/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/000705.MBXT R O U B L E D C O M P A N Y R E P O R T E R Wednesday, July 5, 2000, Vol. 4, No. 130 Headlines ACME STEEL: Action on Loan Delayed AHERF: Settles Fraud Charges With SEC AIOC: Effective Date of Chapter 11 Plan of Liquidation AMERICAN AIRCARRIERS: Announces Agreement With Bank AMERICAN BANKNOTE: Extension of Cash Collateral AMERISERVE: Talking With Wal-Mart Unit APPLIED THERMAL: Files for Chapter 11 BORDEN CHEMICALS & PLASTICS: Agreement To Sell Certain Assets BOSTON CHICKEN: Heinz Grows Boston Market Line BROWN & SHARPE: Possible Sale or Merger CANADIAN AIRLINES: Albert Court Approves Plan CONNEAUT LAKE: Judge Rules That Trustee Takes Control Over Park CWT SPECIALTY STORES: Compromise and Settlement With Committee DYNEX CAPITAL: Bankruptcy On Its Tail ELCOTEL INC: Company In Default On Covenants GENESIS HEALTH: Hamilton Center Unaffected In Chapter 11 GENEVA STEEL: Board Approves Application for $110 Million Loan HARNISCHFEGER: Motion To Amend DIP Facility HILLSBOROUGH RESOURCES: Court Extends Protection Until August HOLLYTEX CARPET: Owners Decide To Shut Down Plant HYUNDAI GROUP: Agrees To Back Out Of Car Business KITTY HAWK: Bond Prices Questionable MONARCH DENTAL: Extends Loan Agreement NORTON MOTORCYCLES: Pledges Shares To Circle Capital OREGON STEEL: Releases Second-Quarter Report OWENS CORNING: Releases Expectations To SEC PANDA GLOBAL: S&P Downgrades to `CCC' From `B-' PATHMARK STORES: Prepack Bankruptcy Gives Control To Bondholders PIC N PAY: Shoe Show To Take Over 73 Stores PRIME CAPITAL: Negotiations Cease Between Prime and Finantra RECOM MANAGED SYSTEMS: Files Chapter 11 Bankruptcy Petition RELIANCE GROUP: Moody's Downgrades Ratings SOGO CO.: Lenders to Forgive US$5.9 Billion STRAND PROPERTIES: Defaults On Mortgage Payments TAYLOR CBI/COMMEMORATIVE BRANDS: Moody's Assigns/Lowers Ratings TOYTIME INC: Involuntary Case Summary TOYTIME: Involuntary Petition Filed on July 3, 2000 TRANSTEXAS GAS: Annual Meeting Set For July 25, 2000 WORLDPORT COMMUNICATIONS: Annual Meeting Set For July 21, 2000 Meetings, Conferences and Seminars ********* ACME STEEL: Action on Loan Delayed ---------------------------------- Acme Steel Company announced it has been informed that action on its loan application with the Emergency Steel Loan Guarantee Board has been delayed subject to further discussions with the Executive Director of the Board clarifying the loan application. Stephen D. Bennett, Chairman of the Board, President and Chief Executive Officer, of Acme Metals Incorporated (OTC Bulletin Board: AMIIQ), the parent of Acme Steel Company, said, "I am confident that the Company will be able to submit a plan of reorganization to the Bankruptcy Court in the near future." Acme Metals Incorporated, the parent company of Acme Steel Company, through its operating subsidiaries, is a fully integrated producer of steel, steel strapping and strapping products, and welded steel tubing. On September 28, 1998, Acme Metals and its subsidiaries filed separate voluntary petitions for protection and reorganization under Chapter 11 of the United States Code. The Company is in possession of its properties and assets and continues to manage its business as debtor-in- possession subject to the supervision of the Bankruptcy Code. Its common stock is listed on the Bulletin Board of the National Association of Securities Dealers under the symbol AMIIQ. AHERF: Settles Fraud Charges With SEC ------------------------------------- The Securities and Exchange Commission announced that Allegheny Health Education and Research Foundation has settled fraud charges by agreeing to a cease and desist order, although the non-profit didn't admit nor deny the allegations by SEC that it inflated its 1997 income by more than $114 million and misrepresented finances for subsidiary operations. No fines were imposed since the company is operating business under Chapter 11 Bankruptcy Protection. "We hope this sends a clear message to those in the non-profit health-care world that when they access U.S. markets, they have to do so in a way that's fair and accurate," said Ronald Long, district administrator in the SEC's Philadelphia office. AIOC: Effective Date of Chapter 11 Plan of Liquidation ------------------------------------------------------ Edward G. Moran, the Chapter 11 Trustee of AIOC Corporation and AIOC Resources AG, announces that the effective date of his Amended Joint Transnational Chapter 11 Plan of Liquidation for those chapter 11 debtors was June 22, 2000, and that he made his first distribution to creditors under the plan on June 29, 2000. The plan provides for 100% distributions on all allowed administrative and priority claims, and for distributions that, in total, are estimated at approximately 19% and 27% on allowed general unsecured claims against Corp. and Resources, respectively. The U.S. Bankruptcy Court for the Southern District of New York confirmed the plan by order entered on June 2, 2000. In accordance with the plan and the confirmation order, final applications for payment of administrative expense claims and fee claims must be filed with the Court, and served on all appropriate parties, no later than July 12, 2000. Failure to timely file and serve such applications shall result in such claims being disallowed and forever barred and discharged. Copies of the plan, the confirmation order, and the notice of the occurrence of the effective date may be obtained electronically by accessing the Court's website at: www.nysb.uscourts.gov. Parties in interest may also obtain further information by contacting the Chapter 11 Trustee, Mr. Edward G. Moran, at 212- 697-3515 (telephone) or 212-986-1530 (fax). Before the commencement of their chapter 11 cases in April 1996, Corp. and Resources were engaged, among other things, in the purchase and sale of ferrous, nonferrous, and precious metals with trading partners throughout the world, and maintained more than twenty offices worldwide. In August 1996, Resources also became the subject of an involuntary bankruptcy proceeding in Zug, Switzerland, which is being administered by the Bankruptcy Office for the Canton of Zug, Switzerland. The Swiss and U.S. proceedings involving Resources have been administered and coordinated under a Cross-Border Liquidation Protocol entered into by and between the Chapter 11 Trustee and the Swiss Bankruptcy Office, and approved by the U.S. Bankruptcy Court. AMERICAN AIRCARRIERS: Announces Agreement With Bank --------------------------------------------------- According to a report by The Press Enterprise Co. on June 27, 2000, American Aircarriers Support Inc., has reached an agreement with bank lenders to continue funding for its operating capital until Aug 1. The aircraft maintenance company in San Bernardino reported a first-quarter loss last month of $ 769,000 on revenues of $ 14 million, suffering its loss for the first time ever. It resulted the technical default on the company's $100 million line of credit. AMERICAN BANKNOTE: Extension of Cash Collateral ----------------------------------------------- American Banknote Corporation will present a stipulation and order extending the use of cash collateral through September 30, 2000 to the Honorable Prudence Carter Beatty, US Bankruptcy Court, Southern District of New York on July 17, 2000 at 12:00 noon. AMERISERVE: Talking With Wal-Mart Unit -------------------------------------- According to an article in The New York Times on July 1, 2000, AmeriServe Food Distribution Inc. said that it was talking with the McLane company unit of Wal-Mart Stores Inc. and other parties concerning possible "strategic alternatives," including a sale of assets or a partnership. AmeriServe, which is based in Addison, Tex., called the discussions "preliminary" and subject to bankruptcy court approval. McLane, which is based in Temple, Tex., provides distribution services to convenience stores, mass merchandisers and fast-food restaurants. It is owned by Wal-Mart. APPLIED THERMAL: Files for Chapter 11 ------------------------------------- The Daily Oklahoman reports that Applied Thermal Systems Inc. sent home all its manpower maintaining 5 from a total of 22. Neal Tomlins, attorney representing the Tulsa firm that designs heat transfer equipment, says that the company "needs some breathing room" and is in engaged in "highly specialized" work for power plants. Applied Thermal claimed assets of $5.8 million and debts of $7.25 million upon filing with the Bankruptcy Court for the Northern District of Oklahoma. And among the 20 largest creditors that owes $ 4.62 million are two firms from Oklahoma City, three from Canada, and five from Tulsa. Firms from Oklahoma listed $409,829 for ESCOA and $ 88,384 for Petrofab Inc. of Moore. Largest creditor listed that owed $ 1.66 million was Express Metal Fabricators of Locust Grove. BORDEN CHEMICALS & PLASTICS: Agreement To Sell Certain Assets ------------------------------------------------------------- Borden Chemicals and Plastics Limited Partnership has signed a definitive agreement to sell the formaldehyde and certain other assets of its operating limited partnership to Borden Chemical, Inc., a separate entity which is a subsidiary of Borden, Inc., for $48.5 million. As part of the agreement, BCI has an option to acquire the operating limited partnership's methanol assets for $3 million at year-end. The operating limited partnership will own and operate the methanol assets through 2000, with the intent of exiting the business at that time. The operating limited partnership is also closing its nitrogen production facilities, thereby completing the process of exiting all of its non-vinyl based basic chemical businesses. These actions follow the partnership's previously announced strategic decision to become a focused polyvinyl chloride producer and to realize value for its non-PVC businesses, which are currently unprofitable with poor fundamentals. Proceeds at closing will be $38.8 million, with an interest bearing promissory note of $9.7 million due in six months. The proceeds from the sale, net of deal cost, will be used to pay down debt and reinvest in the PVC business. The transaction is expected to result in a gain in the second quarter. Additionally, the partnership expects the salvage value of its nitrogen production facilities to moderately exceed the closing costs. The closing of the sale of the formaldehyde assets is subject to the receipt by the operating limited partnership of regulatory approval and other necessary consents. Under the terms of the agreement, BCI will acquire all of the operating limited partnership's formaldehyde assets, along with methanol tankage and dock facilities and related adjacent land. The agreement provides for the immediate termination of the nitrogen purchase contract between the operating limited partnership and BCI, except for the sale and purchase of existing inventory. The operating limited partnership will close its ammonia and urea production facilities in July. Also, the operating limited partnership will continue to supply BCI and other methanol customers under contract for at least six months and will make arrangements to supply product to other non-BCI nitrogen customers. If it is still operating the methanol facility at year-end, the operating limited partnership expects to close the plant by the end of 2000 or early in 2001. "This transaction represents a major positive step for the partnership," said William H. Carter, chairman of the partnership. "We are shedding businesses that are currently not profitable and have poor long-term prospects based on the U.S. natural gas costs currently exceeding $4.60 per mmBTU versus offshore natural gas costs historically ranging between $0.25 and $1.00 per mmBTU. Natural gas is the principle raw material for methanol, ammonia and urea." The impetus for change was the major downturn across all three business lines that began in 1997. In December 1998, the partnership announced the retention of Evercore Partners and Salomon Smith Barney to explore strategic alternatives. The options explored included joint ventures, mergers or alliances, or the sale of some or all of the businesses. None of the discussions that took place during 1999 resulted in a transaction proposal that the partnership deemed in the interest of the unitholders. More recently, the partnership retained the consulting firm A.D. Little to assist in developing strategic business plans for the various operations. A.D. Little also advised the partnership on the final transaction. "For more than a year, we have reviewed a range of strategic alternatives and discussed possible transactions with a number of parties," said Carter. "The BCI offer clearly represents the best value for unitholders. The transaction enables us to eliminate much of our exposure to natural gas, realize a fair value for these non-core assets, and focus exclusively on our profitable PVC business." Carter said that the operating limited partnership's methanol/formaldehyde and nitrogen products businesses have been breakeven to cash negative for more than two years as a result of high natural gas prices and worldwide overcapacity. Also, U.S. natural gas prices have been elevated for some time with no improvement on the cost side foreseen. In addition, increased offshore methanol and nitrogen products supported by far cheaper sources of natural gas are expected to enter the U.S. market, weakening the domestic supply and demand balance. The overall demand for methanol is also expected to decline as MTBE is phased out as a fuel additive. Carter added that Georgia Gulf, Ashland Chemical and other North American methanol producers have exited the business in the last 24 months due to unattractive fundamentals. In addition, a significant portion of the domestic chemical industry's ammonia and urea production is currently idled. The transactions with BCI were reviewed, and unanimously approved, by a special committee comprised of the three independent members of the board of directors of BCP Management, Inc., the general partner of the operating limited partnership. The special committee retained and was advised by separate legal counsel, Baker & Hostetler, LLP, and a separate financial advisor, Wasserstein, Perella & Co., which issued a fairness opinion to the committee. "This completes a rigorous process of active negotiations over the last few months," said George W. Koch, board member, BCP Management and chair of the special committee. "The committee was unanimous in its approval of the transaction and believes the agreement is in the best long term interest of our unitholders." The partnership also announced that Mark J. Schneider, president and chief executive officer, was elected to the Board of Directors of BCP Management, Inc. Borden Chemicals and Plastics Limited Partnership operates facilities located in Geismar and Addis, La., and Illiopolis, Ill. BCP Management, Inc., a wholly owned subsidiary of Borden, Inc., has a 2 percent interest and serves as general partner. Publicly traded units account for the remaining 98 percent ownership. BOSTON CHICKEN: Heinz Grows Boston Market Line ---------------------------------------------- With sales of its Boston Market brand frozen entrees outstripping projections, H.J. Heinz. Co. is expanding the line. "The concept is having a suite of Boston Market foods," said Michael Doherty, general manager of communications for the Heinz Frozen Food Co. Frozen products will include pot roast, corn bread and cinnamon apples. Pot roast isn't something you can actually purchase at Boston Market restaurants, but neither is the grilled chicken entree that was part of the initial product line Heinz introduced under that banner last fall. But it is in keeping with the upscale turn on downhome American foods that personifies the Boston Market concept, Mr. Doherty said. As for financial particulars, Heinz isn't offering any, other than repeating the $100 million in fiscal 2001 Boston Market sales projected by Heinz CEO Bill Johnson last September. The Boston Market products have had some obstacles to overcome. For instance, the items are, on average, higher priced than established competitors such as Stouffers. And, there's the negative press that dogs the restaurant of the same name. Heinz established a marketing agreement with the Colorado-based restaurant chain whose official name is Boston Chicken Inc. in early 1997. Boston Chicken wound up in Chapter 11 bankruptcy protection and later was acquired by McDonald's. Heinz rolled out frozen entrees in September 1999 to 40 percent of the U.S. They became available in Pittsburgh and the rest of the country in February. Heinz's mission was to turn out a frozen product that matched the quality of the restaurants. The research and development was done here. The Boston Market line was the first major launch by the frozen food division. In-house development is something of a new strategy for Heinz, which has tended to acquire brands rather than focus on R&D efforts. Mr. Doherty said the Heinzs Weight Watchers' Smart Ones also will roll out a line of low-calorie "bowls" - rice or pasta-based dishes - this summer. The concept was launched last year by competitor Con Agris Healthy Choice line and also is used by the rice company Uncle Ben's, which used bowls to segue into the frozen foods section. "The testing is awesome," said Mr. Doherty. Not all Heinz innovations are edible. This August, Heinz will introduce resealable pouch packaging for Ore-Ida french fries. The package will also stand up instead of flopping. BROWN & SHARPE: Possible Sale or Merger ---------------------------------------- According to the Providence Journal-Bulletin, Rhode Island's oldest manufacturer, Brown & Sharpe announced to put itself up for sale or a merger with a company. Chase Securities Inc. was hired "to pursue various strategic alternatives, including a possible sale or merger of the company." NYSE ended trading of Brown & Sharpe stock (BNS:NYSE) at 11 am, before the news was released after 30 mins. Prices declined after it resumed trading about 12:30 pm. The stock was down to 28 percent, or 87.5 cents a share to close at $ 2.25 a share. The company is in "technical default" on its bond and bank loans, and lacks enough equity capital to comply with the agreements between its lenders. CANADIAN AIRLINES: Albert Court Approves Plan ---------------------------------------------- According to an article in The New York Times on June 28, 2000, Canadian Airlines received court approval to settle 3.5 billion Canadian dollars ($2.4 billion) worth of debt with its creditors. The Alberta court approval will then pave a way for its integration with Air Canada of Montreal. The Calgary-based carrier's chief executive, Paul Brotto, says integration with Air Canada may come this year. And under the court-approved restructuring plan, secured creditors will get 97 percent of what the airline owed, while unsecured creditors will get 14 percent. CONNEAUT LAKE: Judge Rules That Trustee Takes Control Over Park --------------------------------------------------------------- The AP reports on June 29, 2000 that a bankruptcy judge in Youngstown, Ohio, ruled that William Jorden, court-appointed trustee, take control over financially troubled Conneaut Lake Park, replacing Conneaut Lake Park Management Group, which has run the 108-year-old park since February 1999. Months ago, Jorden sought to evict the management group, saying that it had failed to pay $100,000 annual rent, and never secured a $600,000 credit line as required by its lease. But the company blocked the eviction by filing for bankruptcy in Youngstown, and Jorden did the same thing in April. The company had plans for $17 million in improvements for the park. But Jorden planned for the trustees to take control of the park and run it as a nonprofit business. Bankruptcy trustee Andrew Suhar last week went to the park and determined that it couldn't get out of debt and move forward without a change in ownership. Jorden said the bankruptcy court Wednesday ordered the management group to leave the property. "My mission has been to preserve Conneaut Lake Park and this is the first, positive step," Jorden said. "We are going to run this, for the first time in a hundred years, in a way that all the profits will go into the park," he added. CWT SPECIALTY STORES: Compromise and Settlement With Committee -------------------------------------------------------------- The debtor, CWT Specialty Stores, Inc., seeks a court order fixing the time, date and place of a hearing to July 20, 2000 at 9:30 AM on the debtor's motion for order determining the allowed amount of the claim of Foothill Corporation and approving a compromise and settlement with the official unsecured creditors' committee. The debtor believes that the payoff amount to Foothill is $8,458,000, however Holdings' claim against the debtor increases commensurate with the magnitude of Foothill's draw under the Letters of Credit. If Foothill draws under the Letters of Credit, Holdings, in effect, will be subrogated to Foothill's position as a secured creditor of the debtor, up to the amount of the draw on the Letters of Credit. The Creditors' Committee has indicated to the debtor and Holdings that, absent approval of the proposed settlement, it would challenge Holdings' secured creditor position under the Junior Participation Agreement as subrogee of Foothill, and would seek to invalidate Holdings' Liens and subordinate its claim below the claims of general unsecured creditors under the doctrine of equitable subordination. After extension negotiations, the debtor, Holdings and the Creditors' Committee have agreed on a proceeds-sharing arrangement, whereby, after Foothill's claim is satisfied in full and Holdings is subrogated to its position, ten percent of any proceeds collected by the debtor's estate, net of administrative expenses, would be available to pay allowed claims against the debtor's estate. Implementation of the settlement with the Creditors' Committee would confirm Holdings' status as a subrogee of Foothill and release Holdings from any further claims or actions by the Creditors' Committee as to it status as a secured creditor of the debtor's estate. The debtor states that a failure to determine the amount of Foothill's claim would unduly disrupt the wind-up of this case. DYNEX CAPITAL: Bankruptcy On Its Tail -------------------------------------- The Richmond Times Dispatch reports that Dynex Capital Inc. may follow the path of other finance firms in the past year and a half into bankruptcy. The company is currently in talks with lenders on dissolving its debts. Dynex president, Thomas H. Potts, says "the company has short-term credit obligations, and even though we're not in default, we're still on a very short fuse." Lenders and creditors have withdrew credit from Dynex as well as the other subprime lending industry. Dynex could remain independent or start fishing for buyers. ELCOTEL INC: Company In Default On Covenants -------------------------------------------- The Sarasota Herald-Tribune reports that Elcotel Inc. posted a $ 7.8 million loss for the fourth quarter of this year and $ 11.2 million for last years together with the very low demand for its pay telephones which is the heart of its business. Losses amounted to 57 cents and 83 cents per share, respectively. Company officials reveals that Elcotel is still in default on some covenants of $ 11.5 million for its bank financing and is seeking funds to pay for it. Company executives were wrong on the expected time frame it could secure for funds. GENESIS HEALTH: Hamilton Center Unaffected In Chapter 11 --------------------------------------------------------- Intelligencer Journal reports that Lancaster Hamilton Arms Center is unaffected from its parent company's filing for bankruptcy protection in Chapter 11. Genesis health Ventures Inc.'s filing in U.S. Bankruptcy Court in Delaware will not affect Hamilton Arms 95 residents or its manpower of 95 at the 336 West End Ave. Linda Sullivan, Hamilton's administrator, says that "We're going to continue to do business as usual," and "We're known for quality care and we're going to continue that." Hamilton Arms Center, the only Genesis-owned nursing home in this area, was privately owned by Geriatric and Medical Corp. before it was acquired in the early 1970s. GENEVA STEEL: Board Approves Application for $110 Million Loan -------------------------------------------------------------- Geneva Steel announced on July 3, 2000 that the Emergency Steel Loan Guarantee Board has extended an offer of guarantee to Citicorp USA, as administrative agent, in connection with a proposed $110 million term loan to the Company. Geneva Steel is currently developing a Chapter 11 plan of reorganization through, among other things, discussions with the official creditors committees established in its Chapter 11 proceeding. The objective of the plan of reorganization is to restructure the Company's balance sheet to (i) significantly strengthen the Company's financial flexibility throughout the business cycle; (ii) fund required capital expenditures and working capital needs; and (iii) fulfill those obligations necessary to facilitate emergence from Chapter 11. In conjunction with formulating the plan of reorganization, the Company, with Citicorp USA, filed an application on January 31, 2000, for a U.S. government loan guarantee under the Emergency Steel Loan Guarantee Program. The application sought an eighty five percent guarantee for a $l10 million term loan. The term loan is a portion of the financing required to consummate Geneva's plan of reorganization. The plan also contemplates that the Company will establish a revolving credit facility as well as receive an equity infusion of $25 million through issuance of preferred stock. With the guarantee having been granted, Geneva is now in a position to finalize its financing arrangements and file a plan of reorganization. "Today's offer of a guarantee by the Emergency Steel Loan Guarantee Board is a very important step forward in Geneva's efforts to emerge from Chapter 11. The board's decision clears the way for the Company to file its plan of reorganization within a short time," said Joseph A. Cannon, chairman of the board and chief executive officer. Although Geneva expects to file a plan of reorganization, there can be no assurance at this time that the plan of reorganization will actually be proposed by the Company, approved or confirmed by the bankruptcy court, or that, if proposed, approved, confirmed and consummated, such a plan will achieve the objectives described above. Similarly, there can be no assurance that the financings contemplated by the plan of reorganization can be obtained on terms favorable to the Company, or at all. Under Chapter 11 bankruptcy, the rights of, and the ultimate payment by the Company to, prepetition creditors may be substantially altered. This will likely result in such claims being paid in the Chapter 11 bankruptcy proceedings at substantially less than 100 percent of their face value. Moreover, the interests of existing preferred and common shareholders could, among other things, be eliminated. Although Geneva currently anticipates filling the plan of reorganization shortly, there can be no assurances as to the actual timing for the filing of the plan. Geneva Steel is an integrated steel mill operating in Vineyard, Utah. The Company manufactures steel plate, hot-rolled coil, pipe and slabs primarily in the Western and Central United States. HARNISCHFEGER: Motion To Amend DIP Facility ------------------------------------------- The Debtors move the Court for entry of an order authorizing them to enter into a Third Amendment to their Revolving, Term Loan and Guaranty Agreement. The Third Amendment provides for a reduction of the DIP Credit Agreement from $750 million to $350 million. The facility, as amended, will consist of two tranches, and the term loan component of the DIP Credit Facility will be eliminated: Tranche A: (1) in the amount of $250 million, will be available for both revolving loans and letters of credits, with a limit for the issuance of letters of credit of $210 million, consisting of $190 million sublimit for standby letters of credit and $20 million sublimit for import documentary letters of credit. In the case of standby letters of credit, the aggregate Letter of Credit Outstandings, (a) in favor of lenders to HII's Foreign Subsidiaries, shall be limited to $100 million when aggregated with loans and investments permitted to repay the Indebtedness of Foreign Subsidiaries, and (b) in connection with performance and bid requirements, customer advance and progress payments and surety bonds of HII's Foreign Subsidiaries, will be limited to $100 million (instead of $40 million). (2) will mature on the date as was originally provided under the DIP Credit Agreement, that is, the earliest of: (a) two years after the Petition Date; (b) the substantial consummation of a plan or plans of reorganization in the Debtors' chapter 11 cases, which for purposes of the Loan Agreement will be no later than the effective date of such plan; and (c) the Lenders' election, in their sole discretion, upon the occurrence of an event of default. Tranche B: (1) in the amount of $100 million, will consist of revolving loans, pursuant to which the name of the DIP Credit Agreement will be changed to the Revolving Credit and Guaranty Agreement; (2) will mature on December 31, 2000; The amendment also provides that: (1) The availability under the DIP Credit Agreement will be subject to a Borrowing Base, which is defined to include: (a) 85% of the total Eligible Accounts Receivable; (b) 35% of Eligible Unbilled Accounts Receivable; (c) 35% of Eligible Work-in Process; (d) 50% of Eligible Raw Materials and Finished Goods; (e) M&E Component; and (f) the Intellectual Property Component (until Tranche B is repaid in full). The Borrowing Base will be computed at the end of each fiscal month, and the failure to timely deliver a certified Borrowing Base Certificate will constitute an additional Event of Default. (2) The cash collateralization of the Letters of Credit will now be required if the aggregate Letters of Credit Outstanding in excess of the amount held in the Letter of Credit Account exceeds the lesser of the Total Commitment or the Borrowing Base. (3) The availability of funds under the DIP Credit Agreement for the benefit of Beloit will be limited to an aggregate principal amount not in excess of the sum of (a) the portion of the Net Cash Proceeds received from the Beloit sale auction which was loaned by Beloit to HII, plus (b) $23,000,000, plus (c) an amount not in excess of $17,000,000 in respect of Letters of Credit issued for Beloit's benefit. (4) The availability of funds under the DIP Credit Agreement for the benefit of Beloit will be further limited by the requirement that Beloit's cumulative EBITDA will be no less than $50,000,000 for the period commencing on May 1, 2000 through December 31, 2000. (5) No further funds will be available to Beloit under the DIP Credit Agreement after December 31, 2000. (6) The following changes are proposed to be made to the negative covenants contained in the DIP Credit Agreement: (a) Liens on the assets of Foreign Subsidiaries granted to secure Indebtedness for borrowed money of such Foreign Subsidiaries in existence on the Petition Date will be allowed in the aggregate amount of $200 million (instead of $175 million) of such Indebtedness with no further limitations; (b) Indebtedness with respect to Capital Leases will be permitted in an amount not to exceed $5,000,000 in the aggregate, and additional loans and advances to Foreign Subsidiaries will exclude Beloit's Foreign Subsidiaries; (c) Capital Expenditures will be reduced; (d) The amount of required cumulative EBITDA will be reduced to exclude Beloit's EBITDA; (e) Allowed investments will be redefined to (i) prohibit advances and loans to and among Beloit and its consolidated Subsidiaries, including its Foreign Subsidiaries; (ii) limit the aggregate amount of loans and advances by the Debtors to Foreign Subsidiaries from and after the Third Amendment Effective Date to $75 million (instead of $110 million) for repayment of Indebtedness, when aggregated with loans and investments permitted to repay the Indebtedness of Foreign Subsidiaries, provided, that the sum of advances and loans under this clause and the Letter of Credit Outstandings of Letters of Credit issued (A) in favor of lenders to Foreign Subsidiaries and (B) in connection with performance and bid requirements, customer advances, progress payments and surety bonds of Foreign Subsidiaries may not exceed $150 million in the aggregate; and (iii) limit advances and loans to Beloit in the manner will be made available as described above; (f) Sales and other dispositions of assets outside of the ordinary course of business will be permitted for assets having a fair market value not exceeding $250,000 for each such sale or, in the case of assets having a market value in excess of $250,000, $10 million in the aggregate. The Amendment also provides for the payment of an amendment fee in the amount of $2,562,500 as a condition precedent to the effectiveness of the Amendment. The Debtors submit that as the proposed amendment of DIP Facility more accurately reflects the current capital needs of the Debtors, it will reduce the Debtors' administrative expenses by reducing the amount of the commitment fees payable, and is in the best interest of the Debtors, their estates and creditors in the Debtors' business judgment. (Harnischfeger Bankruptcy News Issue 24; Bankruptcy Creditors' Services Inc.) HILLSBOROUGH RESOURCES: Court Extends Protection Until August ------------------------------------------------------------- Hillsborough Resources Limited (Vancouver, British Columbia) ("HLB"-TSE) announced that the Supreme Court of British Columbia has extended the protection previously granted to Hillsborough and its wholly owned subsidiary, Quinsam Coal Corporation, under the Companies' Creditors Arrangement Act until August 31st, 2000. The extension was granted to permit Hillsborough Resources and Quinsam time in which to complete meetings of the shareholders and creditors preparatory to coming out of creditors protection. HOLLYTEX CARPET: Owners Decide To Shut Down Plant ------------------------------------------------- The AP reports on June 30, 2000 that Beaulieu of America, which bought Hollytex Carpet Mills plant, has decided to close the mill, believing that doing so could save them about $5 million a year, City Manager Alan Riffel said. About 300 people will be put out of work. But leaders of Anadarko city don't intend to lose Hollytex that easy. They have formed a task force, which offered to provide more than $1 million in tax breaks and more than $1 million in interest-free loans just to help prevent the closing of the mill. HYUNDAI GROUP: Agrees To Back Out Of Car Business ------------------------------------------------- Hyundai Group said it will loosen links to its flagship car business, Hong Kong I Mail reports, bowing to government pressure. Hyundai's retreat comes less than 24 hours after South Korea's largest industrial group insisted it would maintain its ties to Hyundai Motor, hoping to use a new partnership with DaimlerChrysler to strengthen its dominance of the nation's car market. The reversal, HKIM continues, strengthens the government's hand as it tries to reduce the power of Korea's industrial groups, which have long been run by their founding families as private fiefdoms. At issue is Hyundai founder Chung Ju Yung's 9.1% stake in Hyundai Motor. The government has said he must reduce the holding to less than 3% before the carmaker can be declared legally independent. Hyundai, in response, said the government had no right to dictate how much Mr. Chung could own since he had already sold his stakes in other affiliates and stepped down from management. Instead of spinning off Hyundai Motor, Hyundai suggests it will sell some 20 other units ranging from Korea's largest contractor to life insurers. KITTY HAWK: Bond Prices Questionable ------------------------------------ Mergers and Acquisitions Report reports on July 3, 2000 that following a conference call to its creditors in mid-June, the bonds of bankruptcy-protected Kitty Hawk Inc. shot up about 20%- but one high-yield analyst following the situation thinks investors may be getting ahead of themselves. Kitty Hawk announced on May 1 it had filed for Chapter 11 protection (M&AR, 5/15/00), after having said it would miss a $17 million coupon payment on May 15. It listed $907 million in assets and $512 million in debts, $340 million of which is in 9.95% senior secured notes. The bonds, which had been trading in the mid 20s at the time of the filing, moved up to the low forties in the last few weeks. It would be tempting to push the bonds up further to around 50, but the risk is large, said the analyst. One must remember, "The thing isn't viable. You have very little information in terms of the business itself," he said. One distressed investor said that when the bonds initially dropped to the 20s following the announcement that the assets in the company's collateral package had been overestimated, investors believed that equity in a restructured Kitty Hawk would be worth nothing. Another reason for the bond jump is an increase in buyers relative to sellers. "Those who needed to get out got out," he said-and vultures moved in. He added that there could be some strategic buyers in the mix. A second distressed investor said valuation has gone up because the company's jets are now worth more. But much of the company's collateral is not that attractive. "The bonds went from cheap in the 20s to rich in the 40s. There's no longer an attraction in the 40s," he said. He estimated a recovery value in the mid-40s and said the company's goal of emergence by year-end is "aggressive," but it should happen before the end of the first quarter 2001. Kitty Hawk said it hopes to have a new business plan by the end of July. It's told creditors it will divest its non-core operations and center its attention on freight and charter operations, as it did before the acquisition of its wide-bodied planes in 1998. The analyst said the divestiture of those planes from Kitty Hawk International will add some extra capital, and the company has had a fair amount of success renegotiating some of its contracts, reducing its overhead and cutting costs. Since being freed of its debt obligations by the bankruptcy filing, Kitty Hawk has been steadily building cash and will be able to eke by without DIP financing, he added. At this point Kitty Hawk looks as though it will have more value as an operating business than at liquidation value, the analyst added. Financial advisor Seabury Advisors LLC, which had success in steering Continental Airlines Inc. through bankruptcy in the early 1990s, has, in Kitty Hawk, a company free of the complicating problems such as labor unions which plague other, larger airlines. Bankers at Seabury were unavailable for comment. The analyst thought the end of the year as a re-emergence goal is doable. The official committee of unsecured creditors retained law firm Forshey & Prostok LLP as legal counsel. Wayne Lovett, general counsel for Mercury Air Group Inc., who is co-heading the unsecured creditors committee, said, "Things are progressing well. We have high hopes the company will continue to progress." MONARCH DENTAL: Extends Loan Agreement -------------------------------------- Monarch Dental Corporation (Nasdaq: MDDS), announced that it has entered into an amended loan agreement with its lenders to extend the maturity of its short-term note, due under its Credit Facility, from June 30, 2000 to December 15, 2000. The parties entered into this agreement to provide the Company with additional time to complete its previously announced process of exploring strategic alternatives, including the possible sale or merger of the Company. This extension is subject to certain conditions, including that the Company enter into a definitive agreement with respect to a strategic transaction by July 31, 2000. Failure to satisfy the conditions, covenants and agreements set forth in the amended loan agreement will constitute a default under the Credit Facility and no assurances can be given that the Company will be able to satisfy such conditions, covenants and agreements. Monarch Dental Corporation currently manages 190 dental offices serving 20 markets in 14 states. NORTON MOTORCYCLES: Pledges Shares To Circle Capital ---------------------------------------------------- On March 23, 2000, Circle Capital Group S.A. loaned Norton Acquisition Corporation $200,000 to use for working capital. Nortn Acquisition Corp. is a Minnesota Corporation that owned 6,000,000 of the approximately 7,000,000 outstanding shares of Norton Motorcycles, Inc. All shares owned by Norton Acquisition were issued in a private offering and were therefore "restricted securities" as that term is defined in Rule 144 promulgated under the Securities Act of 1933. Pursuant to the Loan agreements, Norton Acquisition pledged its 6,000,000 shares of Norton Motorcycles, Inc., to Circle Capital as security for the Loan. Norton Acquisition is now in default under the terms of the Loan and Circle Capital has elected to retain the 6,000,000 shares of pledged stock in Norton Motorcycles, Inc., in satisfaction of the Loan. Circle Capital has specifically invoked a procedure under Minnesota Statute ss.336.9-505(2). This statute generally gives a secured creditor the right to retain the collateral in full satisfaction of the secured debt in the event the debtor fails to object to the secured creditor's retention of the collateral after written notification and after a 21-day period has elapsed. As Circle Capital has given this notice and as the 21-day period has now elapsed, it is Norton Motorcycles, Inc.'s understanding that Circle Capital is now the valid owner of 6,000,000 of its shares and will, accordingly, take steps to reflect such ownership in its books and records. Said shares continue to be restricted under the Act. The actions described above result in a substantial change of control of Norton Motorcycles, Inc., as such action transfers approximately 85.7% of the issued and outstanding shares of Norton Motorcycles, Inc., from Norton Acquisition Corporation to Circle Capital. OREGON STEEL: Releases Second-Quarter Report --------------------------------------------- Oregon Steel, Inc. (NYSE:OS) releases its second-quarter earnings report and appears to be heading for another possible downturn. According to Zachs Investment Research, the steel firm will likely meet Wall Street analysts projections for the quarter ending June 30, 2000 but has failed for four consecutive quarters. Oregon Steel will then violate not one, but two of the just-renegotiated covenants. And even if the second quarter does meet expectations the Company will still miss its required interest coverage ratio of 1.87, coming in at a ratio of approximately 1.84 instead. Meeting performance expectations would also mean it will violate the maximum leverage ratio of 4.75, with Oregon Steel instead finding itself with a more troublesome ratio of 4.89. OWENS CORNING: Releases Expectations To SEC ------------------------------------------- Information released by Owens Corning indicates that the softening housing market and related decrease in demand for building materials, coupled with sharp increases in raw material and energy costs, are expected to reduce the company's sales and income from operations for the second quarter ended June 30, 2000, below levels reported for the same period last year. On a preliminary basis and subject to final results for the second quarter, the company expects net sales for the period to be slightly below the $1.3 billion reported in the same period last year. The company said this reflects weaker demand in its roofing, siding and insulation businesses, as the housing market responds to the rise in interest rates. Due to strong sales in the first quarter, the sales for the first half of the year are expected to show growth in excess of four percent. The company reported that $30 million of second quarter cost increases driven by asphalt and PVC cost pressures have continued to depress margins in the roofing and vinyl siding businesses. In addition, higher debt levels and interest rates are expected to increase borrowing costs by more than $10 million versus the same period last year. Also on a preliminary basis, net income, excluding special items, is expected to be approximately $1.00 per share on a diluted basis, compared to $1.31 per share in the same period a year ago. However, it is expected that the company will report a net loss for the second quarter after giving effect to the special items. The company expects to report its actual second quarter results on July 13, 2000. For the full year, the company anticipates sales growth of approximately four percent. However, continued margin pressure, increased borrowing costs and continued market weakness is likely to reduce earnings per share, excluding the special items, by approximately 20% below 1999's levels. PANDA GLOBAL: S&P Downgrades to `CCC' From `B-' ----------------------------------------------- Standard & Poor's today downgraded its rating on Panda Global Energy Co.'s (Panda) $155 million senior secured notes, due 2004, to triple-'C' from single-'B'-minus. The outlook has been revised to negative from stable. Panda's 100 MW coal-fired power project at Luannan, China has recently become commercially operational, but its tariff rate is still under negotiation with the Tangshan Municipal Government. The Luannan project is currently being paid a "testing" tariff rate of slightly below 0.20 yuan/kilowatt-hour (kWh), which is insufficient to cover all operating costs. The tariff rate in the original cash flow projection is around 0.60 yuan/kWh, but the Tangshan Municipal Government is currently only offering around 0.30 yuan/kWh. The rating reflects the following weaknesses: -- Financial performance of the Luannan power project, the major source of cash flow support for debt service on the notes, is substantially below projections due to the low tariff rate currently being paid. -- The debt service reserve was used for the April 2000 debt service payment, and is unlikely to be replenished in the near term. -- The projected after-tax debt service coverage ratio (DSCR) will remain below 1 times (x) from 2000 to 2003 under an initial 0.35 yuan/kWh scenario. The average DSCR from 2000 to 2004 is projected to be 0.8x. -- Uncertainty about the pending lawsuit with Credit Suisse First Boston (Hong Kong) Ltd. (CSFB), a significant bondholder, which could result in a technical default by the company under the notes. CSFB, in a letter to the notes trustee, alleges certain nonpayment covenant defaults relating to the sale of certain assets by Panda Global Holdings Inc. (PGH), the parent and guarantor of the notes, and that fair market value may not have been received in exchange for such assets. PGH and Panda have brought legal actions against CSFB and others, seeking injunctive relief precluding an acceleration of the notes on the basis of the alleged defaults. -- Refinancing risk in that only about 15% of the notes will be amortized prior to maturity in 2004. -- Structural subordination of the notes to existing debt on the Rosemary and Brandywine projects in the U.S. -- A highly leveraged financing structure for Panda and PGH. PGH's debt to capital ratio on a consolidated basis was more than 120% for the year-ending Dec. 31, 1999. The major strengths include: -- Both units of the Luannan power plant are commercially operational despite a construction delay; -- Approximately $6 million in delay liquidated damages are expected to be collected from the engineering, procurement, and construction contractor, which may be available to support debt service; -- The Brandywine and Rosemary projects in the U.S. are performing as expected, providing cash flow support for the notes' debt service; and -- Because it is an active power project developer in the U.S., PGH has some incentives not to default on the notes because it has to obtain debt for new projects. The outlook is negative due to uncertainty about the timing and level of the final tariff rate for the Luannan project and the tight liquidity position of Panda and PGH, Standard & Poor's said. PATHMARK STORES: Prepack Bankruptcy Gives Control To Bondholders ---------------------------------------------------------------- According to a report in Crain's New York Business on June 26, 2000, Pathmark Stores Inc. is working on a prepackaged bankruptcy plan giving bondholders complete control of the company in exchange for the forgiveness of $1 billion in debt. The company believes that the plan will allow the company to emerge from bankruptcy in the third quarter of this year. Executives anticipate that once it is freed from $100 million in annual interest payments to bondholders, the 136-store chain-with 20 locations in the city will be able to upgrade its operations and pursue expansion in its territory of New York, New Jersey and eastern Pennsylvania. "The completion of this restructuring will represent a rejuvenation for the Pathmark franchise," says Harvey Gutman, the chain's senior vice president for retail development. "For the first time, the company will have its hands untied." But with the grocery retailing industry undergoing consolidation, many think the restructuring may be window dressing for a sale of the Carteret, N.J.-based company. PIC N PAY: Shoe Show To Take Over 73 Stores ------------------------------------------- According to an article in The Business Journal on May 26, 2000, Concord-based Shoe Show Inc. plans to open in 73 former Pic 'N Pay stores within three weeks, company officials say. Shoe Show, the nation's largest privately owned footwear retailer, recently bought the store leases from Matthews-based Pic 'N Pay, which filed for federal bankruptcy protection in March and soon after started going-out-of-business sales. According to the article, terms of the lease acquisition haven't been disclosed. Shoe Show could reopen the stores under its store names The Shoe Dept., Burlington Shoes or Shoe Show. The acquired sites are throughout the Southeast, says Kirk Krull, vice president of real estate and development for Shoe Show. The majority of the stores are in Georgia and the Carolinas. Krull outlined the Pic 'N Pay lease acquisitions in an interview during the International Council of Shopping Centers annual convention in Las Vegas this week. Shoe Show was featured as one of the new generation of retailers at the convention, which drew nearly 30,000 participants. Krull declines to disclose Shoe Show's investment in the Pic 'N Pay deal or discuss such details as the cost of renovations. In addition, he says Shoe Show was hired 80% of the current Pic 'N Pay store employees. Pic 'N Pay officials couldn't be reached for comment. Topeka, Kan.-based Payless ShoeSource Inc., the nation's largest publicly held footwear retailer, also has bought some Pic 'N Pay leases. However, a Payless spokesman won't say how many stores that chain plans to open at former Pic 'N Pay sites. The liquidation of 43-year-old Pic 'N Pay comes after several years of struggle and declining sales. Pic 'N Pay initially filed for Chapter 11 in 1996 and, after coming up with a plan for reorganization, re-emerged as a leaner company. Pic 'N Pay's most recent Chapter 11 filing lists about 1,000 creditors. In court documents filed in U.S. Bankruptcy Court in Delaware, the company outlined plans to cease operations by May 31 and hired a liquidation firm to operate going-out-of-business sales. Pic 'N Pay operated 453 stores in 17 states under the names Pic 'N Pay, Shoe World and Shoe City. PRIME CAPITAL: Negotiations Cease Between Prime and Finantra ------------------------------------------------------------ Prime Capital Corporation ("Prime") announced that Prime and Finantra Capital, Inc. ("Finantra") have discontinued negotiations for the purchase of all of the issued and outstanding common shares of Prime. As previously reported, the Letter of Intent executed by the parties on February 8, 2000 and amended on March 31, 2000 expired prior to the satisfaction of certain contingencies. Prime and Finantra had been negotiating continuously and diligently to reach an agreement and satisfy such contingencies but were unsuccessful. As a result of the prolonged negotiations with Finantra and cash flow problems, the Company has failed to timely file its Form 10- K and 10-Q and does not anticipate making such filings in the near future. Further, Prime and its advisor Development Specialists, Inc. have expended substantial efforts to work out various arrangements with its creditors and are still considering all alternatives including a liquidation of Prime's assets. The Company has reduced its workforce by approximately 50% to minimize Prime's expenses during this period. RECOM MANAGED SYSTEMS: Files Chapter 11 Bankruptcy Petition ----------------------------------------------------------- Recom Managed Systems, Inc. (OTCBB:RMSI.OB) filed a petition for voluntary Chapter 11 bankruptcy in the United States Bankruptcy Court Eastern District of California, Sacramento Division on Monday, June 26. In April of this year the company announced its intention to file a Chapter 7 petition for dissolution. Management now believes that a corporate reorganization may be a viable alternative that would better serve the interests of its investors, shareholders and creditors. Consequently, the company filed under Chapter 11 and is currently preparing a reorganization plan for consideration by the court. The current officers and directors continue to manage the affairs of the company. RELIANCE GROUP: Moody's Downgrades Ratings ------------------------------------------ Moody's Investors Service has downgraded the ratings on the senior and subordinated debt issues of Reliance Group Holdings, Inc. The senior debt obligations have been downgraded to B3, and the rating on subordinated debt instruments has been moved to Caa1. The insurance financial strength ratings of the company's principal operating subsidiaries were also downgraded, to Ba2 (Questionable) from Baa2 (Adequate). The ratings remain on review, with direction uncertain pending the outcome of one or more of a number of outstanding matters. Reliance currently faces maturing bank debt of $237.5 million on August 31, 2000 and $290 million of senior notes maturing in November, 2000. With limited financial flexibility at the holding company, the company's ability to take dividends out of the operating entities is critical to enabling Reliance to repay its senior creditors on time. Moody's noted that Reliance has not yet accessed funds at those companies in order to repay its maturing obligations. Further, insurance regulators may be unwilling to give Reliance their approval to take such dividends, owing to continuing uncertainty about the adequacy of reserves and eroding marketplace confidence. The erosion of Reliance's market support is reflected in the company's recent decisions to sell a number of its specialty commercial businesses. Reliance previously announced an agreement to be acquired by Leucadia National Corporation. Moody's does not view the proposed acquisition as a stabilizing factor, given Leucadia's role as a financial -- rather than strategic -- investor. Upon completion of the recently announced divestitures, Reliance will have shrunk its continuing business portfolio to a number of relatively less attractive businesses and Moody's believes that the company will find it difficult to operate profitably going forward, with expense challenges on the remaining active business as well as the growing runoff book. Expanding on its action, Moody's reiterated that the ratings remain under review, with direction uncertain. This review status reflects the evolving nature of the events at Reliance. For example, Moody's noted that Leucadia's due diligence period will end on July 21st. Moreover, over the next two months several other rating factors should take on additional clarity. These factors include the status of the banking facility, the availability of extraordinary dividends from the insurance company (should that be pursued), the completion of the announced sales of certain of Reliance's books of business, and the second quarter operating results. Moody's will continue to evaluate the appropriateness of its rating as these factors come into focus. The following ratings were downgraded: Reliance Group Holdings, Inc. -- Senior debt to B3 from Ba2; Reliance Group Holdings, Inc. -- Subordinated debt to Caa1 from Ba3; Reliance Insurance Company -- Insurance financial strength to Ba2 from Baa2; Reliance Insurance Company of Illinois -- Insurance financial strength to Ba2 from Baa2; Reliance National Insurance Co. of New York -- Insurance financial strength to Ba2 from Baa2; Reliance National Indemnity Co. -- Insurance financial strength to Ba2 from Baa2; Reliance National Insurance Co. -- Insurance financial strength to Ba2 from Baa2; United Pacific Insurance Co. -- Insurance financial strength to Ba2 from Baa2; United Pacific Insurance Co. of New York -- Insurance financial strength to Ba2 from Baa2. Reliance Group Holdings, Inc. is a New York-based publicly traded holding company for several property/casualty insurance subsidiaries. For the quarter ended March 31, 2000 Reliance reported consolidated debt of $735 million and shareholder's equity stood at $1.13 billion. SOGO CO.: Lenders to Forgive US$5.9 Billion ------------------------------------------- Sogo, Japan's ninth-largest department store operator, will have US$5.9 billion in loans forgiven by creditors and the government in what will be the nation's largest bailout ever, according to a report appearing in the Nihom Keizai Shimbun citing unnamed government officials. The bailout will mark the end to days of speculation that the struggling Osaka-based retailer will be kept afloat. Its shares have more than doubled since June 20 after reports of a bailout circulated and after Sogo said it was confident lenders would forgive the loans. Officials, the South China Morning Post explains, opted for a bailout because of the psychological and financial damage a Sogo collapse would wreak. Chief among the worries of the officials engineering a bailout is that Sogo's failure would cause Japanese consumers to fear for their own jobs and stop spending. A Sogo bankruptcy would have a direct impact on its 11,400 employees, the 50,000 employees at the 10,000 companies it does business with and millions of Japanese who work at companies on financial ground almost as shaky as Sogo's. STRAND PROPERTIES: Defaults On Mortgage Payments ------------------------------------------------ An article from the Lexington Herald-Leader reports that Strand Properties defaulted on mortgage payments. Lexington businessman George W. Griffin, gave Strand $ 7.43 million in damages after he agreed to invest $ 500,000 in Strand but failed to provide the money at the last minute. The lender then foreclosed and later sold an office building at 155 East Main Street for $ 2.4 million to recover the $ 2.03 million owed by Strand. According to Fayette Circuit Judge Gary D. Payne, Griffin is guilty of breach of contract, fraud and bad faith. Griffin was then ordered to pay Strand more than $ 1.49 million for actual losses and more than $ 5.94 million in punitive damages. This should help Strand pay its debts and emerge from Chapter 11 bankruptcy reorganization. TAYLOR CBI/COMMEMORATIVE BRANDS: Moody's Assigns/Lowers Ratings --------------------------------------------------------------- Moody's Investors Service assigned a B1 rating to Taylor CBI Company's ("Taylor CBI") proposed $170 million secured revolving credit facility consisting of a $55 million revolver; $57.5 million term A loans and $57.5 million term B loans. The senior implied rating is B1, and the senior unsecured issuer rating is B2. The outlook is stable. This is the first time that Moody's is rating the debt of Taylor CBI which was formed by the merger of Taylor Publishing Company ("Taylor" no rated debt prior to the merger) and Commemorative Brands, Inc. ("CBI" senior implied rating of B2). Additionally in connection with the proposed transactions, Moody's lowered the rating of Commemorative Brands, Inc.'s $90 million 11% senior subordinate notes, due 2007, to (P)Caa2 from Caa1. All ratings are subject to the completion and execution of final documentation. The ratings reflect Taylor CBI's modest credit statistics and the absence of proven and sustained turnaround in the operational efficiency of either of the merged companies. In Moody's opinion, the latter underscores the pro-forma company's high financial leverage, moderate interest coverage and relatively low retained cash as a percentage of total pro-forma debt. This lack of material financial flexibility is concerning given that there is minimal cushion for further operational and/or potential integration related mishaps. The ratings reflect Moody's expectation that the pro-forma financial condition of Taylor CBI will likely remain stable and be characterized by relatively low top line growth with relatively flat to slightly increasing bottom line improvements. The ratings incorporate the longstanding reputation of each company in their respective core markets (publication of scholastic yearbooks and manufacture of class rings in the United States). On a pro-forma basis, the ratings recognize the strength and stability of historical cash flows as evidenced by EBIT margins of approximately 11% achieved during periods of less than desirable operational efficiency. Given that CBI is the dominant contributor of EBIT to the pro-forma entity, the ratings acknowledge the relative de-leveraging of CBI and the incremental improvements, both realized and anticipated, in cash flow and overall enterprise value resulting from the merger. The provisional downgrade of Commemorative Brands, Inc.'s outstanding senior subordinated notes to (P)Caa2 from Caa1 reflects the deeply subordinated position of the notes, given the addition of approximately $110 million of potential secured outstandings ahead of the notes on a pro-forma basis and the intended stripping of substantially all protective financial covenants in the indenture once the sponsor, as part of the proposed merger transactions, tenders the majority of the existing subordinated CBI notes leaving an estimated $40 million outstanding. Retained cash (defined as EBITDA less interest expense, taxes and capital expenditures) is approximately $12 million which equates to 6% of total debt. Adjustments to the $28 million pro-forma EBIT total $3 million of non-cash add-backs related primarily to non-recurring expenses at CBI. It is likely that an estimated $3 million of additional cost savings from the merger should be realized over the intermediate term. Taylor CBI Company is being formed through the merger and recapitalization of Taylor Publishing Company - a leading publisher of scholastic yearbooks in the US servicing approximately 7,800 customer contracts each representing an individual junior high school, high school, college or university - and Commemorative Brands, Inc., a leading manufacturer of class rings and other forms of affinity jewelry in the US through its ArtCarved and Balfour operations. The sponsor, Castle Harlan, Inc. currently controls majority interests in both companies totaling approximately $88 million cash equity invested on a pro- forma basis which accounts for roughly 31% of the pro-forma capital structure. Proceeds from the proposed credit facility are intended to refinance existing debt at both. TOYTIME INC: Involuntary Case Summary ------------------------------------- Alleged Debtor: Toytime, Inc. 2377 Crenshaw Blvd. Suite 302 Torrance, CA 90501 Involuntary Petition Date: June 27, 2000 Case Number: 00-02893 Chapter: 11 Court: District of Delaware Petitioners' Counsel: Michael S. Fox Traub, Bonacquist & Fox, LLP 655 Third Avenue - 21st Floor New York, NY 10017 Jan A. van Armerogen, Jr., Reed, Smith, Shaw, McClay, LLP 1201 N. Market Street, Suite 1500 Wilmington, DE 19801 Petitioners: Mattel Inc. Goods Sold $ 1,154,000 Grey Advertising Inc. Services $ 351,347 GuideStar Direct Corp. Goods Sold & Services $ 304,739 Microsoft Corp. Advertising Services $ 894,996 Mancan, Inc. Services $ 201,406 TOYTIME: Involuntary Petition Filed on July 3, 2000 --------------------------------------------------- The Atlanta Journal and Constitution reports on July 4, 2000 that Mattel Inc. and Microsoft Corp. forced foundering start-up Internet toy seller ToyTime Inc. into bankruptcy court seeking payment of trade debt. In an involuntary Chapter 11 petition filed in U.S. Bankruptcy Court in Wilmington on Monday, Mattel, Microsoft, Grey Advertising Inc., GuideStar Direct Corp. and Mancan Inc. say ToyTime owes them about $ 3 million in unpaid bills. ToyTime, which marketed toys as toytime.com and infant products as babytime.com, closed its Web sites in May, faced with investor apathy and competition, the Los Angeles Times reported. Last month ToyTime asked potential buyers to send e-mail to bidstoytime.com. TRANSTEXAS GAS: Annual Meeting Set For July 25, 2000 ---------------------------------------------------- TransTexas Gas Corporation will hold its annual meeting on Tuesday, July 25, 2000, beginning at 10:00 a.m., central daylight time, at The Hotel Sofitel, 425 North Sam Houston Parkway East, Houston, Texas 77060. The matters to be voted on include: 1. the approval of amendments to the Certificate of Designation for Series A Senior Preferred Stock of the company to decrease the par value of the Series A Senior Preferred Stock from $1.00 to $0.001, to change the first dividend payment date, to make certain conforming changes thereto and to increase the number of authorized shares of Series A Senior Preferred Stock; 2. the approval of amendments to the Certificate of Designation for Series A Junior Preferred Stock of the company to decrease the par value of the Series A Junior Preferred Stock from $1.00 to $0.001, to change the first dividend payment date, to correct an error therein and to make certain conforming changes thereto. The record date for the annual meeting was June 13, 2000. Only stockholders of record at the close of business on the record date are entitled to receive notice of and to vote at the annual meeting. WORLDPORT COMMUNICATIONS: Annual Meeting Set For July 21, 2000 -------------------------------------------------------------- Worldport Communications, Inc. will hold its 2000 annual meeting of stockholders at the Marriott's Lincolnshire Resort located at Ten Marriott Drive, Lincolnshire, Illinois at 10:00 a.m. local time, on July 21, 2000, for the following purposes: 1. To elect four directors to hold office until the 2001 annual meeting; 2. To approve the company's 2000 Long-Term Stock Incentive Plan; 3. To approve an increase in the number of authorized shares of the company's common stock from 65,000,000 to 200,000,000 and to amend the company's Certificate of Incorporation accordingly; 4. To ratify the selection of Arthur Andersen LLP as the company's independent accountants for the year ending December 31, 2000; and 5. To transact such other business as may properly come before the meeting. The Board of Directors has fixed the close of business on May 30, 2000 as the record date for the determination of stockholders entitled to notice of and to vote at the meeting. Meetings, Conferences and Seminars ---------------------------------- July 13-16, 2000 AMERICAN BANKRUPTCY INSTITUTE 7th Annual Northeast Bankruptcy Conference Doubletree Hotel, Newport, Rhode Island Contact: 1-703-739-0800 July 21-24, 2000 National Association of Chapter 13 Trustees Annual Seminar Adams Mark Hotel, St. Louis, Missouri Contact: 1-800-445-8629 or info@nactt.com August 3-5, 2000 ALI-ABA Fundamentals of Bankruptcy Law Seaport Hotel and Conference Center, Boston, Massachusetts Contact: 1-800-CLE-NEWS August 9-12, 2000 AMERICAN BANKRUPTCY INSTITUTE 5th Annual Southeast Bankruptcy Workshop Hyatt Regency, Hilton Head Island, South Carolina Contact: 1-703-739-0800 August 14-15, 2000 TURNAROUND MANAGEMENT ASSOCIATION Advanced Education Workshop Loews Vanderbilt Plaza, Nashville, Tennessee Contact: 1-312-822-9700 or info@turnaround.org August 17-19, 2000 ALI-ABA Banking and Commercial Lending Law -- 2000 Renaissance Stanford Court San Francisco, California Contact: 1-800-CLE-NEWS September 7-8, 2000 ALI-ABA and The American Law Institute Conference on Revised Article 9 of the Uniform Commercial Code Hilton New York Hotel, New York, New York Contact: 1-800-CLE-NEWS September 12-17, 2000 NATIONAL ASSOCIATION OF BANKRUPTCY TRUSTEES Convention Doubletree Resort, Montery, California Contact: 1-803-252-5646 or info@nabt.com September 15-16, 2000 AMERICAN BANKRUPTCY INSTITUTE Views From the Bench 2000 Georgetown University Law Center, Washington, D.C. Contact: 1-703-739-0800 September 21-22, 2000 RENAISSANCE AMERICAN MANAGEMENT & BEARD GROUP, INC. 3rd Annual Conference on Corporate Reorganizations The Regal Knickerbocker Hotel, Chicago, Illinois Contact: 1-903-592-5169 or ram@ballistic.com September 21-23, 2000 AMERICAN BANKRUPTCY INSTITUTE Litigation Skills Symposium Emory University School of Law, Atlanta, Georgia Contact: 1-703-739-0800 September 21-24, 2000 AMERICAN BANKRUPTCY INSTITUTE 8th Annual Southwest Bankruptcy Conference The Four Seasons, Las Vegas, Nevada Contact: 1-703-739-0800 November 2-6, 2000 TURNAROUND MANAGEMENT ASSOCIATION Annual Conference Hyatt Regency, Baltimore, Maryland Contact: 312-822-9700 or info@turnaround.org November 27-28, 2000 RENAISSANCE AMERICAN MANAGEMENT & BEARD GROUP, INC. Third Annual Conference on Distressed Investing The Plaza Hotel, New York, New York Contact: 1-903-592-5169 or ram@ballistic.com November 30-December 2, 2000 AMERICAN BANKRUPTCY INSTITUTE Winter Leadership Conference Camelback Inn, Scottsdale, Arizona Contact: 1-703-739-0800 February 22-24, 2001 ALI-ABA Real Estate Defaults, Workouts, and Reorganizations Wyndham Palace Resort, Orlando (Walt Disney World), Florida Contact: 1-800-CLE-NEWS July 26-28, 2001 ALI-ABA Chapter 11 Business Reorganizations Hotel Loretto, Santa Fe, New Mexico Contact: 1-800-CLE-NEWS The Meetings, Conferences and Seminars column appears in the TCR each Tuesday. Submissions via e-mail to conferences@bankrupt.com are encouraged. ********* 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. The TCR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *