by any of the parties to the settlement. AUTO ADMINISTRATOR: Ontario Court Approves Asset Sale to United Systems ----------------------------------------------------------------------- United Systems Technology, Inc. (OTCBB:USTI) announced today that the Ontario Superior Court of Justice in Bankruptcy has approved USTI's bid for the purchase of substantially all of the assets of Auto Administrator Int'l, Inc. USTI successfully bid US $255,700 in cash for the Auto Administrator DOS and Windows source code and software support and licensing agreements for over 300 customers primarily located in Canada. The assets purchased also included the accounts receivable related to these customers as well as substantially all of the fixed assets of Auto Administrator, in both the London, Ontario and Winnipeg, Manitoba offices. USTI is in the process of registering a wholly owned Canadian subsidiary, USTI Canada, Inc., which will receive the assets purchased in the transaction and serve as USTI's operating entity in Canada. USTI Canada, Inc. will be staffed by former Auto Admin employees. BMJ MEDICAL: Plan Progress Earns Extension of Key Deadlines to September 15 --------------------------------------------------------------------------- Finding that the Debtors established cause for a further extension of their exclusive periods because a plan of reorganization has been proposed and is proceeding toward confirmation as the Debtors make good-faith efforts to resolve a handful of issues facing their estates, Judge Walrath granted BMJ Medical Management, Inc., et al., an extension of the time within which it has the exclusive right to propose a plan of reorganization in it chapter 11 cases to and including July 17, 2000. Judge Walrath granted a concomitant extension of the Debtor's' exclusive period during which to solicit acceptances of their plan to and including September 15, 2000. Separately, Judge Walrath granted BMJ Medical Management, Inc., et al., an extension of the deadline by which the Company must decide to assume, assume and assign or reject leases of non-residential real property to and including July 31, 2000. Additionally, Judge Walrath approved an extension of the maturity date for the DIP Financing Facility provided by Paribas through the close of business on September 15, 2000. BREED TECHNOLOGIES: Exclusive Period to File Plan Extended to September 30 -------------------------------------------------------------------------- As BREED Technologies, Inc., et al., wind their way through the chapter 11 process toward confirmation of their Plan of Reorganization, Judge Walrath granted the Debtors an extension of their exclusive period during which to propose a plan of reorganization to and including September 30, 2000. Further, Judge Walrath granted BREED an extension of its exclusive period during which to solicit acceptances of that plan to and including November 30, 2000. CERPLEX GROUP: 7 Bondholders Present Involuntary Petition to Delaware Court -------------------------------------------------------------------------- The ABI relates that Reuters reports seven bondholders of Cerplex Group Inc. filed a petition with a federal court yesterday to place the company, a provider of computer spare parts and depot repair services, in involuntary chapter 11. According to papers filed in the U.S. Bankruptcy Court in the District of Delaware, the holders of Cerplex's 7.75% convertible subordinated debentures, issued April 1986 and due 2001, have claims totaling $13.5 million plus unspecified interest. Cerplex said it was unable to make a sinking fund payment of $404,008 in interest and $1.8 million in principal that was due April 17. The primary petitioners include Chase Manhattan Trust Co. with a $10.4 million claim and EZ Investment Partnership with a $1.1 million claim. CHECKERS DRIVE-IN: Sale of 16 Rally's Locations in Florida Pulls $1,725,000 --------------------------------------------------------------------------- Checkers Drive-In Restaurants, Inc. (Nasdaq: CHKR) announced that it has sold 16 Rally's restaurants in Jacksonville and Tallahassee, Florida to Burgers & More, Inc. of Charleston, South Carolina, a current Checkers franchisee, for $1.725 million. Burgers & More, Inc. will operate the newly acquired Rally's restaurants as a franchisee and will pay ongoing royalties based on sales at the restaurants. Burgers & More, Inc. has entered into a development agreement in conjunction with their purchase where they have committed to adding nine new Checkers locations over the next five years. In a separate transaction, the Company has sold its modular restaurant manufacturing facility located in Clearwater, Florida to Robotic Parking, Inc. for $1.75 million. The Company is in the process of identifying vendors to produce modular restaurant buildings for future restaurant openings. Checkers Drive-In Restaurants intends to use the net proceeds from these transactions to further reduce existing debt. Daniel J. Dorsch, president and chief executive officer of Checkers, stated, "We are focused on turning this company around. Our mission is to operate profitably while growing responsibly. Selling restaurants to new and existing franchisees was a necessary step to bring a new culture to the company. Selling the manufacturing facility is one of many actions we are taking to position the company to concentrate on operating restaurants. Our future success is based on selling great-tasting, quality food, and manufacturing does not fit with that plan." Dorsch continued, "We have now sold a total of 151 restaurants to franchisees and entered into new development agreements for 85 additional stores with the close of the purchase agreements. We expect to complete additional transactions very shortly." CITY BREWING: Lack of Financing Leads to Substantial Cost-Cutting Measures -------------------------------------------------------------------------- The Associated Press reports that City Brewing Co. sent 30 employees home, reducing its labor force by half. This news follows disclosures that the company can't replenish its stock of cans and bottles, for want of money and trade credit. City Brewing President Randy Smith says a Chicago bank just launched a foreclosure on a $4.5 million loan. Further, New York-based Platinum Holdings Inc., failed to provide $1 million into the business as promised a couple of weeks ago. CLARIDGE HOTEL: US Trustee Opposes Noteholders' Bid to Retain CIBC as Advisor ----------------------------------------------------------------------------- Indemnification provisions buried in an engagement letter between (a) the Official Committee of Unsecured Noteholders in The Claridge Hotel and Casino Corporation chapter 11 cases and (b) CIBC World Markets Corp. are objectionable to Patricia A. Staiano, the United States Trustee for Region III. The Committee, as previously reported in the TCR, wants to retain CIBC as its financial advisor and consultant to evaluate restructuring proposals and other transactions. The U.S. Trustee charges that indemnification provisions which hold a bankruptcy estate liable for possible claims against CIBC are unwarranted and not in the best interest of the estate. The U.S. Trustee points Judge Wizmur's attention to In re Dailey International, Inc., Case No. 99-1233 (PJW) (Bankr. D. Del. July 1, 1999), where Judge Walsh held indemnification provisions requested by Ernst & Young inappropriate. Kevin Sullivan, Esq., is the Attorney-Advisor from the Office of the U.S. Trustee assigned to prosecute Ms. Staiano's objection before the Judge Wizmur in Camden, New Jersey. COMMERCIAL FINANCIAL: Judge Rasure Approves Settlement with Former Employees ---------------------------------------------------------------------------- U.S. Bankruptcy Judge Dana L. Rasure put her stamp of approval on a debtor- proposed program allowing 1,367 former employees of Commercial Financial Services Inc. to receive one week's pay. Each payment, however, is conditioned on an individual former employee agreeing not to sue CFSI for failing to provide notice under the Federal WARN Act and any other applicable law. The once 3,900-strong company has been reduced now to five full-time employees who spend their time forwarding checks and letters to the appropriate servicer. CFS filed for Chapter 11 protection from creditors Dec. 11, 1998, laid off half its staff Jan. 8, 1999, and finally ceased operations on June 23, 1999. CREDITRUST CORP.: Seven Accountholders Allege Consumer Protection Violations ---------------------------------------------------------------------------- The Associated Press reports that Creditrust Corp. faces $2 million in lawsuits brought by seven people alleging violations of the Maryland Consumer Protection Act. The financially troubled Woodlawn-based company collects and manages delinquent credit card accounts. The seven debtors say that Creditrust makes false promises and charges exorbitant fees. Joanne Suder, Esq., in Baltimore, represents the seven plaintiffs. The lawsuits were filed in Baltimore City Circuit Court. These lawsuits, are just the latest headache for Creditrust, the AP notes, as the Company has already announced defaults on debt payments and its auditors have expressed doubt about the Company's ability to continue as a going concern. DATAPOINT CORP.: Requests August 10 General Claims Bar Date ----------------------------------------------------------- Over 95% of the claims against Datapoint Corporation are accounted for by $55,000,000 owed to the holders of publicly traded Debentures issued by the Company prior to its bankruptcy filing. To flush out all claims against its estate, Datapoint asks Judge Walsh to fix a deadline by which all creditors must file a proof of claim against its estate or be forever barred from asserting such claim. Jason W. Staib, Esq., of Morris, Nichols, Arsht & Tunnell in Wilmington, serving as local counsel to Datapoint, suggests that an August 10, 2000, Bar Date would provide ample time for Bankruptcy Services, LLC, to mail claim packets and for creditors to complete and return proof of claim forms. DATAPOINT CORP.: Court Approves Sale of European Operations & Name Change -------------------------------------------------------------------------- Datapoint Corp. announced Friday that the U.S. Bankruptcy Court for the District of Delaware approved the previously reported sale of its European operations, headquartered in Paris, and certain U.S. Assets to Datapoint NewCo I Ltd. for $49.5 million in cash, less certain adjustments, including an adjustment in the event that the aggregate shareholder deficit of the European operations exceeds $10.0 million at closing, according to a newswire report. The sale is expected to close within 30 days, and the company said it intends to file a chapter 11 reorganization plan. In addition, the court approved the company's name change to Dynacore Holdings Corp. The San Antonio-based company specializes in the design, integration and maintenance of data, voice and networking communications solutions, including call center and computer- telephony integration. (ABI 19-Jun-2000) DIGITAL ENTERTAINMENT: Files Chapter 7 Petition, Owing $10MM to 200 Creditors ----------------------------------------------------------------------------- An article in The Los Angeles Times relates that Digital Entertainment Network filed for Bankruptcy Court liquidation owing more than $10 million to more than 200 creditors. The company, also known as DEN, is considered one of the highest-profile Internet firms to end in bankruptcy. The filing in Los Angeles was expected after the closing of its office in Santa Monica and dismissed more than 100 employees. FURNITURE.COM: Receives $27 Million in New Financing, Averting Shutdown -------------------------------------------------------------------------- Furniture.com, which had been on the verge of shutting down, received a $27 million cash infusion from a CMGI-led investor group, according to a newswire report. Chief Executive Andrew Brooks said he met with bankruptcy lawyers on June 12 to explore the company's options. Furniture.com, a 2-year-old company based in Framingham, Mass., was among several Net firms that went public just before the stock market's downturn. The company recently withdrew its initial public offering, which was filed in January, and cut 12 percent of its workforce in April. Although it said it received 19.6 million customer orders during the first quarter (which was a 46 percent jump from the prior quarter), the Boston Globe reported that the company had trouble raising money from its previous backers. In its January filing with the Securities and Exchange Commission, the company said that it lost $46.5 million in 1999 and that its cash reserves totaled $31 million. (ABI 21-Jun-2000) GENCOR INDUSTRIES: Creditors Charge Elliotts Runs Company as Personal Fiefdom ----------------------------------------------------------------------------- "Creditors say executives at Gencor Industries Inc. gave themselves big salary increases, cashed in on stock and secretly sold assets -- all as the company battled a crippling financial crisis, [and] Gencor officials also tried to mask losses at subsidiaries and misused millions of dollars from a customer that was intended for a citrus-plant project," Susan G. Strother writes in an article appearing in the Orlando Sentinel. Ms. Strother points to pleadings presented by seven angry creditors to Bankruptcy Judge Karen Jennemann in Orlando in a pitch to have the company placed into involuntary bankruptcy and for appointment of a trustee. Gencor has established a "clear pattern of gross mismanagement, incompetence, self-dealing and deceit," the seven creditors charge, mincing no words when it comes to their feelings about the company's management. The Elliotts have run Gencor as their "personal fiefdom," court documents state. Judge Jennemann has sent the company and the seven creditors to mediation and required that Gencor start turning over non- public financial records. GLOBAL OCEAN: Exclusive Period Extended to September 11 ------------------------------------------------------- Everyone's worked diligently to bring these chapter 11 cases to a quick conclusion, a plan and disclosure statement have been filed, and that plan is making its way toward confirmation, Global Ocean Carriers Limited, et al., tell Judge Walrath. Against that backdrop, the Debtors assert, cause exists for (1) an extension of their exclusive period during which to file a plan of reorganization through September 11, 2000, and (2) an extension of their exclusive period during which to solicit acceptances of that plan through November 10, 2000. "The Debtors seek this extension of the Exclusive Periods to afford it time to complete the plan confirmation process which is already under way," Edward J. Kosmowski, Esq., of Young Conaway Stargatt & Taylor, LLP tells Judge Walrath. GST TELECOM: Committee Selects Milbank Tweed & Morris Nichols as Counsel ------------------------------------------------------------------------ The Official Committee of Unsecured Creditors of GST Telecom, Inc., et al., whose membership consists of: * Magten Asset Management; * Cerberus Capital Management, L.P. (Mark Neporent, Committee Chair); * Nortel Networks; * United States Trust Company of New York; * United States Trust Company, N.A.; * NCTF Capita; (ex officio member); and * Oaktree Capital Management, LLC (ex officio member); tells the Delaware bankruptcy court that it selected Milbank, Tweed, Hadley & McCloy LLP as its lead counsell and Morris, Nichols, Arsht & Tunnell as its local counsel. From Los Angeles, Paul S. Aronzon, Esq., and Thomas R. Kreller, Esq., lead the Milbank team in the GST engagement. Robert J. Denney, Esq., and Gregory W. Werkheiser, Esq., are the lead attorneys at Morris Nichols in the Firm's representation of the Committee. Milbank agrees to bill at its customary hourly rates, now $200 to $600 per hour for work performed by its attorneys and $115 to $160 per hour for work performed by legal assistants. The Committee asks the Court to approve the retention nunc pro tunc to May 17, 2000. GST TELECOM: Offers Employees $6.1 Million Retention Incentive Package ---------------------------------------------------------------------- GST Telecommunications, to keep employees from jumping ship, proposes to spend $6.1 million while the company is being reorganized or readied for sale. Employee confidence was shaken severely after Time Warner Telecom backed out of its deal to plan to acquire GST for $450 million. An auction for GST's assets is now scheduled for August 4 by the U.S. Bankruptcy Court in Delaware. Employees are nervous and are being courted by competitors. If there's going to be anything left to sell in August, GST needs to retain its employees. The Company will pressent its retention incentive plan to the Delaware bankruptcy court on June 23. GULF STATES: Noteholders' Committee Objects to Disclosure Statement ------------------------------------------------------------------- The Official Committee of Holders of the 13.5% First Mortgage Notes due April 15, 2004, issued by Gulf States Steel. Inc. of Alabama, objects to the Debtor's request for approval of the Disclosure Statement filed in support of its First Amended Plan of Reorganization. The Noteholders' Committee makes no secret that it does not support, will not support, and will encourage creditors to vote against the Debtor's Plan. The Disclosure Statement, the Noteholders tell Judge James S. Sledge, is deficient because it does not make that statement. The Disclosure Statement is further deficient, the Noteholders say, because the Debtor has already indicated that it plans to further amend the Plan. And the changes to the Plan aren't minimal, Lawrence M. Handlesman, Esq., of Stroock & Stroock & Lavan, representing the Noteholders' Committee says, those "changes will have a significant impact on creditor recoveries." HARVARD PILGRIM: Massachusetts Regulators Appoint New Board of Directors ------------------------------------------------------------------------ "Regulators this week appointed a new 10-member board of directors for Harvard Pilgrim Health Care Inc., one of the steps required by the Massachusetts Supreme Judicial Court before ending state receivership," The Wall Street Journal Reports, observing that "with just two doctors, the board is far different from the one that presided when the financially ailing health- maintenance organization went into receivership earlier this year." HOUSING RETAILER: Chapter 7 Trustee Objects to Debtors' Disclosure Statement ---------------------------------------------------------------------------- Jeoffrey L. Burtch, serving as the Chapter 7 Trustee overseeing the liquidation of Ted Parker Home Sales, Inc., and Carolina Home Sales, Inc., objects to the Disclosure Statement filed in support of a chapter 11 plan of reorganization presented by those entities' parent company, Housing Retailer Holdings, Inc. It is clear to Mr. Burtch that Ted Parker and Carolina Homes hold significant claims against their parent. The chapter 11 plan on the table attempts to thwart his efforts to recover value from the parent company for the benefit of the operating subsidiaries' creditors. To meet the disclosure standard required by 11 U.S.C. Sec. 1125, Adam Singer, Esq., of Cooch and Taylor in Wilmington, serving as counsel to the Trustee, asserts, the Parent's Disclosure Statement needs to present information about all of the Intercompany Claims arising from (a) the Parent's receipt of dividend payments while the Operating Subsidiaries were insolvent and (b) how the Parent breached its fiduciary obligations to the Operating Subsidiaries. Certainly, the Trustee suggests, those Intercompany Claims have a significant impact on the feasibility of the Parent's proposed chapter 11 plan. INACOM: Business As Usual At Inacom Canada ------------------------------------------ Inacom Corp. filed for protection in the United States under Chapter 11 of the Bankruptcy Protection Act on Friday, June 16, 2000. Inacom U.S. had been unable to find a buyer for its service organization. However, operations at Inacom Information Systems Ltd., (Inacom Canada), a licensee of the Inacom trademark in Canada, are unaffected by the developments in the United States. It is business as usual at Inacom Canada, a Canadian-owned and financed technology management services company. Profitable since its inception in 1997, Inacom Canada continues to be a leading infrastructure product and services provider with extensive experience in delivering high-quality, practical solutions in response to its clients' IT infrastructure needs. Inacom Canada's focus is to help its clients manage their infrastructure in a way that results in operational efficiencies and enables them to take full advantage of today's dynamic e-Business economy. INACOM: PC Helps Ready to Pick-Up its Share of Inacom Customers --------------------------------------------------------------- "Inacom Corporation (NYSE:ICO), succumbing to the burden of growing financial problems and increased competition, filed for bankruptcy on Friday, June 16, 2000, leaving hundreds of clients holding the proverbial "support bag." In the midst of this sudden and confusing turn of events, PC Helps Support, Inc. is offering Inacom's clients a solution - a fast-track program that can absorb a company's help desk call volume on off-the-shelf software applications," PC Helps Support states in a press release issued earlier this week. JITNEY JUNGLE: Creditors' Committee Asks for Lessors' Committee to Disband -------------------------------------------------------------------------- The Creditors Committee in the Jitney Jungle (Jackson, MS) Chapter 11 Case has filed a motion seeking to have the US Bankruptcy Court disband the Lessors Committee recently appointed by the US Trustee. Meanwhile, F&D Reports speculates in its weekly Scrambled Eggs newsletter, the Lessors Committee has formally organized itself and retained counsel, who will undoubtedly oppose the Committee's motion, scheduled to be heard on June 29. JUMBOSPORTS, INC.: Selling Greenville Store to Bob Jones Univ. for $1.25 Mil. ----------------------------------------------------------------------------- Subject to bankruptcy court approval, Jumbosports, Inc., agrees to sell its store located at 3150 Wade Hampton Boulevard in Greenville, Sourth Carolina to Bob Jones University for $1,250,000 in cash. To assure the Court and creditors that the highest and best price is obtained for the property, BJU agrees to subject its offer to a competitive bidding process. Buyers willing to pay at least $10,000 more, in cash, should contact Charles A. Postler, Esq., at Stichter, Riedel, Blain & Prosser, P.A., in Tampa, Florida, at 813/229-0144 by July 3, 2000. JUST FOR FEET: Shareholders Allege Advertising Rebate Scheme Inflated Profits ----------------------------------------------------------------------------- Just for Feet Inc. shareholders accuse the Birmingham shoe retailer of using rebates from an advertising agency to inflate its revenue before filing for bankruptcy last year, a report appearing in The Wall Street Journal says. The shareholders' federal lawsuit alleges that Just for Feet asked a local advertising agency to overcharge it for services, then listed rebates from the agency as revenue or money owed in order to improve its balance sheet. An attorney for former CEO Harold Ruttenberg tells the Journal that the lawsuit is without merit. LAIDLAW, INC.: Moody's Downgrades Ratings on $3.4 Billion of Securities ----------------------------------------------------------------------- Moody's Investors Service lowered the ratings of Laidlaw Inc. senior unsecured debt (to Ca from Caa2) and bank debt (to Caa3 from Caa1), and Greyhound Lines, Inc. (senior unsecured to Caa1 from B3). Moody's notes that Laidlaw missed the interest due May 15, 2000 of certain debt securities and subsequently declared an interest moratorium on all holding company debt. The grace period for the missed interest expires today and the bondholders could declare a default and accelerate payment of principal if the interest is not paid. Irrespective of the outcome, the rating actions are based on Moody's views of potential recovery value for debt holders and completes Moody's rating review. Ratings on Greyhound's debt reflect the protections provided by the covenants in Greyhound's public debentures and Laidlaw's statement that the interest moratorium does not apply to subsidiary debt. Laidlaw's intent to restructure its debt obligations at the holding company level to reflect the cash flow of the core bus units and the company's still high overall indebtedness could take some time even if healthcare asset sales can ultimately be completed, in Moody's view. The ratings lowered are: * Laidlaw, Inc. - notes, debentures, and pollution control revenue bonds to Ca from Caa2; issuer rating to Ca from Caa2; $1.5 billion Bank Revolving Credit Facility to Caa3 from Caa1; and shelf registration for the issuance of senior debt to (P)Ca from (P)Caa2. * Laidlaw One, Inc. - guaranteed exchangeable notes, which are guaranteed by Laidlaw, Inc., to Ca from Caa2 * Greyhound Lines, Inc. senior unsecured Notes to Caa1 from B3. Laidlaw reported consolidated debt as of February, 2000 of approximately $3.4 billion, and subsequently advised that $1.25 billion was outstanding under its bank credit agreement within that total. However, claims on Laidlaw' assets could be considerably higher depending on Laidlaw's further obligations with respect to its Safety-Kleen investment. Such claims could include guarantees on certain debt, residual obligations for environmental clean-up sites and lawsuits. Safety-Kleen, and its subsidiaries, filed for bankruptcy protection on June 9, 2000. Laidlaw's healthcare business was recently written down to a carrying value of $830 million and the business has been for sale since late 1999. Because of the continuing difficult overall healthcare environment and the particular challenges for reimbursement of ambulance services, any disposition of Laidlaw's units could take some time to complete and the proceeds may be less than the carrying value, in Moody's view. Moody's notes that Laidlaw is a leader in its core bus transportation business of municipal and school bus routes and Greyhound's lines. The business generates reasonably stable cash flow, although somewhat seasonal in nature. Although a number of similar bus businesses have been sold recently, Moody's believes that the multiples used to value Laidlaw's business should be discounted considerably from multiples seen in recent sales. This is because there are currently a smaller number of viable strategic buyers and a weak high yield bond market limits funding sources for potential financial buyers and, the prices paid in many recent transactions included a premium for strategic positioning by the buyers and merger synergies that may not be achievable under current market conditions, in Moody's opinion. Further, as much of Laidlaw's bus business involves municipal contracts that need to be re-bid on a regular basis, a bankruptcy filing by Laidlaw could weaken its position during the re-bid process and would reduce values of the bus business considerably, in Moody's view. The transportation units generated income from operations of $127 million for the first six months of Laidlaw's fiscal year, although Moody's notes that the first six months are usually the seasonal low point for the business. Moody's differentiates ratings on the bonds versus the bank debt, by rating the bank debt one refined rating notch higher than the senior unsecured bonds. The bank debt of Laidlaw, Inc. is guaranteed by Laidlaw Transportation, Inc., a U.S. holding company which indirectly owns a relatively large portion of Laidlaw's total assets. This guaranty provides the potential for somewhat better recovery for the bank lenders versus the senior unsecured holders. However, in Moody's opinion, the priority of claim under liquidation could be limited in this case taking into account, among other factors, limitations on subsidiary debt and negative pledge provisions in bond indentures that preceed the date of the current bank agreement. Laidlaw, Inc., headquartered in Burlington, Ontario, Canada, is North America's largest provider of school busing, municipal transit services, patient transport, and emergency room physician management. MARQUIP, INC.: Obtains DIP Financing and Company Outlines Business Plan ----------------------------------------------------------------------- Judge Thomas S. Utschig approved an $8,000,000 DIP financing pact for Wisconsin-based Marquip, Inc. Marquip, as previously reported in the TCR, filed a chapter 11 petition in the Western District of Wisconsin, attributing its financial troubles to a downturn in the corrugated industry. Marquip anticipates it will shutter its plant in Madison, Wisconsin, and will consolidate operations at its Phillips, Wisconsin, headquarters. More than 350 people have been laid off since February, but no further layoffs are expected. James D. Sweet, Esq., of Murphy & Desmond, S.C., in Madison, Wisconsin, represents the debtor. Mark L. Metz, Esq., of Reinhart, Boerner, Van Dueren, Norris and Rieselbach, S.C. of Milwaukee represent the Creditors' Committee. Thor Lundgren, Esq., and Ann Smith, Esq., of Michael, Best & Friedrich, S.C. in Milwaukee represent the secured lenders. NATIONAL HEALTHCARE: Negotiates Covenant Waivers ------------------------------------------------- National HealthCare Corporation (AMEX:NHC), one of the nation's oldest publicly traded long-term health care companies, said its negotiations for a waiver continue for a previously disclosed default on certain covenants on a loan it guarantees. First, all principal and interest payments on all loans are current. Second, negotiations continue with the lenders to waive the default. NHC provides services to 105 long-term health care centers with 13,917 beds. NHC also operates 34 homecare programs, six independent living centers and assisted living centers at 17 locations. NHC's other services include managed care specialty medical units, Alzheimer's units and a rehabilitation services company. NUTRAMAX PRODUCTS: Committee Retains Otterbourg, Pepper Hamilton & M.R. Weiser ------------------------------------------------------------------------------ The Official Committee of Unsecured Creditors asks Judge Walrath for permission to retain: (A) New York-based Otterbourg, Steindler, Houston & Rosen, P.C., as its lead bankruptcy counsel; (B) Pepper Hamilton LLP as its local counsel for routine appearances before the Delaware bankruptcy court; and (C) M.R. Weiser & Co., LLP as its accountants; nunc pro tunc to May 12, 2000, in the chapter 11 cases commenced by Nutramax Products, Inc., et al. Edward Humphrey of Cargill, Inc., chairs the Creditors' Committee. Scott L. Hazen, Esq., is the partner in charge at Otterbourg. David B. Stratton, Esq., at Pepper Hamilton, leads local representation of the Committee's interests in Nutramax's cases. Andrew W. Plotzker leads the team at M.R. Weiser working on the Nutramax cases. NUTRAMAX PRODUCTS: $48,000,000 DIP Facility Now in Place -------------------------------------------------------- Judge Walrath gave her final stamp of approval for Nutramax Products, Inc., et al., to enter into and borrow under a $48,000,000 superpriority debtor-in- possession financing facility. The DIP Facility will be used to: (A) immediately pay $32,500,000 to Fleet National Bank in partial satisfaction of the Debtors' prepetition loan obligations under a 1996 Credit Agreement; and (B) fund Nutramax' on--going working capital needs. The DIP Facility is underwritten by: The CIT Group/Business Credit, Inc., is underwriting $30,000,000 of the DIP Facility, providing $20,000,000 of revolving credit and a $10,000,000 term loan. The remaining $18,000,000 of financing is provided, with rights junior to CIT, by Cape Ann Investors, LLC, Peritus Capital Partners LLC and Bernard J. Korman. Robert J. Graves, Esq., of Jones, Day, Reavis & Pogue in Chicago serves as counsel to CIT. Gerald C.. Bender, Esq., of Fried, Frank, Harris, Shriver & Jacobson and Laura Davis Jones, Esq., of Pachulski, Stang, Ziehl, Young & Jones, P.C., serve as counsel to Nutramax. PAGING NETWORK: Landenburg Recommends Notes to Get Arch Stock via Prepack Plan ------------------------------------------------------------------------------ Ladenburg Thalmann & Co.'s High Yield Division raised its rating on Paging Network's (OTC Bulletin Board: PAGE) senior subordinated notes to STRONG BUY from HOLD last week. Further, Ladenburg Thalmann initiated coverage of Arch Communication Group's (OTC Bulletin Board: APGR) 10.875% senior discount notes with a BUY rating. On Nov. 8, 1999, LT&C recalls, Paging Network and Arch Communications Group, Inc. announced the signing of a definitive merger agreement. The proposed transaction will combine the Number 1 and 2 players in the paging industry, creating an entity with approximately 14.5 million subscribers and a 30% market share at the time of the merger. Since the announcement, meaningful progress has been made and Ladenburg Thalmann believes the merger will be finalized by mid- to late-September, through a pre-packaged bankruptcy. Upon consummation, the Paging Network notes will be converted into the common shares of Arch. For a copy of the report, telephone Mr. Reid Dabney in Ladenburg Thalmann's High Yield Division at (310) 444-9135 or (888) 838-6650. PATHMARK STORES: Grocery Chain's Total Enterprise Value Fixed at $1.3 Billion ----------------------------------------------------------------------------- The prepackaged chapter 11 plan of reorganization proposed by Pathmark Stores, Inc., is premised on a total enterprise value of $1.3 billion. That valuation, a report appearing in The Star-Ledger observes, is significantly less than the $1.75 billion Royal Ahold NV was offering to pay for the grocer last year. The valuation is part of the disclosure statement sent to investors adding details to the story of Pathmark's failed merger with Ahold. As widely reported, Pathmark plans to file a prepackaged Chapter 11 case in a few weeks' time. PENNCORP FINANCIAL: Plan's Effective Date Was June 13, 2000 ----------------------------------------------------------- Weil, Gotshal & Manges LLP, counsel to PennCorp Financial Group, Inc., advises the United States Bankruptcy Court for the District of Delaware that, following confirmation of the Plan of Reorganization, dated April 25, 2000, proposed by the Debtors and the Unofficial Committee of Preferred Shareholders, the Effective Date of the Plan occurred on June 13, 2000, and the Plan has been substantially consummated. Pursuant to the terms of the Plan, PennCorp assumed its new name, Southwestern Life Holdings, Inc. QUAKER COAL: Files for Chapter 11 Protection in Kentucky -------------------------------------------------------- From Pikesville, Kentucky, the Associated Press reports that Quaker Coal Co. Inc., and all of its subsidiaries, including Branham & Baker Coal Co., filed for Chapter 11 bankruptcy protection. Donn Chickering, owner and chief executive officer, suggests that the decision to file was driven by weak prices in the coal market. Quaker sells coal, primarily in the domestic steam market, produced from mines it operates in Kentucky, Ohio, and West Virginia. Revenues for the year ended Dec. 31, 1999, were approximately $275 million on sales of more than 11 million tons, the AP relates. RANCHO LA COSTA: Case Summary and Largest Unsecured Creditor ------------------------------------------------------------ Debtor: Rancho La Costa Elfin Forrest 1235 Hotel Circle So. San Diego, CA 92108 Chapter 11 Petition Date: June 13, 2000 Court: Southern District of California Bankruptcy Case No.: 00-05975 Judge: Louise DeCarl Adler Debtor's Counsel: Ruben F. Arizmendi 110 West "C" Street Suite 1201 San Diego, CA 92101 Telephone (619) 231-0460 E-mail: rfa52@aol.com Total Assets: $ 2,500,000 Total Debts: $ 1,213,894 Largest Unsecured Creditor American Waste Transport, Inc. c/o Michael M. Daly 8910 University Center Lane Suite 550 San Diego, CA 92122 Disputed $ 600,000 RENCO METAL: Moody's Downgrades Sr. Notes To Caa2; Outlook Is Negative ---------------------------------------------------------------------- Moody's Investors Service downgraded the ratings of Renco Metals, Inc., lowering the rating for its $150 million of guaranteed 11.5% senior notes due 2003 to Caa2 from B3, lowering the company's senior implied rating to Caa1 from B2, and lowering its senior unsecured issuer rating to Caa3 from Caa1. The rating outlook was changed to negative from stable. The downgrade reflects further slippage in Renco Metal's sales, cash flow, and liquidity since Moody's lowered its ratings on the company in April 1999. For the six months ended April 30, 2000, Renco Metal's operating income and EBITDA were $3.8 million and $7.9 million, respectively, compared to cash interest of $9.0 million. These recent results are about $9 million less than the company reported for the first six months of 1999, primarily due to 8% lower magnesium shipments and 6% lower magnesium prices. The company's inability to cover interest from operating cash flow exacerbates the liquidity concerns that led to Moody's April 1999 downgrade. Moody's does not see volume and pricing pressure from imported magnesium abating in the foreseeable future. In fact, the start-up of Noranda's Magnola Project in 2000 could further impact Renco Metals, especially if antidumping and countervailing duties on Canadian imports, currently the subject of "sunset reviews" by the International Trade Commission and the Department of Commerce, were revoked. Furthermore, the recent improvements in Renco Metal's steel business (Sabel Industries, Inc.) could be short-lived if U.S. steel prices come under pressure, as appears to be the case. Renco Metal remains committed to higher-than-normal capital expenditures at its Magcorp subsidiary for new electrolytic cell technology, although the project has been scaled back and delayed somewhat because of the company's reduced operating cash flow. Approximately $31 million is expected to be spent between 2000 and 2002 for the electrolytic cell conversion. The new technology is required, practically speaking, as it should ensure compliance with future environmental standards and improve manufacturing efficiency. Renco Metal's weaker cash flow has accelerated the company's consumption of cash and revolving credit utilization compared to Moody's April 1999 forecast. As of April 30, 2000, Renco Metals had unused revolving credit availability of $24 million ($21.8 million of this is available to Magcorp). This is likely to be reduced on July 1, following the payment of $8.6 million in semiannual bond interest. Without relief from improved magnesium prices and sales, the company's operating and capital spending plans may experience additional restrictions due to lack of liquidity. Renco Metal's considerable debt, $161 million on April 30, 2000, and negative equity provide very little protection to unsecured creditors. Its assets total $125 million. The company's revolving credit facilities are secured by receivables and inventories. The $150 million of 11.5% notes, due 2003, are general unsecured obligations of Renco Metals, and are unconditionally and fully guaranteed, jointly and severally, on a senior unsecured basis by its two subsidiaries, Magcorp and Sabel. Renco Metals, Inc., headquartered in Salt Lake City, is a holding company with two operating companies, Magnesium Corporation of America, engaged in the production and sale of magnesium and magnesium alloys, and Sabel Industries, Inc., involved in the steel service center, scrap metal and rebar businesses. RIDGE RUN: Case Summary and 6 Largest Unsecured Creditors --------------------------------------------------------- Debtor: Ridge Run Limited Partnership, A Partnership c/o Dakota West Inc. 1800 E. Sahara Ave #107 Las Vegas, NV 89104 Chapter 11 Petition Date: June 13, 2000 Court: District of Nevada Bankruptcy Case No.: 00-14352 Judge: Linda B. Riegle Debtor's Counsel: T. James Truman 6900 Westcliff Dr #515 Las Vegas, NV 89128 Tel:(702) 256-6000 Total Assets: $ 2,000,450 Total Debts: $ 1,310,654 6 Largest Unsecured Creditors Standard Professional Services 630 Dundee Road, #215 Northbrook, IL 60062 Equipment lease $ 275,000 Kenco Equipment Lease Co. Equipment lease $ 158,043 Alpine Property Management Property Management $ 5,000 Apex Security Alarm System Maintenance $ 2,000 Holy Cross Electric Assoc. Electric bills $ 2,000 KN Energy Gas bills $ 2,000 RITE-AID: Refinancing Completed and S&P Adjusts Ratings to Reflect Changes -------------------------------------------------------------------------- As widely reported, Rite-Aid Corporation completed its refinancing, granting new security to some $3.70 billion of the Company's debt. On that news, Standard & Poor's lowered its rating on the Company's senior unsecured debt to B- from B to reflect the increased level of senior claims against Rite Aid's assets. Additionally, S&P withdrew it ratings on the Company's recently exchanged $200 million senior unsecured notes due December 2000 and the $350 million senior unsecured notes due December 2001. S&P went on to state that "the rating(s) on the senior unsecured notes will again be addressed after Rite Aid announces financial results, to determine if the notes are more disadvantaged than the current analysis indicates." SERVICE MERCHANDISE: Downsizes Outlet Near Headquarters -------------------------------------------------------- The Tennesean reports that Service Merchandise has reduced the size of its store located in Cool Springs, Tennessee, located near it Brentwood headquarters. The store now occupies less space and the excess space is sublet to retailer H.H. Gregg. Service Merchandise began reorganizing in March of 1999. This downsizing of individual store locations is one of the cornerstones of SMCO's operational restructuring. The Cool Springs location is one of the first to complete the design transition. SILVER CINEMAS: Committee Voices Concerns About Terms of Jefferies Engagement ----------------------------------------------------------------------------- The Official Committee of Unsecured Creditors appointed in the chapter 11 cases commenced by Silver Cinemas International, Inc., et al., voiced concerns about the Debtors' application to employ Jefferies & Company, Inc., as its financial advisor. First, the Committee found the proposed success fee payable to Jefferies too rich. Negotiations culminated in Jefferies' agreement to reduce any success fee by an amount equal to 50% of its monthly billings from January 1, 2000 through October 1, 2000. Second, the Committee is troubled by the broad indemnification the Debtors' estates agree to provide to Jefferies. The Committee understands that the United States Trustee is equally concerned and is planning to launch full- scale litigation to defeat those provisions of the engagement. Accordingly, the Committee says, it will be satisfied with whatever resolution the U.S. Trustee achieves. Robert J. Moore, Esq. and David B. Zolkin, Esq., from the Los Angeles office of Milbank, Tweed, Hadley & McCloy, LLP, serve as lead counsel to the Committee in Silver Cinemas chapter 11 cases pending before Judge Farnan in Delaware. SILVER CINEMAS: Committee Troubled by Aggressive DIP Financing Terms -------------------------------------------------------------------- The Official Committee of Unsecured Creditors appointed in the chapter 11 cases commenced by Silver Cinemas International, Inc., et al., is troubled by two provisions buried in the $50,000,000 debtor-in-possession financing facility extended by Farallon Capital Funding, LLC: (A) Farallon improperly attempts to collateralize the estates' avoidance actions; and (B) Farallon attempts to charge the debtors a $50,000 pre-payment penalty for each month in advance of the November 2001 maturity date that the loan facility is pre-paid. No exigent circumstances are present in the Debtors' case to justify granting Farallon liens on recoveries from the Debtors' exercise of its avoiding powers under Chapter 5 of the Bankruptcy Code, the Committee argues. Any such recoveries cannot be pursued for the benefit of one creditor, so it is improper for the DIP Lender to encumber such proceeds. The Committee points out that the $50 million facility will refinance all of Farallon's $33 million pre-petition secured loans and the DIP Financing will be further secured by another $50 million of collateral. The pre-payment penalty is nothing more than a disincentive for the Debtors to emerge from chapter 11 sooner rather than later, the Committee contends. As such, that provision is directly contrary to the Bankruptcy Code's policy encouraging debtors to exit from bankruptcy as quickly as they are able. The pre-payment provision, Robert J. Dehney, Esq., of Morris, Nichols, Arsht & Tunnell, local counsel to the Committee, says, should be stricken or the DIP Financing pact should not be approved. SUNTERRA CORP.: Abelco Finance Offers $53 Million DIP Financing Arrangement --------------------------------------------------------------------------- Sunterra Corp. will seek final approval from the bankruptcy court on June 27 for a $53 million debtor-in-possession financing agreement with Ableco Finance LLC, Federal Filings, Inc., reports, adding that Sunterra will be entitled to fully tap the facility only if the value of its unencumbered assets is at least $150 million. Without the DIP financing, the developer and operator of time-share resorts tells creditors and the Court in its motion papers that it "will have no available cash and will, effectively, be denied any hope of reorganization." TRANSCOASTAL MARINE: Files Voluntary Chapter 7 Petition in Houston ------------------------------------------------------------------ TransCoastal Marine Services, Inc. (Nasdaq:TCMS) announced yesterday that it filed a voluntary petition for Chapter 7 Liquidation in the U.S. Bankruptcy Court for the Southern District of Texas. Voluntary bankruptcy petitions were filed not only for TransCoastal Marine Services, Inc., but also for a number of its subsidiaries forming its Pipeline & Marine Group. The Company had been attempting to recapitalize through either divestiture of its ongoing pipeline operations or raising equity capital. However, without an immediate equity infusion, continued operations were not feasible. The Company further announced that it has discontinued the operations of its Pipeline & Marine Group. "Significant factors that prevented the Company's ability to complete a timely recapitalization included: the assertion of approximately $28 million in claims by Chevron Global Technology Services Company against Dickson GMP International, Inc. (a wholly-owned subsidiary of TCMS) and delayed recovery in the oilfield service markets. Deferred collection on a significant Mexican receivable also severely impacted the ongoing liquidity of the Company," TransCoastal said in a prepared statement. UNITED STATES ENRICHMENT: Plant Closure May Be Imminent ------------------------------------------------------- Press reports circulating this week report that United States Enrichment Corp., owner of the nation's only uranium enrichment plants, is in such financial turmoil that a plant closure may be the next logical step. No word about whether management is looking at closure of the in Portsmouth, Ohio, or Paducah, Kentucky, facility. "You've got an industry that's very well set up for the 1970's," William H. Timbers Jr., president and chief executive of United States Enrichment, told a reporter for The New York Times, but 30 years later, "[i]t has to restructure." Estimates vary, the Times says, but world demand for nuclear fuel is around 36 million units a year, while the supply is 42 million units. And since uranium has limited uses, price declines do not stimulate demand. Last July, USEC laid off 625 of nearly 4,000 workers in Ohio and Kentucky. Those layoffs weren't sufficient to stem operating losses. VIVAX MEDICAL: Settles Dispute with Vail Products, Inc. ------------------------------------------------------- In October, 1999 Vail Products, Inc., obtained an injunction by default in Ohio District Court against Vivax Medical Corporation enjoining Vivax from manufacturing, marketing, renting and selling its Soma Safe Enclosure Bed (the "SSE"). Subsequent rulings vacated the injunction and the parties have now entered into a settlement agreement. Subject to certain conditions, the settlement recognizes Vivax's continuing right to manufacture, market, sell and rent its SSE without interference by Vail. In the October, 1999 default judgment entered by the United States District Court for the Northern District of Ohio against Vivax Medical Corporation, Vivax was ordered to stop manufacturing, marketing or selling the SSE. As a result of Vivax's September, 1999 bankruptcy filing in Hartford, CT, however, the October, 1999 order of the Ohio court was rendered void. Vail subsequently filed a new action against Vivax in the bankruptcy court in Hartford, seeking essentially the same relief. The parties have now resolved that new action and Vail will be dismissing its adversary claim against Vivax in the Hartford bankruptcy court. Under the settlement agreement, which has been approved by the bankruptcy judge in Hartford, Vail and Vivax also have agreed on certain amounts for Vail's claims in the bankruptcy process, agreed on certain mechanisms designed to avoid future confusion in the marketplace between the SSE and Vail's products, and agreed that Vivax can continue to market and sell the SSE, subject to certain conditions. WESTERN FERTILIZER: Case Summary -------------------------------- Debtor: Western Fertilizer Inc. a Nevada Corporation P.O. Box 789 Soda Springs, ID 83276 Type of Business: Warehouse and Sale of fertilizer. Chapter 11 Petition Date: June 16, 2000 Court: District of Idaho Bankruptcy Case No.: 00-40991 Judge: Jim D. Pappas Debtor's Counsel: Craig R. Jorgensen, Esq. P.O. Box 4904 Pocatello, ID 83205-4904 (208) 233-1237 Total Assets: $ 1,000,000 Total Debts: $ 6,500,000 ********* A listing of Meetings, Conferences and Seminars appears each Tuesday in the TCR. 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