/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/000831.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, August 31, 2000, Vol. 4, No. 171 Headlines ANKER COAL: Says Goodbye to Wilbur in Favor of $6.3MM Foothill Financing BAPTIST FOUNDATION: Files Negligence Suit Against Arthur Andersen LLP BOSTON CHICKEN: Plan Trustee Needs Until Oct. 31 to Object to Tax Claims CERPLEX GROUP: Meeting of Creditors to Convene on Sept. 15 in Wilmington EINSTEIN/NOAH: Declines to Pursue New World's Third Vague Offer FEDERATED DEPARTMENT: Moody's Confirms Baa1 Senior Credit Ratings FRUIT OF THE LOOM: Debtor Reports Second Quarter Operating Results GRANT GEOPHYSCIAL: PricewaterhouseCoopers Resigns from Audit Engagement IMPERIAL HOME: Delaware Court Extends Exclusivity to October 18 INTEGRATED HEALTH: Texas Utilities Stipulate to Sec. 366 Adequate Assurance LAROCHE INDUSTRIES: Committee May Avoid Lenders' Liens up to Confirmation MARINER POST-ACUTE: Summit's Moves to Sublet Vacant Premises to Glenwood MARVEL ENTERPRISES: Shareholders to Gather in New York City on Sept. 28 MICROAGE INC.: Arizona Court Extends Exclusive Period to December 13, 2000 MINNESOTA CENTRAL: Railroad Files for Chapter 11 Protection in Wisconsin NATIONAL HEALTH: Court Approves Debtors' 4th Amended Disclosure Statement NATIONAL HEALTHCARE: Exiting Florida Markets as Liability Insurance Expires PC SERVICE: Files for Chapter 11 Protection in Dallas, Texas PRISON REALTY: Pacific Life Announces Vote On Prison Company's Proposals PRISON REALTY: Results for Second Quarter Ended June 30, 2000 RANDALL'S ISLAND: Chase Urges Court to Limit or Deny Exclusivity Extension RELIANT BUILDING: Committee Taps Haynes and Boone, LLP, as Counsel SABRATEK CORPORATION: Stipulation Grants Co-Exclusivity to November 15 SYSTEM SOFTWARE: Harmonizing U.S. & Argentine Bankruptcy Laws is Impossible TOKHEIM CORPORATION: Case Summary UNITED KENO: Ontario Court Extends CCAA Protection to September 27 U.S. CAN: Moody's Gives Lukewarm Reception to $785MM New Debt & Securities VLASIC FOODS: Senior Lenders Agree to Waive Covenants through Feb. 28, 2001 WAXMAN INDUSTRIES: After Barnett Sale is Completed, Look for Fall Prepack ********* ANKER COAL: Says Goodbye to Wilbur in Favor of $6.3MM Foothill Financing ------------------------------------------------------------------------ Anker Coal Group, Inc. has received a commitment letter from Foothill Capital Corporation to provide a supplemental term loan in the amount of $6.3 million. Bruce Sparks, President of the company, stated that "he is very pleased with Foothill's commitment to provide this supplemental facility and their continuing cooperation with the company as it implements its business plan and works to improve its financial performance." The supplemental term loan will be provided under the company's existing credit facility with Foothill and others, and will not increase the maximum borrowing amount of $55 million under that facility. The supplemental term loan will be amortized over a period of three years and will be payable in thirty-six monthly installments beginning January 1, 2001. It will bear interest at the same rate as the company's existing term loan and will be secured by the same collateral securing the company's senior credit facility. The supplemental term loan will be closed on or before September 29, 2000, and will be used to fund in part the interest payment due on October 1, 2000 under the company's senior secured notes. Closing of the supplemental term loan is subject to conditions contained in Foothill's commitment letter, including execution of satisfactory documentation, excess availability of at least the amount of the supplemental term loan, and other customary closing conditions. In light of the company's receipt of the commitment letter for the supplemental term loan, the company has determined not to exercise its option to sell additional senior secured notes to WLR Recovery Fund L.P. (successor to Rothschild Recovery Fund, L.P.). BAPTIST FOUNDATION: Files Negligence Suit Against Arthur Andersen LLP --------------------------------------------------------------------- Baptist Foundation of Arizona announced that it has filed a lawsuit in the Arizona Superior Court charging its former auditors, the "Big 5" accounting firm of Arthur Andersen LLP, with negligence in conducting its annual audits of BFA's financial statements for a 15-year period beginning in 1984, and culminating in BFA's bankruptcy late last year. Investors have lost hundreds of millions of dollars as a result of BFA's demise. The lawsuit alleges that, in conducting its annual audits, Arthur Andersen ignored numerous "red flags" that should have alerted it to the fact that BFA had been transformed by its former senior management team from a legitimate investment vehicle into a "Ponzi Scheme," in which money from new investors was used to pay off old investors. The massive losses accumulated by BFA during this period were hidden from investors through the transfer of non-performing assets from BFA to undisclosed related entities in a series of highly suspicious, non-arms' length transactions. Arthur Andersen's failure to investigate these transactions, which were improper under generally accepted accounting principles, allowed BFA's undisclosed losses to escalate to hundreds of million of dollars, and ultimately resulted in its demise. "The tragedy of BFA is an all too familiar example of accounting professionals failing to do their job, with innocent investors left holding the bag once the misconduct is disclosed," according to Alan Schulman of Bernstein Litowitz Berger & Grossmann LLP, lead counsel for BFA in this matter. "By filing this lawsuit, we intend to hold Arthur Andersen responsible for the consequences of its failures." BFA was founded in 1948 by the Arizona Southern Baptist Convention ("ASBC") as a "not-for-profit" corporation for the purpose of benefitting Southern Baptist causes. BFA raised funds through a variety of investment vehicles that it marketed to Southern Baptist churches, pastors and church members, among others. By 1999, more than 13,000 individuals had invested approximately $590 million with BFA. On November 9, 1999, BFA filed a petition for reorganization under Chapter 11 of the Bankruptcy Code, following the discovery of accounting improprieties. BFA is represented in this action by the law firm of Bernstein Litowitz Berger & Grossmann LLP ("BLB&G"). BLB&G, with offices in California, New York and New Jersey, specializes in prosecuting actions nationwide on behalf of institutional and significant individual investors. The firm recently served as co-lead counsel for the Class in In re Cendant Corporation Litigation, which resulted in a settlement in excess of $3 billion in cash, including a recovery in excess of $300 million from Cendant's former auditor, another "Big 5" accounting firm, which is believed to be the largest recovery ever obtained from an accounting firm in a securities fraud class action. BOSTON CHICKEN: Plan Trustee Needs Until Oct. 31 to Object to Tax Claims ------------------------------------------------------------------------ "The magnitude of the administrative details and the large number of priority claims primarily including prepetition and postpetition tax claims of hundreds of taxing entities, has made it impossible," Gerald K. Smith, Esq., of Lewis & Roca LLP in Phoenix, the Plan Trustee appointed pursuant to Boston Chicken, Inc.'s Third Amended Plan of Reorganization confirmed on May 15, 2000, tells Judge Case, to object to all secured and priority claims before the September 23 deadline imposed by the Plan. "Much progress has been made, but a continuance of the deadline is essential." Mr. Smith suggests that he can settle or object to all secured and priority claims by October 31, 2000, and, accordingly, requests that the deadline be extended to that date. CERPLEX GROUP: Meeting of Creditors to Convene on Sept. 15 in Wilmington ------------------------------------------------------------------------ On June 20, an involuntary Chapter 11 bankruptcy petition was filed against The Cerplex Group, Inc. Cerplex consented to the involuntary petition and, on July 27, 2000, Cerplex Inc., filed a voluntary petition under Chapter 11. The United States Trustee for Region III will convene a meeting of Cerplex's creditors on September 15, 2000 at 11:30 AM, 844 King Street, Room 2313, Wilmington, Delaware. Counsel for the debtors are: Norman L. Pernick, Esq. Saul, Ewing, Remick & Saul LLP 222 Delaware Avenue PO Box 1266 Wilmington, DE Adam H. Isenberg, Esq. Saul, Ewing, Remick & Saul LLP 1500 Market Street, 40th Floor Centre Square West Philadelphia, Pa. 19102 EINSTEIN/NOAH: Declines to Pursue New World's Third Vague Offer --------------------------------------------------------------- In response to inquiries, Einstein/Noah Bagel Corp. (OTC Bulletin Board: ENBXQ) announced today that it received a copy of an August 28, 2000 letter from New World Coffee-Manhattan Bagel, Inc., discussing a possible combination of New World and the Company. The New World letter was addressed to the Creditors' Committee in the Company's Chapter 11 case. The New World letter, which also references a June 21 proposal that had not been received by the Company, is incomplete and vague and does not provide a basis for any meaningful discussions between the Company and New World. Among other things, the New World letter does not address how such a combination between the two companies would be financed, what consideration would be paid by New World or what, if any, distributions are to be made to Bagel Store Development Funding, L.L.C. Moreover, the Company is not aware of the basis for certain assumptions made by New World regarding New World's projected EBITDA and purported merger synergies. The Company also announced that New World had made similar vague proposals on two prior occasions. On both occasions, after considering the viability of a combination and the benefits to be received by the Company's stakeholders, the Company's board declined to engage in further discussions with New World because it did not believe the New World inquiries provided the basis for a meaningful transaction. The Company further stated that, by law, it currently has the exclusive right to propose and solicit acceptances of a plan of reorganization. As previously reported, the Company expeditiously filed and prosecuted a plan of reorganization which it believes to be in the best interests of its stakeholders. The plan was mailed to creditors and other parties in interest on August 14 and is currently being voted on. The hearing on confirmation of the plan is scheduled to begin on September 19. The Company intends to continue its efforts to confirm and consummate its plan and to emerge from Chapter 11 as soon as possible. Currently, ENBC, through Bagel Partners, operates 458 retail bagel stores in 29 states and the District of Columbia operating under the Einstein Bros. and Noah's New York Bagels brand names. Einstein Bros. and Noah's stores are unique bagel cafes and bakeries featuring fresh-baked bagels, a variety of cream cheese spreads, specialty coffee drinks, soups, sandwiches and salads. FEDERATED DEPARTMENT: Moody's Confirms Baa1 Senior Credit Ratings ----------------------------------------------------------------- Moody's Investors Service confirmed the ratings of Federated Department Stores, Inc., but changed the rating outlook from stable to negative, following the company's announcement of a new $500 million share repurchase authorization. The confirmation of Federated's ratings reflect Moody's expectation that cash flow generation by the company's department store business will continue to be strong, and that the asset quality problems at Fingerhut will not cause a significant deterioration in the company's debt protection measures. The change in outlook to negative reflects the fact that Federated may undertake further share repurchases at a time when corrective actions at Fingerhut are negatively impacting earnings and when there is still uncertainty about the strength of future Fingerhut sales in a stricter credit environment. Ratings confirmed: a) Senior bank credit facility and senior unsecured notes at Baa1. b) Senior unsecured shelf at (P)Baa1. c) Preferred stock shelf at (P)"baa2". d) Commercial paper at Prime-2. The announcement of Federated's new share buyback authorization comes at a time when the challenges at its Fingerhut subsidiary are already adversely impacting debt protection measures and could signal a somewhat more aggressive financial policy than in the past. The authorization is additive to the approximately $70 million remaining on Federated's existing share repurchase program as of the end of the second quarter. While its department store division is expected to continue to generate strong cash flow, Federated's Baa1 rating could come under downward pressure if resolving the challenges at Fingerhut and/or aggressive share repurchases result in significant further deterioration in the company's debt protection measures. Delinquencies at Fingerhut have been higher than planned. Consolidated second quarter EBIT was hurt by larger bad debt reserves to cover Fingerhut's delinquencies. There is also the possibility that EBIT could be lowered by an additional $200 to $250 million during the fall season due to a further increase in reserves for bad debt at Fingerhut, as well as, the negative impact on sales from tighter credit policies and controls. While consolidated profitability can clearly absorb such hits -- in fiscal 1999, Federated's consolidated EBIT was about $1.7 billion -- the projected reductions in EBIT are still significant. The factors that led to lower credit quality at Fingerhut include the conversion to revolving credit and more aggressive credit policies such as deferred credit for newer customers. Federated has implemented more conservative credit policies, including lower credit lines and the use of new credit scoring before adjusting credit lines. Federated has also increased collections activity, placed Fingerhut's credit operations under Federated's own Financial and Credit Services Group, and changed customer invoices to reflect Fingerhut's name as creditor. Such initiatives could result in improved credit operations at Fingerhut next year. Moody's cited Federated's traditional department store business as a credit positive and noted that it remains the major source of earnings and cash flow for the company. Federated's valuable franchise is geographically diverse and includes well known national chains like Macy's and Bloomingdale's. Customer loyalty is bolstered by the company's nine private brands, that target various customer segments and lifestyles, and its proprietary credit cards which account for about 40% of revenues. Evidence of the acceptance of Federated's merchandise assortments can be seen in its comparable store sales, which have been stronger this year than many of its competitors'. With corporate offices in Cincinnati and New York, Federated Department Stores, Inc. operates more than 400 department stores in 33 states. Its department stores operate under the names Bloomingdale's, Macy's, The Bon Marche, Burdines, Goldsmith's, Lazarus, Rich's and Stern's. Federated also operates a number of direct-to-consumer catalog and electronic commerce businesses including Fingerhut. Federated's net sales in fiscal year 1999 exceeded $17.7 billion. FRUIT OF THE LOOM: Debtor Reports Second Quarter Operating Results ------------------------------------------------------------------ Fruit of the Loom, Ltd. (OTC Bulletin Board: FTLAQ), one of the world's leading marketers and manufacturers of basic family apparel, today reported operating results for its second quarter. Dennis Bookshester, Chief Executive Officer commented, "We have made significant progress in restructuring the operations of the Company in our effort to emerge from bankruptcy. Although our second quarter financial results reflect the carryover of the costs associated with problems which occurred in the second half of 1999, we have experienced significant operational and cost improvements in the first half of 2000 versus 1999." Fruit of the Loom filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code on December 29, 1999 and is currently working through its restructuring in bankruptcy proceedings. The Company reported sales of $446.0 million for its second quarter ended July 1, 2000 compared to $517.7 million for the second quarter of 1999. Loss from continuing operations for the second quarter of 2000 was $55.9 million ($.83 per share) compared to earnings from continuing operations of $4.5 million ($.07 per share) for the second quarter of 1999. Including discontinued operations, the net loss for the second quarter of 2000 was $55.9 million ($.83 per share) compared to a net loss of $2.3 million ($.03 per share) for the second quarter of 1999. For the six months ended July 1, 2000, the Company reported sales of $820.9 million compared to $888.3 million for the corresponding period in 1999. Loss from continuing operations for the six months ended July 1, 2000 was $135.1 million ($2.02 per share) compared to a loss from continuing operations of $0.4 million ($.00 per share) for the corresponding period in 1999. Including discontinued operations, the net loss for the six months ended July 1, 2000 was $137.7 million ($2.06 per share) compared to a net loss of $11.3 million ($.16 per share) for the corresponding period in 1999. The Company's earnings before interest, taxes, depreciation, amortization and restructuring costs ("EBITDAR"), as defined in the Company's debtor-in- possession credit facility ("DIP"), was $84.1 million compared to $49.4 million during the second quarter of 1999. EBITDAR excludes the Company's inventory variances (which are additional product costs in excess of standard costs) capitalized in 1999, gains and losses on nonoperating asset sales and the restructuring costs associated with the bankruptcy. For the six months ended July 1, 2000, EBITDAR was $138.0 million compared to $84.6 million during the corresponding period of 1999. The borrowing availability under the DIP is $338.5 million and there was no usage of the revolver component of the DIP as of August 17, 2000. Management believes that the size of the DIP provides the Company adequate financial flexibility and liquidity to pay its suppliers and meet customer expectations. The Company reported an operating loss from continuing operations in the second quarter of $11.4 million compared to $26.6 million in operating earnings from continuing operations during the same period last year. The operating loss from continuing operations includes $72.2 million of fourth quarter 1999 inventory variances which represent actual product costs incurred in excess of 1999 standard costs. These additional product costs were incurred in 1999 as a result of the Company's manufacturing and operating difficulties and were charged to gross earnings as the inventory, which included such costs, was sold during the second quarter of 2000. The total impact of the $149.1 million in higher manufacturing costs incurred during the last six months of 1999 has been recognized in the six months ended July 1, 2000 and will not affect future periods. Actual production costs incurred in the first six months of 2000 were substantially improved and in line with expected operating performance. Inventory costs in excess of standards for the first six months of 2000 amounted to $24.4 million and will be absorbed in operating results in the second half of 2000 as the inventory associated with these costs is sold. RESTRUCTURING UPDATE Dennis Bookshester, Chief Executive Officer commented, "With the changes that have been implemented in our operations, we have been able to service our customers at a higher level. The entire organization is focused on reducing costs, improving product quality and delivering superior value to our customers. The Company is now benefiting from improved manufacturing efficiencies associated with higher volume per style and the consolidation of production into Company owned facilities. The investment we made at the beginning of the year in improving controls, reengineering standards, improving planning and production scheduling and reducing the number of product offerings has resulted in improvements in key reporting metrics including order fill rates, plant efficiency and material utilization. The benefits of the improvements have been reflected in product quality and timeliness of production. At the same time, we have reduced selling, general and administrative expenses to further improve our cost competitiveness. As part of the Company's restructuring we have sold the Gitano business, closed the Pro Player operations and discontinued non-core products. With the elimination of non-core businesses and products, the Company is evaluating production capacities and will adjust production to meet expected future sales demand. Any reduction in production capacities may have a material adverse affect on future results of operations due to the incurrence of one time costs. I am proud of the contributions made by all of Fruit of the Loom's employees to improve the Company's performance." GRANT GEOPHYSCIAL: PricewaterhouseCoopers Resigns from Audit Engagement ----------------------------------------------------------------------- On August 14, 2000, Grant Geophysical, Inc. was informed by PricewaterhouseCoopers LLP that the firm had resigned as the company's independent auditors. The company's Audit Committee did not participate in, or approve, the decision to change independent auditors as the change was due to PricewaterhouseCoopers' resignation. IMPERIAL HOME: Delaware Court Extends Exclusivity to October 18 --------------------------------------------------------------- The Imperial Home Decor Group Inc. said today that the United States Bankruptcy Court for the District of Delaware has extended the period in which the company has the exclusive right to file and advance a plan of reorganization in its chapter 11 case. IHDG has been granted another 75 days, until October 18, 2000, in which the company has the exclusive right to file a plan of reorganization. The company also has the exclusive right for another 60 days after that date, until December 18, 2000, to solicit creditors to vote for the plan. As reported to the court, IHDG has reached several critical milestones in its case that are consistent with the company's goal of emerging from chapter 11 by the end of the year. They include completing and submitting the company's three-year business plan, which will become the foundation for a plan of reorganization, to creditors, and conducting substantive discussions with creditors regarding the proposed capital structure of the company following its emergence from chapter 11. "We are ready to put chapter 11 behind us," said Douglas R. Kelly, president and chief executive officer of IHDG. "The process is moving quickly and smoothly. We are confident that we can develop a consensual plan of reorganization that will conclude the case by the end of the year." Kelly also noted that the company has made numerous improvements in operations. "We have wisely used our time in chapter 11, taking the actions necessary both to stabilize and to improve our business, focus on our strengths and enhance our position as the world's largest producer of residential wallcoverings," he said. Imperial Home Decor Group is the world's largest designer, manufacturer and distributor of residential wallcovering products. IHDG also markets commercial wallcoverings and is a premiere supplier of pool liners through its subsidiary, Vernon Plastics, Inc. Headquartered in Cleveland, Ohio, IHDG supplies home centers, national chains, independent dealers, mass merchants, design showrooms and specialty shops. Product lines include the Imperial, Katzenbach & Warren, Albert Van Luit, Sterling Prints, Imperial Fine Interiors, Sunworthy and Colorfields. The company was created in 1998 through the merger of Imperial Wallcoverings and Borden Decorative Products. In 1999, Imperial Home Decor Group had net sales of $411.7 million. INTEGRATED HEALTH: Texas Utilities Stipulate to Sec. 366 Adequate Assurance --------------------------------------------------------------------------- Pursuant to the Court's First Day order governing requests for additional adequate assurance of future payment for post-petition utility service consumed by Integrated Health Services, Inc., and its debtor-affiliates, the Debtors and Brownsville, Texas Public Utilities Board agree that the Debtors will pay BPUB a post-petition Security Deposit of $11,900, which the Debtors may substitute with a surety bond for $12,525 issued by either Amwest Surety Insurance Company or a financial institution or insurance company of equal financial rating and acceptable to BPUB. BPUB may terminate utility services to the Debtors if the Bond expires or is cancelled without valid substitution, or if the Debtors default on payment of the Security Deposit or the Bond, or default on payment of BPUB's invoices for post-petition services in the absence of a good faith dispute and the default is not cured within seven days after written notice. (Integrated Health Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) LAROCHE INDUSTRIES: Committee May Avoid Lenders' Liens up to Confirmation ------------------------------------------------------------------------- In connection with Judge Farnan's approval of a Debtor-in-Possession Financing Facility post-bankruptcy working capital to LaRoche Industries, Inc., and LaRoche Fortier, Inc., in the course of their chapter 11 restructurings, LaRoche's Official Committee of Unsecured Creditors negotiated for the ability to challenge the validity, enforceability, priority or extent of the Pre-Petition Lenders' liens on the Debtors' assets. The Debtors, the Committee and the Lenders entered into a Stipulation extending that window of opportunity to July 27, 2000. Scott K. Charles, Esq., of Wachtell, Lipton, Rosen & Katz, lead counsel to the Creditors Committee, has led further due diligence by the Creditors' Committee into the Lenders' liens and mortgages on the Debtors' assets. On or about July 25, 2000, Mr. Charles told the Lenders that either they would consent to an extension of the Stipulation or they'd be sued. Marshall S. Huebner, Esq., of Davis, Polk & Wardwell, counseled his Lender-clients to sign the extension agreement. Under the new agreement, the Lenders grant the Committee, until the time of confirmation of a plan of reorganization in LaRoche's cases, the continued right to challenge the validity, enforceability, priority or extent of the Lenders' liens. A Stipulation memorializing this open-ended extension of time, presented to Judge Farnan in Delaware for his stamp of approval, suggests that the Committee contests the valdity of the Lenders' liens on the Debtors' (i) 66.67% interest in LII Europe SARL, (ii) copyrights and (iii) trademarks. Additionally, the Committee hints that the Lenders received voidable preference when they took liens on five parcels and of real estate and two promissory notes within the 90-day period prior to LaRoche's Petition Date. MARINER POST-ACUTE: Summit's Moves to Sublet Vacant Premises to Glenwood ------------------------------------------------------------------------ Summit Institute for Pulmonary Medical and Rehabilitation, Inc. d/b/a Summit Hospital of Northeast Louisiana, a debtor-affiliate of Mariner Post- Acute Network, Inc., found a new tenant, Glenwood Regional Medical Center, for the vacant half of its premises located at its Facility at 6200 Cypress, West Monroe, Louisiana. Accordingly, Summit sought and obtained the Court's authority to consummate the lease under Bankruptcy Code section 363(b) and (m), whereby Glenwood will lease from Summit available space of approximately 13,172 square feet and all existing hospital room furnishings, including beds located in the Premises. Summit is operating a 40-bed long-term acute care facility at approximately one half of the premises. The other half has been vacant since Summit acquired the lease in 1998 and is currently used by Summit as storage space. Glenwood intends to open and operate a Behavioral Health Unit/Program in the Premises, which will provide psychiatric services to geriatric patients. Summit expects the lease transaction to bring revenue of approximately $ 142,000 per annum. Moreover, it will create an opportunity for Summit to contract with Glenwood for select ancillary services, such as food services and housekeeping, at the new Behavioral Health Unit/Program. In addition, the physical improvements that Glenwood intends to make to the Premises in order to accommodate its patients, along with Glenwood's occupancy of the Premises, will significantly enhance the value of the Facility. Summit will also be able to offer a larger variety of services to its patients. Summit does not believe that a market exists for other competitive leasing options, due to the somewhat remote location of the premises, Summit's inability to fund improvements and the limited growth of the medical community in Northeast Louisiana. Summit tells the Court that Glenwood is the only health care provider which has shown an interest in and committed to leasing the premises, being an operator only two miles from the premises, and interested in expanding its operation by opening the Behavioral Health/Unit Program. In the circumstance, Summit believes that the lease transaction is in the best interest of the estates. (Mariner Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392- 0900) MARVEL ENTERPRISES: Shareholders to Gather in New York City on Sept. 28 ----------------------------------------------------------------------- The 2000 annual meeting of stockholders of Marvel Enterprises, Inc., a Delaware corporation, will be held at 10:00 A.M., local time, on Thursday, September 28, 2000 at the Loews New York Hotel, 2nd Floor, 569 Lexington Avenue at East 51st Street, New York, New York, for the following purposes: 1. To consider and vote upon a proposal to approve and adopt an amendment to Article VIII, Section 8.1 of the company's restated certificate of incorporation proposed by the company to eliminate the sentence which provides a fixed number of the size of the Board of Directors. 2. To elect ten directors of the company to serve until the company's next annual meeting of stockholders and until the election and qualification of their respective successors. 3. To ratify the appointment of Ernst & Young LLP as the company's independent accountants for the fiscal year ending December 31, 2000. The Board of Directors has fixed the close of business on August 25, 2000 as the record date for determination of stockholders entitled to notice of, and to vote at, the annual meeting. MICROAGE INC.: Arizona Court Extends Exclusive Period to December 13, 2000 -------------------------------------------------------------------------- MicroAge Inc. at today's regular monthly hearing received court approval to extend the period in which the company has the exclusive right to file or advance a plan of reorganization in its Chapter 11 case. Today's order extended the exclusivity period to Dec. 13, 2000, and further extended the company's exclusive right to solicit acceptances of its plan to Feb. 13, 2001. In approving the order, the court noted that the extension had received support from the Official Committee of Unsecured Creditors. On Aug. 21, 2000, the committee filed its pleading with the court supporting the extension of the exclusivity period commending MicroAge for efforts thus far. In the pleading, the committee noted that MicroAge had "worked cooperatively and extensively with the Committee" and that the company has "demonstrated good faith efforts to reorganize in a way that will maximize the distribution to unsecured creditors." "The extension of exclusivity will enable the Company to focus its resources on operating the business," said Chairman and Chief Executive Officer Jeffrey D. McKeever. "In addition, in knowing that the Company remains in control of the restructuring process, we believe that our clients and vendors will have added confidence in our stability. We are encouraged by the support we have received from the Creditors' Committee, our clients and the vendor community at large. "We believe the support we have received will increase further due to the extension of the exclusivity period." The company filed voluntary Chapter 11 petitions in the U.S. Bankruptcy Court for the District of Arizona in Phoenix on April 13, 2000. MicroAge Inc. provides B2B technology solutions and infrastructure services. The corporation is composed of information technology businesses, delivering ISO 9001-certified, multi-vendor integration services and solutions to large organizations and computer resellers. The company does business in more than 20 countries and offers over 250,000 products from more than 1,000 suppliers backed by a suite of technical, financial, logistics and account management services. More information about MicroAge is available at http://www.microage.com MINNESOTA CENTRAL: Railroad Files for Chapter 11 Protection in Wisconsin ------------------------------------------------------------------------ The Milwaukee Journal Sentinel reports that Minnesota Central Railroad Co., a small rail carrier with headquarters in Green Bay, Wisconsin, filed for Chapter 11 bankruptcy protection. The railroad's bankruptcy petition, obtained by a Sentinel reporter, reports $100,000 to $500,000 in assets and $1 million to $10 million in debts owed to 100 to 199 creditors. The Minnesota Department of Transportation reports that MCRC is a Class III carrier, operating operates 94 miles of track in Minnesota. Burlington Northern Santa Fe, by comparison, operates 1,600 miles of track and little- known Duluth & Northeastern Railroad operates 8 miles of track. NATIONAL HEALTH: Court Approves Debtors' 4th Amended Disclosure Statement ------------------------------------------------------------------------- National Health & Safety Corporation (OTC Bulletin Board: NHLT) received on Bankruptcy Court approval of its Fourth Amended Disclosure Statement With Respect to the Fourth Amended Joint Plan of Reorganization. This Court's Order is the result of the hearing held on August 21, and the final submission of a few minor changes on the same day. The Order authorizes the Company to proceed with printing and distribution of these documents along with voting instructions to Creditors, Shareholders and other interested parties. The Disclosure contains a comprehensive business plan for POWERx/MedSmart as well as detailed financial projections. It is extremely important that each interested party review these documents in detail and submit their ballot no later than October 23, 2000 to the Balloting Agent. A Confirmation Hearing Date has been set for 11:00 a.m. on November 6, 2000 at which time the Company will seek Confirmation of the Joint Reorganization Plan. SUMMARY OF THE PROPOSED REORGANIZATION PLAN -- MedSmart (including POWERx) will become a wholly owned subsidiary of National Health & Safety Corp. through a Restricted 144 stock exchange. -- MedSmart has greatly improved and developed POWERx at a cost in excess of $1.4 million and turned POWERx into a turnkey Internet eCommerce B2B and B2B2C service provider. -- KJE (co-proponent) will contribute $600,000 in cash in exchange for Restricted 144 Common Stock. -- Under this proposed Plan the unsecured Creditors will receive Series A Equity Units in exchange for their claims. These units consist of 1 share of Preferred Stock that is convertible into 5 shares of free trading Common Stock. -- Existing Common shareholders will continue to own the same number of shares they presently own since the proposed Plan does not envision a reverse split as part of the Plan. Reacquiring of the POWERx business allows National Health to benefit from both the royalty income from MedSmart as well as the net revenue from POWERx, which is typically 12.5 times the royalty stream. After such Reorganization, the Company's balance sheet should change from its present deficiency of approximately $4.5 million to a post- reorganization consolidated positive net book value of approximately $2.4 million. This represents a net positive change of about $6.9 million. The Management of the Company believes that this Proposed Plan represents an exceptional and viable business opportunity for all interested parties and an exciting future for National Health & Safety Corp. NATIONAL HEALTHCARE: Exiting Florida Markets as Liability Insurance Expires --------------------------------------------------------------------------- The Tampa Bay Business Journal reports that Tennessee-based National HealthCare Corp. will leave the Florida operations due to the lack of liability insurance. The company may cancel management contracts or send them off to new companies before Sept. 30, which is the scheduled date the company's liability insurance ends. National HealthCare manages nursing homes and assisted living facilities, is working on renewing its current liability insurance, which expires on Sept. 30 for facilities in several states. But obtaining liability insurance for nursing homes in Florida posed a special challenge, according to the company. PC SERVICE: Files for Chapter 11 Protection in Dallas, Texas ------------------------------------------------------------ PC Service Source, Inc. (Nasdaq: PCSS) announced today that the company has filed a voluntary petition for protection under Chapter 11 of the Bankruptcy Code for the company and all of its subsidiaries. The petition was filed in the federal bankruptcy court for the Northern District of Texas, Dallas Division. Due to the significant losses from the company's discontinued parts sales division, the company filed for Chapter 11 protection to seek a financial reorganization of its rapid turnaround desktop and notebook repair business. The company and it subsidiaries will continue to operate the company's repair business under the protection of the bankruptcy court while seeking to finalize a plan of reorganization to implement its anticipated restructuring. Morti Tenenhaus, the company's president and chief executive officer commented, "We believe the most effective way to serve our existing customer base and maximize the future growth of our rapid turnaround desktop and notebook repair business is to operate in the ordinary course of business under Chapter 11. We continue to believe the combination of our customer base, ability to timely perform desktop, notebook and component repair services, and our dedicated employees give us a unique market position. As a result, we will also continue to work toward securing a strategic or financial partner for the repair business to enhance its growth potential." PC Service Source also announced today that it expects to be delisted from Nasdaq later this week because the company is currently not in compliance with Nasdaq's continued listing requirements. The company anticipates filing its 10-Q for the three month period ended June 30, 2000 next week. PRISON REALTY: Pacific Life Announces Vote On Prison Company's Proposals ------------------------------------------------------------------------ Pacific Life Friday announced its intent to vote for the charter amendments, the merger and related transactions as detailed in Prison Realty's proxy statement dated July 31, 2000. Prison Realty has given notice to stockholders to consider and vote upon proposals to adopt certain amendments to its charter to permit a restructuring of Prison Realty including not being taxed as a REIT beginning in year 2000 and to approve the merger of Corrections Corporation of America and Prison Realty. Though the proposals are less than perfect, Pacific Life believes that the merger is a necessary first step to begin the process of stabilizing Prison Realty. Founded in 1868, Pacific Life provides life and health insurance products, individual annuities and group employee benefits and offers to individuals, businesses and pension plans a variety of investment products and services. Over the past five years, the company has grown from the 25th to the 16th largest life insurance company in the nation(1). The Pacific Life family of companies manages more than $315 billion in assets, making it one of the largest financial institutions in America, and currently counts 67 of the 100 largest U.S. companies as clients(2). Additional information about Pacific Life can be obtained at its Web site, www.PacificLife.com. PRISON REALTY: Results for Second Quarter Ended June 30, 2000 ------------------------------------------------------------- Prison Realty Trust, Inc. (NYSE: PZN) announced results for the second quarter ended June 30, 2000. Prison Realty reported revenues of $17.5 million and a net loss available to common shareholders of $74.3 million, or ($0.63) per common share for the quarter. Prison Realty has proposed a comprehensive restructuring, including the merger of Prison Realty with CCA and its operation as a taxable subchapter C corporation rather than as a REIT beginning with its 2000 taxable year. The company's revenues were reduced for the second quarter of 2000 to reflect a reserve of $72.6 million to offset lease revenues from Prison Realty's primary tenant, Corrections Corporation of America (CCA), due to the uncertainty regarding the collectibility of the payments. The results for the second quarter of 2000 include $4.4 million in write- offs of amounts under lease agreements related to tenant incentive fees due CCA on two facilities opened in 2000, $28.1 million reserved for merger transaction fees related to the termination of previously announced transactions, and $7.5 million in foreign currency transaction losses as a result of the strong U.S. dollar against the UK pound arising from receivables related to the Company's HMP Forrest Bank facility in Salford, England. CCA, Prison Realty's primary tenant, had second quarter revenues of $142.4 million and a net loss of $76.8 million. The loss includes gross lease expenses before amortization of deferred credits of $81.6 million related to leases with Prison Realty. In addition to CCA, the two service companies had combined revenues of $72.9 million and combined net income before taxes of $2.0 million for the quarter. Prison Realty's economic interest in the two service companies is reported as equity in earnings of subsidiaries. Systemwide, the three companies doing business as CCA had 64,260 prison and jail beds in operation at the end of the second quarter of 2000, versus 50,513 beds at June 30, 1999. Occupancy for the quarter was 84.8% this year compared with 92.7% last year, and compensated mandays for the quarter rose 1.9% to 4.6 million from 4.1 million in the second quarter of 1999. About the Company Prison Realty's business is the development and ownership of correctional and detention facilities. Headquartered in Nashville, Tennessee, the Company provides financing, design, construction and renovation of new and existing jails and prisons that it leases to both private and governmental managers. Prison Realty currently owns or is in the process of developing 50 correctional and detention facilities in 17 states, the District of Columbia, and the United Kingdom. The companies operating under the "Corrections Corporation of America" name provide detention and corrections services to governmental agencies. The companies are the industry leader in private sector corrections with approximately 70,000 beds in 77 facilities under contract or under development in the United States, Puerto Rico, Australia, and the United Kingdom. The companies' full range of services includes design, construction, renovation and management of new or existing jails and prisons, as well as long distance inmate transportation services. Prison Realty has previously announced a proposed restructuring, pursuant to which, among other things, Prison Realty will merge with Corrections Corporation of America, its primary tenant, and elect to be taxed as a subchapter C corporation commencing with its 2000 taxable year. Prison Realty is seeking stockholder approval of the restructuring at a Special Meeting scheduled for September 12, 2000. Pending stockholder approval, the companies intend to complete the restructuring on or before September 15, 2000. Prison Realty has filed definitive proxy materials with respect to the restructuring with the U.S. Securities and Exchange Commission and has commenced delivery of such materials to its stockholders. Stockholders are urged to read these materials carefully as they include important information with respect to the companies and the proposed restructuring. RANDALL'S ISLAND: Chase Urges Court to Limit or Deny Exclusivity Extension -------------------------------------------------------------------------- "[W]hile the Debtors allege that they have been 'working cooperatively with Chase' in this chapter 11 case, nothing could be further from the truth," Richard S. Toder, Esq., of Morgan, Lewis & Bockius LLP says in an objection filed by The Chase Manhattan Bank, as agent for the pre-petition lenders to Randall's Island Family Golf Centers, Inc., et al., in Randall's chapter 11 cases. "Chase has made many requests for financial information from the Debtors. These requests, until recently, were uniformly ignored and, even now, are only tardily and partially addressed," Chase charges. "The lack of information provided has been a serious issue." Chase directs Chief Judge Bernstein's attention to Randall's latest operating results: a $50.6 million loss for the 3 months ended June 30, 2000, and a $72 million loss for the 6-month period ending June 30, 2000. "[While the] Debtors state that they have made progress in formulating a plan of reorganization, the Debtors have not even formulated a comprehensive business plan, let alone a plan of reorganization," Chase observes. Chase urges the U.S. Bankruptcy Court for the Southern District of New York to deny Randall's bid for a further extension of its exclusive periods under 11 U.S.C. Sec. 1121. Alternatively, Chase asks Judge Bernstein to limit any extension to 45 days. Mr. Toder encourages Judge Bernstein to consider that "Section 1121 does not create a deadline for filing a plan. The Debtors may develop and file their plan or plans as they feel appropriate. The risk that while the debtors are developing their plan, another party in interest may file a plan is a risk that Congress intended, so as to preserve the balance between a debtor's needs and the legitimate interest of creditors," quoting from In re Southwest Oil Co. of Jourdantown, Inc., 84 B.R. 448 (Bankr. W.D. Tex. 1987). RELIANT BUILDING: Committee Taps Haynes and Boone, LLP, as Counsel ------------------------------------------------------------------ The Official Committee of Unsecured Creditors of Reliant Building Products, Inc., et al. seeks court authority to employ and retain the law firm of Haynes and Boone, LLP as its legal counsel. The professional services that the firm will render to the Committee include, but shall not be limited to: a) Providing legal advice with respect to the Committee's powers and duties in these cases; b) The preparation on behalf of the Committee of all necessary applications, answers, orders, reports and other legal papers; c) The representation of the Committee in any and all matters involving contests with the debtors, alleged secured creditors and other third parties; d) The negotiation of a plan of reorganization. The attorneys and paralegal that may be designated to represent the Committee and their current, standard hourly rates include: Robin E. Phelan (Partner) $425 per hour Mark X. Mullin (Partner) $320 per hour Eric Terry (Associate) $190 per hour Linda Breedlove (Paralegal) $110 per hour SABRATEK CORPORATION: Stipulation Grants Co-Exclusivity to November 15 ---------------------------------------------------------------------- "[I]n the spirit of continuing cooperation towards the development of a jointly sponsored plan or a debtor sponsored plan supported by the Committee, [Sabratek Corporation has] agreed to share with the Committee the exclusive right to file a plan," James H.M. Sprayregen, Esq., and Matthew N. Kleiman, Esq., of Kirkland & Ellis, tell the U.S. Bankruptcy Court for the District of Delaware. "[I]n reliance upon that agreement," Martin J. Bienenstock, Esq., and Johnson C. Ng, Esq., of Weil, Gotshal & Manges LLP, tell Judge Walrath, "the Committee has refrained from filing a motion to terminate exclusivity . . . and an objection to [Sabratek's] Exclusivity Extension Motion." Arm-in-arm, counsel for Sabratek and its Official Committee of Unsecured Creditors present Judge Walrath with a Stipulation agreeing that, through and including November 15, 2001, both the Debtors and the Committee shall have the exclusive right to file a chapter 11 plan and, through January 15, 2001, both the Debtors and the Committee shall have the exclusive right to solicit acceptances of that plan, all without prejudice to the right of either or both parties to seek a further extension of these periods. "The Debtors and the Committee shall use their best efforts to cooperate in developing a chapter 11 plan . . . and obtaining confirmation [of that plan]; provided, however, that if [they] do not reach a consensus . . . either party or both may file a chapter 11 plan . . . not supported by the other party at any time," the attorneys say. The lawyers make it clear to Judge Walrath that if she does not approve this Stipulation, the Court can anticipate staunch opposition to the Debtors' request to extend its exclusive periods at the hearing scheduled on September 8, 2000. SYSTEM SOFTWARE: Harmonizing U.S. & Argentine Bankruptcy Laws is Impossible --------------------------------------------------------------------------- Systems Software Associates, Inc., asks the U.S. Bankruptcy Court for the District of Delaware for authority to effect an orderly liquidation of its Argentine Assets under Argentine Law. In short, SSA asks for permission to abandon its Argentine Assets. SSA argues that it has no practical way to bring its Argentine Assets to the U.S. for distribution under U.S. bankruptcy law and it has no practical way to subject its Argentine Creditors to the jurisdiction of the U.S. Bankruptcy Court. SSA tells Judge Roderick R. McKelvie that it maintains a branch office in Argentina. Although applicable U.S. law holds that the Argentine Assets are property of SSA and SSA has liability for all Argentine Debts, applicable law in Argentina deems branch operations of foreign corporations to have a separate corporate existence. That means, lawyers at the Argentine law firm of Abeledo Gottheil Abogados tell SSA, all Argentine Assets must be used to satisfy the branch's creditors before those assets can be used for the benefit of U.S. creditors. The Argentine Assets consist of (a) $200,000 in cash; (b) $50,000 of furniture and fixtures; and (c) $70,000 to $160,000 of receivables. The Argentine operation needs to satisfy (x) $400,000 of priority employee termination claims and (y) $250,000 of administrative claims. SSA's best idea at this juncture, Janet E. Henderson, Esq., Shalom L. Kohn, Esq., and Kenneth P. Kansa, Esq., of Sidley & Austin in Chicago, and Laura Davis Jones, Esq., and Rachel S. Lowy, Esq., of Pachulski, Stang, Ziehl, Young & Jones, P.C., in Wilmington, say, is to liquidate the Argentine Assets and let Argentine Creditors line-up in an Argentine insolvency proceeding. SSA's U.S. legal team reaches the conclusion that if the Argentine Creditors think they can make a claim against the U.S. company, so be it. It will be impossible, SSA's convinced, to harmonize Argentine and U.S. bankruptcy, insolvency and commercial laws. The priority schemes are too varied and Argentine law is fraught with numerous civil and criminal penalties. TOKHEIM CORPORATION: Case Summary --------------------------------- Debtor: Tokheim RPS, LLC 1209 Orange Street Wilmington, Delaware 19801 Affiliates: Tokheim Corporation 10501 Corporate Drive Fort Wayne, Indiana 46845 Tokheim Investment Corporation Management Solutions, Inc. Gasboy International, Inc. Tokheim Services, LLC Sunbelt Hose and Petroleum Equipment, Inc. Type of Business: World's largest producer of petroleum dispensing devices, manufacturing and servicing electronic and mechanical petroleum dispensing systems. Chapter 11 Petition Date: August 28, 2000 Court: District of Delaware Bankruptcy Case Nos: 00-03454 through 00-03460 Judge: Peter J. Walsh Debtor's Counsel: Anthony W. Clark, Esq. Skadden, Arps, Slate, Meagher & Flom, LLP One Rodney Square P.O. Box 636 Wilmington, DE 19899-0636 (302) 651-3000 Skadden, Arps, Slate, Meagher & Flom, LLP 333 West Wacker Drive Chicago, IL 60606 Post-Petition Lenders: AmSouth Bank, as Documentation Agent ABN Amro Bank, N.V., as Administrative Agent Total Assets: $ 691,000,000 Total Debts : $ 700,000,000 UNITED KENO: Ontario Court Extends CCAA Protection to September 27 ------------------------------------------------------------------ United Keno Hill Mines Limited announced that the Superior Court of Ontario extended the protection from its creditors granted to United Keno pursuant to an Order made in Toronto under the Companies' Creditors' Arrangement Act on February 18, 2000. Under the Order made on Friday, August 25, 2000 protection from proceedings against United Keno has been extended to September 27, 2000. Under last week's Order, United Keno has been given until September 19, 2000 to call meetings of its creditors to implement the Plan of Arrangement which it filed with the Court on July 7, 2000. U.S. CAN: Moody's Gives Lukewarm Reception to $785MM New Debt & Securities -------------------------------------------------------------------------- Moody's Investors Service assigned a (P) B3 rating to United States Can Company's proposed $150 million senior subordinated notes. The senior unsecured issuer rating is (P) B2. Moody's assigned a (P) B1 rating to each tranche of US Can's new $400 million secured credit facility consisting of a $140 million six year revolver; $80 million tranche A term loan, six years; and $180 million tranche B term loan, eight years. Moody's placed the existing 10 1/8% of $235 million senior subordinated notes, due 2006, at U.S. Can Corporation (non operating parent holding company) on review for possible downgrade from B2 to (P) Caa1 for non-tendered amounts. The lower rating would reflect their structural and effective subordination to debt at the operating company given that all covenants and guarantees will be released as part of the tender consent. Upon completion of final documentation for the proposed transactions, the provisional ratings will be in effect and the senior implied rating will be lowered to B1 from Ba3. The ratings outlook is stable. The ratings reflect US Can's increased financial leverage resulting from the recapitalization, reduced coverage of interest expense, and low retained cash as a percentage of total debt. Current management (largely new since 1998) has had success in working through leveraged situations, and US Can has operated with higher debt levels in the past. Nonetheless, this is the first time that current management will manage US Can with significantly higher pro-forma leverage. Margins are susceptible to increased raw material costs (notably steel, and to a lesser extent plastic resin costs which are associated with an estimated 5% of the company's business), the heightened price sensitivity of customers, and the competitive pricing of industry participants. The combination of these factors could result in flat to slightly improving operating margins in the near term. The ratings also reflect certain operating inefficiencies that are temporarily pressuring margins, notably technical and operating difficulties in the ramp up of new equipment and skilled labor at certain plants. The ratings incorporate US Can's leading market positions in the United States and Europe, solid returns and solid customer relationships with significant consumer products companies, most of which are under long term contracts. Product and geographic diversity serve to temper the effects of seasonality on working capital, however inventory build up remains prominent throughout the first half of the year as evidenced by pro-forma inventory days at LTM 7/2/00 of approximately 60. Meaningful growth opportunities are most likely offshore, namely in Europe and Latin America where the company has already improved its market position via acquisition (May Verpackungen acquired in December 1999) and joint ventures, respectively. Pro-forma for the May acquisition, approximately 32% of sales are generated in Europe. The (P) B1 rating assigned to the secured credit facility reflects the absence of tangible asset coverage and the fact that, in our opinion, term amortization is aggressive relative to retained cash. Outstandings are secured by a first priority lien on all assets and capital stock of the borrower, United States Can Company, and subsidiaries. Certain designated foreign subsidiaries may be borrowers under the $75 million multi-currency sublimit (available in certain currencies including British Pounds, German Marks, French Francs and Euros). Guarantees from U.S. Can Corporation and all its domestic subsidiaries support the facility. In addition, the subsidiaries of the foreign subsidiary borrowers will also guarantee the loans extended to the foreign subsidiary borrowers. Upon completion of final documentation, financial covenants will be in place addressing maximum leverage, minimum interest coverage, minimum fixed charge coverage and minimum EBITDA. The (P) B3 rating assigned to the proposed senior subordinated notes reflects their contractual subordination to senior debt (approximately $337 million at the close of the transactions). Unconditional joint and several guarantees from U.S. Can Corporation and from USC May Verpackungen Holding, Inc., the company's only domestic restricted subsidiary, support the notes. In addition to the proceeds from the proposed transactions, new equity totaling approximately $160 million will fund the recapitalization which has an estimated transaction value of $649 million representing 6.1x pro- forma LTM 7/2/00 EBITDA. Equity will consist of $133 million from Berkshire Partners LLC in the form of $91 million 10% cash or PIK preferred stock issued by U.S. Can Corporation with the remaining Berkshire contribution in common stock. Existing shareholders will rollover equity of approximately $22 million in the form of preferred and common stock and management will invest approximately $5 million in common stock. Moody's views the equity sponsorship and management's investment positively. Pro-forma for the recapitalization at LTM 7/2/00, financial leverage is aggressive with total debt of $487 million to EBITA of $74 million at 6.6x (debt/EBITDA of $106 million at 4.6x). Adjusting for operating leases, adjusted pro-forma debt to EBITDAR increases to approximately 4.9x. Pro- forma retained cash (defined as EBITDA less interest expense, taxes, and capital expenditures) is low at approximately 2% of total debt, thereby supporting our concern that term loan amortization may be aggressive initially. Moody's expects capital expenditures to exceed depreciation throughout the intermediate term as the company will likely reinvest to fuel its organic growth initiatives, to improve operating efficiencies and to facilitate its growth through acquisitions (tuck-in type acquisitions are probable). As with all packaging companies, there is significant lead time to ramp up new equipment and trained staff which creates a lag between initial capital investment and EBIT generation - a factor that is significant given expected debt levels. The fact that US Can currently benefits from its historically heavy capital spending serves to mitigate the lag being experienced from the company's on-going capital spending. Pro-forma coverage of interest expense is modest as LTM 7/2/00 EBITA covers interest expense 1.4x and EBITDA less capital expenditures coverage tightens to 1.3x (EBITDA coverage is 2.0x). Moody's anticipates some improvement in coverage ratios as the operating profits should improve as the May acquisition accretes and costs continue to be taken out through initiatives currently in place. However, given the company's acquisitive nature, meaningful debt reduction could be precluded by further add-ons. Working capital requirements will likely be met through internally generated cash. However, liquidity benefits from approximately $90 million of availability under the revolver at the close of the transactions. Headquartered in Oak Brook, Illinois, U.S. Can Corporation, through its wholly owned subsidiary United States Can Company, is a leading manufacturer of steel containers for personal care, household, automotive, paint, industrial and specialty products in the United States and Europe, as well as food cans in Europe and plastic containers in the U.S. VLASIC FOODS: Senior Lenders Agree to Waive Covenants through Feb. 28, 2001 --------------------------------------------------------------------------- Vlasic Foods International and its senior credit facility bank syndicate have reached an agreement in principle to extend its existing waiver of certain covenants of that facility through February 28, 2001, subject to mutually acceptable documentation. The credit facility is lead-arranged by J.P. Morgan Securities Co., and the syndication agent is Chase Securities, Inc. Vlasic confirms it is current on all outstanding debt instruments. WAXMAN INDUSTRIES: After Barnett Sale is Completed, Look for Fall Prepack ------------------------------------------------------------------------- Waxman Industries, Inc. (OTC Bulletin Board: WAXX), a leading supplier of specialty plumbing and other products to the U.S. repair and remodeling market, reported its revenue and earnings for the fourth quarter ended June 30, 2000. The Company accounts for its 44.2% ownership of Barnett Inc. (Nasdaq: BNTT - news) under the equity method of accounting. Operating Results Net sales for the Company's wholly-owned operations for the fourth quarter ended June 30, 2000 amounted to $19.0 million as compared to $19.5 million in the prior year's comparable period. The prior year fourth quarter included $1.0 million in net sales for Western American Manufacturing Inc., which was sold effective March 31, 2000. Excluding WAMI's results, net sales increased by $0.5 million for the fiscal 2000 fourth quarter in comparison to the same period last year. The pretax loss for the fiscal 2000 fourth quarter amounted to $16.0 million, as compared to a pretax loss of $5.1 million in the same period last year. Included in the fourth quarter losses for fiscal 2000 and 1999 are equity earnings from Barnett of $1.2 million and $1.7 million, respectively. The current quarter and fiscal year pretax loss was affected by certain restructuring, impairment and procurement charges, including: * a restructuring charges of $0.6 million related to (i) the closure of Consumer Products' Grand Prairie, Texas distribution center, which was consolidated into its distribution center near Columbus, Ohio, and (ii) the closure of a packaging operation in Tijuana, Mexico, the functions of which were transferred to the Company's operations in Taiwan and China. * the write-off of $1.7 million of packaging material and other inventory associated with these closings, which are recorded in cost of sales. * an asset impairment charge of $6.7 million related to the write-off of goodwill. * the loss of $2.0 million on the sale of significantly all of the assets of WAMI. * the Company will source its faucets from third party suppliers, allowing it to close its faucet component manufacturing facility in China. This action resulted in a restructuring charge of $1.2 million and $0.9 million in charges that reduced operating income for accounts receivable and inventory adjustments. The Company believes that the sale, consolidation and closure of these facilities are important to its restructuring effort and will benefit the Company by preserving cash, streamlining its cost structure and allowing it to focus on its core business. To that end, the Company was also pleased to announce the comprehensive debt restructuring agreement reached in July 2000, the pending sale of the Company's entire interest in Barnett and the resulting reduction of approximately $139 million in debt. The net loss for the three months ended June 30, 2000 totaled $15.5 million, or $1.28 per basic and diluted share. For the fiscal 1999 fourth quarter, the net loss amounted to $5.0 million, or $0.42 per basic and diluted share. For the fiscal year ended June 30, 2000, net sales for the Company's wholly-owned operations amounted to $81.4 million, as compared to $99.1 million for fiscal 1999. Excluding the results of U.S. Lock, which was sold effective January 1, 1999, WAMI, which was sold effective March 31, 2000 and the faucet manufacturing operation closed in June 2000, comparable net sales for the continuing businesses amounted to $77.8 million and $81.9 million in fiscal 2000 and fiscal 1999, respectively. The Company reported a pre-tax loss of $28.9 million for fiscal 2000, as compared to a pre-tax loss of $6.4 million for fiscal 1999. Included in the pre-tax loss for fiscal 2000 were the charges incurred in the fourth quarter as described above, in addition to the $1.3 million charge for the consolidation of Consumer Products' packaged plumbing products under the Plumbcraftr brand name and a business procurement charge of $0.65 million. Included in the pre- tax loss for fiscal 1999 is the net gain of $10.3 million on the sale of U.S. Lock, $6.7 million in equity earnings from Barnett and $4.5 million in restructuring and procurement charges, incurred in connection with the relocation of Consumer Product's warehouse to Groveport, Ohio, and business procurement charges. The net loss for fiscal 2000 amounted to $28.8 million, or $2.39 per basic and diluted share, as compared to a net loss for fiscal 1999 of $7.5 million, or $0.62 per basic and diluted share. Comprehensive Financial Restructuring During fiscal 2000, the Company initiated discussions with a committee representing a substantial majority of our 12-3/4% Senior Secured Deferred Coupon Notes due 2004 and 11-1/8% Senior Notes due 2001. Those discussions resulted in an agreement, which provides for a process to eliminate nearly $139 million in debt obligations, including both of those obligations and nearly $10 million of our working capital bank facility. On July 10, 2000, the Company announced that it reached agreements with the bondholder committee (the ``Committee''), among others, for the sale of it ownership in Barnett Inc. common stock and the financial restructuring of Waxman Industries. These agreements include the Company's agreement to vote in favor of the acquisition of Barnett Inc. by Wilmar Industries Inc. for $13.15 per share in cash, which is expected to be completed in the fall of 2000. Following the anticipated sale of the Company's interest in Barnett, the Company and the Committee will file a jointly sponsored, prepackaged plan of reorganization with the United States Bankruptcy Court to effectuate the terms of the financial restructuring plan. Under the plan of reorganization, the holders of the Deferred Coupon Notes will be the only impaired class of creditors; none of the Company's operating subsidiaries or operating divisions will be included in the filing and they will continue to pay their trade creditors, employees and other liabilities under normal conditions. The Company expects to complete this plan by late- 2000. Waxman Industries, Inc. is a leading supplier of specialty plumbing and other products to the repair and remodeling market in the United States. Through its wholly-owned subsidiaries, Consumer Products, Medal of Pennsylvania, Inc., WAMI Sales and its Orient Group, TWI and CWI, the Company distributes its products to a wide variety of large national and regional retailers, other independent retailers and wholesalers in the United States. ********* Bond pricing, appearing in each Monday's edition of the TCR, is provided by DLS Capital Partners in Dallas, Texas. 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