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/raid1/www/Hosts/bankrupt/TCR_Public/010125.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, January 25, 2001, Vol. 5, No. 18 Headlines APCOA/STANDARD: Moody's Downgrades All Ratings & Outlook Negative ARMSTRONG HOLDINGS: Paying Sales, Property, & Franchise Taxes BEPAID.COM: Can't Pay, So Files Chapter 7 Bankruptcy Petition COMPLETE MANAGEMENT: Disclosure Statement Hearing Set for Feb. 16 eTOYS: Misses Payments to Creditors FLIPSIDE.COM: Closes Office & Cuts 30% of Staff FRUIT OF THE LOOM: Creditors Oppose Claims Objection Protocol GENESIS HEALTH: Settles Medicare Overpayment Claims With HHS GLOBAL AVIATION: Files for Chapter 11 Protection in New York ICG COMMUNICATIONS: To Prioritize Reclamation Claims iCOPYRIGHT: Board Votes To Shut Digital Content Venture Down KRIGEL'S JEWELERS: Files for CHapter 11 Protection in Kansas City LEGEND AIRLINES: Looks For New Funding After Lender Defaults LERNOUT & HAUSPIE: Proposes Key Employee Severance Program LERNOUT & HAUSPIE: Inks $60MM DIP Facility with Cerberus/Gabriel LETSBUYIT.COM: Raises $2.32 Million of $3.73 Needed LIDS CORP.: Wells Fargo Extends $25 Million DIP Loan LOEWEN GROUP: Settles Claims with Bayview Shareholders LONDON FOG: Seeks Fifth Exclusivity Extension to April 19 LTV CORPORATION: Continues Workers Compensation Programs NETROM INC: Hires James Toreson as New CEO OWENS CORNING: Enters Settlement Pact re GBF/Pittsburgh Landfill RG RECEIVABLES: S&P Raises VARIG Securitization Rating to B SERVICE MERCHANDISE: Gets $35MM Committed Vendor Credit Line SERVICE MERCHANDISE: Hires Michael E. Hogrefe as New SVP & CFO US AUTOMOTIVE: Selling All Assets to FDP Virginia ********* APCOA/STANDARD: Moody's Downgrades All Ratings & Outlook Negative ----------------------------------------------------------------- Moody's Investors Service lowered all ratings of APCOA/Standard Parking Inc. Said ratings include: (a) $40 million bank facility downgraded to B2 from B1 (b) $140 million 9.25% senior subordinated notes due 2008 downgraded to Caa2 from Caa1, (c) $70 million 11.25% senior discount notes (issued by the parent company AP Holdings Inc) lowered to Ca from Caa2. (d) The senior implied rating was lowered to Caa1 from B2 (e) Issuer rating lowered to Caa1 from B3. Rating outlook is negative. Moody's said the rating change and negative outlook were prompted by the company's continued high leverage relative to expectations at the time of the original offering in 1998 and the tight liquidity position with $7 million in cash and $5 million available on the revolver. Wit the negative outlook, ratings could fall again over the intermediate term if leverage cannot be reduced or the holding company does not successfully resolve its issues related to the AmeriServe bankruptcy. The ratings reflect the company's leveraged financial condition, the constrained liquidity position, and the intensely competitive parking services industry, according to Moody's. The risk that Holberg's exposure to the AmeriServe bankruptcy is not successfully resolved and slowness in achieving administrative synergies from the 1998 APCOA and Standard Parking merger also restrain the rating. Moody's also relates that the increased outsourcing of parking management by building owners, the company's significant market position within the parking industry, and the increasing proportion of higher-margin managed parking facilities relative to leased facilities are strengths for the credit. Moody's further states that: (a) The B2 rating on the bank facility (issued by APCOA/Standard Parking Inc) considers that the company's real and personal property secure this loan and that the company's domestic operating subsidiaries provide guarantees. In a default scenario, Moody's believes that the bank lenders could achieve full recovery. (b) The Caa2 rating on the senior subordinated notes (issued by APCOA/Standard Parking Inc) reflects their contractual subordination to a substantial amount of debt including the bank facility and trade accounts payable. The company's twelve most significant operating subsidiaries do provide subordinated guarantees. Moody's expects that the company's likely recovery value in a default scenario would not suffice to prevent a material loss on these notes. (c) The Caa3 rating on the senior discount notes (issued by AP Holdings Inc) recognizes that the notes are structurally subordinate to all debt obligations at APCOA/Standard Parking Inc and the operating subsidiaries. AP Holdings Inc contributed the proceeds of $40.3 million from this discount note issue to APCOA/Standard Parking Inc in the form of redeemable preferred stock. Interest payments (at AP Holdings Inc) and preferred dividend payments (at APCOA/Standard Parking Inc) will pay in kind until the note balance accrues to $70.0 million in March 2003 when payments in cash begins. Moody's anticipates that holders of these discount notes could experience a complete loss in a distressed scenario. APCOA/Standard and AmeriServe were the two principal businesses under the common ownership of Holberg Industries Inc., Moody's said. AmeriServe filed for bankruptcy in January 2000 and, following liquidation of most assets, its creditors have recovered only about one-third of the $1.1 billion of pre- bankruptcy debt. While Holberg's creditors have the right to regard the AmeriServe bankruptcy as an event of default, Moody's believes however that this is an unlikely scenario given that such action would trigger change of control provisions that compel APCOA to repurchase all rated debt. The APCOA/Standard Parking and AP Holdings debt is senior to any debt at Holberg and Moody's expects settlement of the rated debt would exhaust all enterprise value. According to Moody's, the company has not achieved administrative synergies from the 1998 APCOA and Standard Parking merger as quickly as anticipated. Delays in finding administrative synergies have led to operating profitability substantially less than 1998 expectations. However, the company has managed cost control of individual contracts reasonably well in meeting our gross profitability expectations of around 22%. Moody's believes that the 4th Quarter 2000 special charge of $1.4 million to reduce annual administrative expense by $2 million is prudent, but administrative costs will still remain higher than originally projected in 1998. If the company is able to become cash-flow neutral over the short term, the current liquidity position allows for working capital variation in daily operations, according to Moodys. Increased liquidity would allow the company to seek new contracts that require permanent working capital investment as well as buffer against external shocks. APCOA/Standard Parking Inc, headquartered in Chicago, Illinois, manages about 1900 parking facilities with 1.0 million parking spaces across the United States and Canada. ARMSTRONG HOLDINGS: Paying Sales, Property, & Franchise Taxes ------------------------------------------------------------- Stephen Karotkin, Esq., and Debra A. Dandeneau, Esq., of Weil, Gotshal & Manges LLP, asked Chief Judge Joseph Farnan to grant Armstrong Holdings, Inc., authority to pay prepetition sales, use, property, franchise, and other "trust fund" taxes to the respective taxing authorities in the ordinary course of the Debtors' businesses, without prejudice to the Debtors' rights to contest the amounts of any taxes on any grounds which arise. In the ordinary course of its businesses, the Debtors bill sales tax on non-exempt sales of products. Sales tax is billed to the customer on its invoice, collected, and subsequently remitted by the Debtors to the applicable taxing authorities. Sales taxes accrue on a periodic basis and are calculated based upon a statutory percentage of the sale price. For the most part, sales taxes are paid in arrears. Some jurisdictions, however, require the Debtors to remit estimated sales taxes on a monthly or quarterly basis. The applicable Taxing Authority requires a subsequent "true up" to determine any payment deficiency or surplusage for the period, after which the applicable refund or payment is then made. The Debtors also are obligated to remit use taxes on a periodic basis to the applicable taxing authorities. AWI incurs these taxes with its purchase of taxable equipment and supplies for its own use, in circumstances where the vendor failed to collect a sales tax from AWI. Use taxes accrue on a monthly basis and are remitted to the relevant taxing authorities on the same basis as sales taxes. As of the Petition Date, AWI had collected and accrued approximately $496,363.00 in sales and use taxes on behalf of the taxing authorities. As of the Petition Date, AWI had not remitted any of this amount to the taxing authorities. Property taxes are payable on certain real and personal property owned by AWI within the United States. Such taxes normally accrue on an annualized basis and are paid in installments throughout the calendar year. The combined estimated real and personal property taxes due through the fourth quarter of the 2000 calendar year are approximately $865,502.00. Franchise taxes are payable on certain franchises owned by AWI within the United States. Such taxes accrue and are paid on an annualized basis when a request for an extension of time to file the tax return is made with the various states. The estimated franchise taxes for the 2000 calendar year are $458,350.00. The Debtors request authority to pay these taxes in the ordinary course of their business operations on an unaccelerated basis, as the payments become due. To the extent that any checks issued by AWI prepetition on account of the taxes were not cleared as of the Petition Date, AWI seeks authorization from the Court for the banks to resubmit and honor the checks and any wire transfer requests. To the extent that the taxing authorities have not otherwise received payment, the Debtors seek authority to pay such obligations through replacement checks, or provide for other means of payment to the taxing authorities, to the extent necessary to pay all outstanding taxes due as of the Petition Date, inclusive of the Debtors' obligations for taxes on real and personal property, throughout the remainder of the 2000 calendar year. After consideration of the Debtors' motion and argument, Judge Farnan granted the motion and directed payment of the taxes on the terms and conditions stated in the motion, without prejudice to the rights of the Debtors to contest amounts due on any appropriate basis. (Armstrong Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) BEPAID.COM: Can't Pay, So Files Chapter 7 Bankruptcy Petition ------------------------------------------------------------- Bepaid.com voluntarily filed for chapter 7 bankruptcy protection with the U.S. Bankruptcy Court, Southern District of New York, according to LocalBusiness.com. Founded in Iceland and then relocated to New York in March, the company sought to create a business around paying consumers to view advertisements on the Internet using its proprietary software. The 25-employee company was launched on a $4 million investment from Icelandic investors. According to court records, Bepaid.com had assets of $236,000, including $99,000 in Beenz, the Internet currency floated by New York's Beenz.com, and another $72,000 in receivables from Phonefree.com. The company listed liabilities of $638,000, including $300,000 owed to parties in Iceland and another $20,000 owed to Hill Knowlton, a public relations firm in New York. The company's U.K. based subsidiary, BePaid UK Limited, entered liquidation proceedings in November, according to court documents. (ABI World, January 23, 2001) COMPLETE MANAGEMENT: Disclosure Statement Hearing Set for Feb. 16 ----------------------------------------------------------------- On January 17, 2001, Complete Management, Inc. filed a Chapter 11 Amended Plan of Reorganization and related Disclosure Statement with the U.S. Bankruptcy Court, which subsequently scheduled a February 16th hearing to consider approving the Disclosure Statement's adequacy. The Company has been operating under Chapter 11 protection since October 12, 1999. (New Generation Research January 23, 2001) eTOYS: Misses Payments to Creditors ----------------------------------- Perhaps signaling eToys' place on the endangered dot-com list, a creditor has gone public complaining that the online retailer has not paid its bills, according to the Daily News. RemedyTemp, which does business as Remedy Intelligent Staffing, said it provided temporary staffing for eToys' customer service center and its distribution centers during the Christmas rush last month. Now, in a move it says reflects eToys' failure to pay invoices, RemedyTemp expects to post a charge of about $2 million, or 14 cents a share, the first fiscal quarter ended Dec. 31. A RemedyTemp executive accused eToys of failing to live up to its commitments. "We are extremely disappointed that eToys suddenly stopped making its payments under an explicit plan, particularly following their history of consistent, prompt payments," said Alan M. Purdy, RemedyTemps' senior vice president and chief financial officer. He said the charge his company plans to take represents the entire balance due from eToys. Several calls to eToys were not returned for comment. However, the CNET news service quoted eToys spokesman Gary Gerdemann as confirming that some creditors have not been paid. (ABI World, January 23, 2001) FLIPSIDE.COM: Closes Office & Cuts 30% of Staff ----------------------------------------------- Flipside.com, a subsidiary of Vivendi Universal, said that it has closed its Seattle office and laid off 39 employees to focus on its core business, according to CNET News.com. Vernon Thompson, a spokesman for the unit, said the online game site last week transferred 30 percent of its 37 staffers in Seattle to Vivendi Universal Sierra Online's Bellevue, Wash., offices. The remainder was laid off. Flipside was formed in March 2000 following the merger of online game sites Won.net and PrizeCentral.com. It makes money through advertising and draws viewers by offering cash and prizes. Although analysts say web surfers are signing up to play online games, web companies that rely on advertising revenues have hit hard times. Thompson called the move strategic and not primarily aimed at cutting costs. He declined to say whether the privately held company is profitable. (ABI World, January 23, 2001) FRUIT OF THE LOOM: Creditors Oppose Claims Objection Protocol ------------------------------------------------------------- South Florida Stadium Corp., Miami Dolphins Ltd., Huizenga Holdings Inc., and Florida Panthers Hockey Club Ltd., object to Fruit of the Loom's proposed procedures for claims objection and settlement. On August 23, 1996, Union Underwear entered agreements with the above parties concerning stadium naming rights and sponsorship for entertainment and promotions. On April 7, 2000, the Court approved a stipulation between the parties and permitted the creditors to file a proof of claim. Proofs of claim were filed on August 14, 2000. Todd C. Schiltz Esq., from the law firm Wolf, Block, Schorr & Solis- Cohen, counsel for the creditors, recites Fruit of the Loom's proposed procedures for claims objection: (A) Debtor is permitted to object to claims on enumerated grounds including: (1) the description in the claim is insufficient (2) the claim is overstated (3) Debtors books/records show no basis for allowance of the claim (B) Separate hearings may be held on each of the enumerated grounds raised Mr. Schiltz argues that this procedure authorizes separate and multiple hearings on any objection raised by Fruit of the Loom. Admittedly, separate hearings may be appropriate in other contexts, but in the above case would lead to multiple hearings on the same issues. This would be wasteful for the Court, the creditors and Fruit of the Loom's estate. If the procedures are not changed, creditors may have to bring witnesses and evidence to Delaware from Florida. This would cause considerable hardship and expense if forced to do so more than once. A consolidation would serve judicial economy. Allied Signal Inc., American Cyanamid Company, Rutgers, The State University of New Jersey, Columbia University, Mount Union College, The BOC Group Inc., University of Illinois, Ciba Specialty Chemicals Corporation, University of Minnesota, Pure- Lab Company of America and Western Michigan University object to Fruit of the Loom's motion authorizing rejection of executory contracts. The objectors make two claims to support their position. First, many of the objectors have already settled their matters with Fruit of the Loom through cash payments and otherwise. Essentially, they have already met their obligations. Second, many of the parties subject to the motion have not been contacted or served with a copy of the motion. Jeffrey D. Prol Esq., from Lowenstein Sandler of Roseland, New Jersey states that the term "executory contract" is not defined in the Bankruptcy Code. However, under Section 365, numerous courts have offered similar definitions. See In re Columbia Gas System Imc., 50 F. 3d 233 (3rd Cir. 1995), citing Sharon Steel Corp. v. National Fuel Gas Distribution Corp., 872 F. 2d 36, 39 (3rd Cir. 1989). Unless both parties to a contract have unperformed obligations that would constitute a material breach if not performed, the contract is not an executory contract under Section 365. Therefore, the objectors have rendered full performance of their obligations making their agreements with Fruit of the Loom something other than executory contracts and cannot be rejected by Debtor. (Fruit of the Loom Bankruptcy News, Issue No. 20; Bankruptcy Creditors' Service, Inc., 609/392-0900) GENESIS HEALTH: Settles Medicare Overpayment Claims With HHS ------------------------------------------------------------ As previously reported, HHS determined that it had made Prepetition Overpayments to the Genesis Health Ventures, Inc. in the amount of $2,332,950 and Prepetition Overpayments to The Multicare Companies, Inc. in the amount of $544,015 for services provided by the Debtors to Medicare beneficiaries pursuant to provider agreements. HHS asserted that it had the right to setoff or recoup such amounts from payments owed to the Debtors. In order to have regular payments from HHS, and to provide adequate protection to HHS for its alleged setoff or recoupment rights, the GHV Debtors and Multicare Debtors entered into respective stipulations with HHS. With regard to the GHV Debtors, the HHS Stipulation provides that the Debtors will repay the Prepetition Overpayments in six monthly installments of $388,825. The Debtors have made four of the six required Monthly Payments. The Multicare Stipulation with HHS provides that the Debtors will repay the Prepetition Overpayments in three monthly installments of $181,338. The Multicare Debtors have made all of the required Monthly Payments. The HHS Stipulation also provides that if HHS subsequently determines that it has underpaid the Debtors, HHS would credit such underpayment against the Monthly Payments. The Amendments Subsequent to the Court's approval of the HHS Stipulation, HHS revised its calculation of the amount of Prepetition Overpayments to GHV to $2,003,556. HHS advised both the GHV Debtors and the Multicare Debtors that due to subsequent audits and other matters, future calculations could result in an increase in the amount of the Prepetition Overpayments. To provide adequate protection to HHS in the event the Prepetition Overpayments are larger than anticipated, and with respect to the GHV cases, also to reduce the remaining Monthly Payments, the parties entered into an Amended Stipulation which provides that: (1) GHV's last Monthly Payments will be reduced to $59,431 instead of $388,825; (2) In the event HHS determines it owes any underpayments to any of the GHV Debtors or Multicare Debtors and setoff the underpayments against the Prepetition Overpayments, in accordance with the HHS Stipulation, HHS shall provide written notice to the Debtors within ten business days of such action; (3) In order to provide adequate protection to HHS in the event the prepetition overpayments actually exceed the amounts specified in the Amended Stipulation, the Debtors agree that HHS may withhold or "freeze" certain amounts that may in the future be determined to be owed to the Debtors. Such amounts relate, in large part, to claims made by the Debtors for service periods prior to the implementation of the prospective payment system for amounts that have been disallowed by the fiscal intermediary or HHS and are subject to review or appeal. HHS's administrative freeze will continue until the earlier of (i) the determination by HHS that it has a liquidated claim against the Debtors which would give HHS a right of setoff against the frozen funds, or (ii) the confirmation of a plan of reorganization, at which time either party may file a motion with the Bankruptcy Court seeking an adjudication with respect to the disposition of such frozen funds. Judge Walsh has given his stamp of approval to the Stipulations. (Genesis/Multicare Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) GLOBAL AVIATION: Files for Chapter 11 Protection in New York ------------------------------------------------------------ Twenty months after it began operations at the Griffiss Business and Technology Park in upstate New York, Global Aviation Services, an aircraft maintenance and repair company, has filed for chapter 11 bankruptcy, according to the Central New York Business Journal. Global and its parent company, Quebec-based Aviation Resources Limited Liability Corp., are more than $6.7 million in debt and have more than 100 creditors. One of the creditors is Griffiss Local Development Corp. (GLDC), the economic-development organization responsible for managing and attracting new businesses to the former military base. GLDC is owed more than $774,000. Robert Duchow, communications and marketing specialist for the Mohawk Valley EDGE, an economic development agency, said it is too early to tell what will happen, but that there is still hope that Global will survive and eventually thrive in Rome, N.Y. "There have been several companies that have already expressed an interest in taking a look at Global Aviation Services," he said. Expectations were high when Global began operations in Rome in 1999. The state of New York along with GLDC, offered approximately $5.5 million in incentives for Aviation Resources LLC to establish its aircraft industry at Griffiss in hopes that the company - and the industry -would thrive at the former base. It was extolled as a major step in the redevelopment of the former military base, which closed in 1995, and company officials projected that the workforce might reach close to 500 by the time its lease expired in 2006. But those hopes have not materialized. (ABI World, January 23, 2001) ICG COMMUNICATIONS: To Prioritize Reclamation Claims ------------------------------------------------------- ICG Communications, Inc. filed a Motion seeking an Order which: (a) Confirms a grant of administrative status to obligations arising from the postpetition delivery of goods; (b) Establishing authority for the Debtors to pay certain expenses in the ordinary course of their business; (c) Confirming administrative expense treatment, at a minimum, for certain holders of valid reclamation claims; and (d) Prohibiting third parties from reclaiming goods or interfering with the delivery of goods to the Debtors. In granting this Motion, the Bankruptcy Court ordered that vendors will have the status of administrative claimants for undisputed obligations arising from outstanding orders relating to shipments of goods received and accepted by the Debtors after the Petition Date. The Court further authorized the Debtors to pay their undisputed obligations arising from postpetition shipment or delivery of goods by vendors and accept delivery under the Debtors' customary practice in the ordinary course prior to the commencement of these Chapter 11 cases, and to pay for goods in transit on and after the Petition Date. Vendors were granted administrative status, at a minimum, for the value of goods received and accepted by the Debtors, if and to the extent that the vendor has made a valid reclamation demand, but only to the extent that the vendor proves the validity of its demand and the amount of its claim. Nothing in this Order prejudices the vendors' rights to seek a lien to secure their claim by Order of the Court. If the vendor asserts a timely and proper reclamation demand with respect to goods received and accepted by the Debtors, the Court then ordered that the Debtors were deemed to have waived the following defenses: (a) The Debtors' use, sale or commingling of goods after the date and time that the Debtors receive a reclamation demand with respect to the goods; (b) A reclamation claimant's failure to take any and all possible "self-help" measures with respect to the goods; (c) The failure of a reclamation claimant to institute an adversary proceeding against the Debtors seeking to enjoin them from using or selling such goods or any other similar relief. Judge Robinson further enjoined all vendors from reclaiming or interfering in any way with the postpetition shipment or delivery of goods to the Debtors without first making application to and obtaining an Order of the Court. (ICG Communications Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392- 0900) iCOPYRIGHT: Board Votes To Shut Digital Content Venture Down ------------------------------------------------------------ The board of directors for iCopyright on voted to shut the company down after it failed to improve its financial health following layoffs in December, according to LocalBusiness.com. Based in Renton, Wash., the company automated the licensing and delivery of digital content, giving online publishers new ways to sell their products. An employee with the company said that the company held a meeting Friday afternoon to determine whether or not to continue as a business. Later, the employee said that a general announcement would be made for employees on Saturday. "It's pretty much guaranteed that they're going to be closing up shop," said the employee. Company officials could not immediately reached for comment. According to the employee, after the company trimmed its staff by 14 percent in December, the Board said that they (iCopyright) had "two to three months" to prove the concept. To help matters, the Board granted the company a "$2 million to $3 million" bridge loan. But when revenues continued to decline, they decided to liquidate the business and give the staff some kind of severance, said the employee. (ABI World, January 23, 2001) KRIGEL'S JEWELERS: Files for CHapter 11 Protection in Kansas City ----------------------------------------------------------------- The 90-year-old Kansas City area chain Krigel's Jewelers filed for Chapter 11 bankruptcy court protection, The Kansas City Star relates. Company owner and president Scott Krigel disclosed that ARY Jewellers, bullion dealers and retail jewelers from Dubai in the United Arab Emirates, intends buy the 21-store chain and turn it into a national operation. Based in Overland Park, Krigel's has stores in Kansas, Missouri, Ohio and Illinois Krigel's attorney, James Bird, Esq., said that before filing the bankruptcy petition, the company consulted and got majority of its 63 creditors, to whom the company owes approximately $10 million dollars, to agree to the bankruptcy plan. As part of the deal, ARY will pay 60 cents on the dollar, or about $6 million to partly cover the company's debts. ARY's attorneys have confirmed that ARY has already deposited the amount in a U.S. bank to pay the creditors. Moreover, Krigel's was paid up with all its other creditors, Bird said. Aside from $6 million, ARY will also pay $50,000 for the company stock and pay Scott Krigel $500,000 a year for three years as part of a noncompete and consulting agreement. Bankruptcy records show that Krigel's has $16.5 million in assets and $18.5 million in debts. Those debts comprise $8.5 million in secured debt, $9.7 million in unsecured debt and $328,601.44 in tax claims. Krigel's had sales of $29,445,009 in the year that ended in February 1999, $28,814,011 in the year that ended in February 2000 and $23,223,693 from March through December 2000, The Kansas City Star reports. The company hopes to complete the bankruptcy proceedings within 45 days. The Kansas City Star reports that ARY can cancel the deal if it is not completed by April 30. According to Krigel, ARY intends to keep all of Krigel's stores open and keep all 250 employees, including the executive team. The chain was founded by Krigel's grandfather in 1910, was taken over by his father and had three stores when Krigel himself joined the business in 1976, The Kansas City Star reports. It gradually grew to its current 21 stores. Krigel said the chain lost substantial money in the past two years, would lose money in January, perhaps break even in February and lose money in March. "Our volume dwindled and our costs escalated as the malls let more jewelers in," Krigel said. "There are not only more (competitors), but they are better run" than in the past. Krigel said he started shopping the company and contacted every national chain, but got no firm offers. "They would have cut our staff and stores, and the 30 people in our corporate offices in Overland Park would have been let go completely," Krigel said. "When ARY came and said they would keep everything intact, we decided to sell to them." Krigel said ARY has seven retail stores in Dubai but wants a presence in the United States and Europe. Buying Krigel's would give ARY a base from which to create a national chain. "They chose us because we have the computer systems and the executives and already have stores," Krigel said. "They can go national by expanding our organization." The court approved all the motions made on behalf of Krigel's, but questioned compensation to be paid during the bankruptcy to Krigel and his mother, Peggy Krigel, who also works for the company, according to The Kansas City Star. Scott Krigel is paid nearly $200,000 a year, and his mother makes about $150,000 a year. The court has approved the plan for two months but will review the matter if the bankruptcy took longer. LEGEND AIRLINES: Looks For New Funding After Lender Defaults ------------------------------------------------------------ Legend Airlines Inc. announced that it may start looking for new financing after a group of private investors led by former airline securities analyst John Pincavage failed to deliver the money needed to restart the bankrupt airline, according to a newswire report. "Legend Airlines is extremely disappointed by this additional failure of the lender to honor its commitment," said President T. Allan McArtor. "We believe the lender is in default of the court-approved financing arrangement." So far, Legend has received only $250,000 of $20 million in financing approved last week by the U.S. Bankruptcy Court for the Northern District of Texas. By this point, the investors should have delivered an additional $2.75 million to $3 million, a company spokesman said. Pincavage could not be reached for comment Jan. 22 but said last week that the delay will not derail efforts to fund the airline. Dennis Olson, a Dallas attorney who represents the creditors committee, said he would file a motion Jan. 26 to dismiss the financing plan. It is increasingly unlikely that Pincavage's group will deliver on its promises, he said. "I don't believe Legend has gotten a straight [answer] " for why the investors group has reneged on its commitment, he said. "The excuses are getting more and more difficult to believe." (ABI World, January 23, 2001) LERNOUT & HAUSPIE: Proposes Key Employee Severance Program ---------------------------------------------------------- Lernout & Hauspie Speech Products N.V. and Dictaphone Corp. sought Court authority to make severance payments to employees who have been or will be terminated after the Petition Date. As part of its reorganization efforts, the Debtors seek to streamline costs through a labor force reduction designed to lower payroll and employee-related expenses. This undertaking is part of an overall work force reduction plan being implemented globally by the Debtors and their non-debtor affiliates, under which approximately 800 employees (including 289 in Korea) will be terminated worldwide during January 2001, and an additional 400 during the first fiscal quarter of 2001. In connection with this downsizing effort, the Debtors have requested authority to make severance payments under a new plan developed after the Petition Date, with the amount of the payments calculated as a function of the length of the employees' service with the Debtors. The Debtors propose to pay approximately 264 employees a total of approximately $2.8 million. If the employment of these persons were continued, their eligible payroll will be approximately $12.3 million annually. Their departure will therefore result in a cost savings to the Debtors of approximately $9.5 million (netting out the severance payments). A breakdown of the severance payments relating to each member of the Debtors is: L&H: Will terminate 70 employees, for a total severance payment of $1,619,000, including taxes and early paid vacation. Dictaphone: Will terminate 154 employees for a total severance payment of $1,003,726. L&H Holdings: Will terminate 40 employees, for a total severance payment of $136,560. (L&H/Dictaphone Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) LERNOUT & HAUSPIE: Inks $60MM DIP Facility with Cerberus/Gabriel ---------------------------------------------------------------- Cerberus Capital Management LP and Gabriel Capital Group have agreed to provide troubled speech technology company Lernout & Hauspie with $60 million of debtor-in-possession (DIP) financing, Reuters relates. The agreement, which was coursed through Cerberus/Gabriel affiliate Ableco Finance LLC, gives a $20 million term and $40 million revolving credit to provide working capital for ordinary business operations. It will also be used to pay off a $20 million "bridge" financing agreement with General Electric Capital Corp., the finance unit of General Electric Corp. L&H filed an emergency motion Tuesday saying it would seek approval of the DIP financing agreement, which will expire unless approved, at a Thursday hearing in Camden, N.J. Reuters obtained a copy of the emergency motion, and says the credit agreement requires the following terms of L&H: a) a $232,000 commitment fee plus a $200,000 term closing fee b) $200,000 in expenses c) an $800,000 revolver fee; d) $25,000 monthly monitoring fee e) $10,000 monthly administration fee. The base interest rate will be at least 9.5%. The Ableco lenders will have a perfected first priority lien over other creditors on the L&H assets in bankruptcy. Noteholders of Dictaphone Corp. and former controlling shareholders of both Dictaphone and Dragon Systems, Inc. are among those who have objected against securing DIP financing with these companies' assets. L&H will also try to seek approval of a $175 million insurance agreement with AON Corp. unit Cananwill, Inc. LETSBUYIT.COM: Raises $2.32 Million of $3.73 Needed ---------------------------------------------------- Struggling Internet retailer LetsBuyIt.com announced that it has raised $2.32 million of the $3.73 million it needs to avoid bankruptcy, an industry source said. But even if it does raise the outstanding $1.4 million it needs to convince judges at a Friday court hearing in Amsterdam that it can stay afloat, it still needs to find a further $28 million by March 14 to satisfy its short-term liquidity needs, according to Reuters. A court ruling on Friday gave the debt-laden e-tailer until 12:00 EST on Jan. 24 to come up with $1.4 million in funding or bank guarantees, following a petition for bankruptcy by LetsBuyIt's own debt moratorium administrators. (ABI World, January 23, 2001) LIDS CORP.: Wells Fargo Extends $25 Million DIP Loan ---------------------------------------------------- Lids Corp., a Westport, Ma. retailer of headwear, has received a $25 million credit line from Wells Fargo Retail Finance in order to help fund its reorganization efforts. The privately-held company operates 388 stores in forty-seven states nationwide. Lids recently filed Chapter 11 in the U.S. Bankruptcy Court in Wilmington, De. (New Generation Research January 23, 2001) LOEWEN GROUP: Settles Claims with Bayview Shareholders ------------------------------------------------------ Pursuant to the More Formal Share Purchase Agreement between The Loewen Group, Inc. and the Shareholders of Bayview Services, Inc. dated December 2, 1992, LGII delivered 13 Promissory Notes dated January 1, 1993 and bearing interest at a rate of 8% per annum, each obligating LGII to make 10 annual payments beginning on January 1, 1994 and continuing through and including January 1, 2003. From January 1994 through January 1999, LGII made timely annual payments pursuant to the terms of the Promissory Notes but ceased making payments after the petition date. On or about July 27, 2000, the parties to whom the Promissory Notes are payable were movants for relief from the automatic stay, or alternatively, request for adequate protection. In connection with the Purchase Agreement and Promissory Notes, the Debtors had also executed mortgages on certain real property in favor of the Movants, in order to secure the payment obligations under the Promissory Notes, and had entered into a Non Competition Agreement dated January 1, 1993 with the movants. The movants also filed their motion on or about July 27, 2000 for an order compelling LGII to assume or reject the Non-Compete Agreement, and to the extent necessary, for relief from the automatic stay to terminate the non-compete agreement. The Debtors and Movant wish to resolve the Stay Relief Motion, the Non-Compete Motion and certain related matters upon certain terms and conditions and have sought and obtained the Court's approval of their stipulation. Stipulation and Agreed Order The parties agree that: (1) Within 10 days of the Agreement Effective Date, that is, the date the Stipulation and Order becomes a final, nonappealable order of the Court, the Debtors shall make Catch-Up Payments in the respective agreed amounts, each of which is equal to the amount of interest that accrued under the terms of the applicable Promissory Note as calculated at the applicable rate, for the period from August 1, 2000 through and including November 30, 2000. (2) Beginning on January 1, 2001, provided that the Agreement Effective Date has occurred, until the entry of an order of the Court confirming a plan of reorganization in the Debtors' chapter 11 cases or any other further order of the Court addressing the obligations arising under the Promissory Notes, the Debtors shall make monthly Future Payments to each of the Movants in the respective amounts, each representing the amount of interest that would have accrued during the month prior to payment on the outstanding principal balance under the applicable Promissory Note, calculated at the applicable rate. (3) The Debtors shall make the monthly Future Payments on the first business day of each month without notice or demand from the Movants. Future Payments shall be considered timely so long as they are made on or before the 10th calendar day of the applicable month. (4) The Catch-Up Payment and the Future Payments shall be credited to LGII's obligations to the Movants under the Promissory Notes. (5) The Movants waive any rights that they may have under the Loan Documents to calculate, accrue, collect or assert a claim for, on account of the late payment of any installment under the Loan Documents: (a) interest at any "default" or "penalty" rate exceeding the applicable nondefault rate; or (b) any late fees or charges, prepayment premiums, acceleration fees, premiums or penalties or `interest on interest." (6) The January 1999-May 1999 Interest and the June 1999- July 2000 Interest shall be payable pursuant to the terms of the Confirmation Order or such other further order of the Court addressing these amounts and the obligations under the Loan Documents. (7) Through the date of entry of the Confirmation Order or such other order, neither the January 1999- May 1999 Interest nor the June 1999- July 2000 Interest shall accrue any interest, fees or other charges. (8) The Movants agree to continue to be bound by the terms and conditions of the Non-Compete Agreement, notwithstanding the Debtors' failure to make timely payments under the terms of the Promissory Note. (9) The Movants further agree that so long as LGII complies with the terms of this Stipulation and Order (a) they will not assert that LGII has breached the Non-Compete Agreement and (b) their covenants under the Non-Compete Agreement remain in full force and effect. (10) The Movants and the Dcbtors reserve their rights concerning, and this Stipulation is made without prejudice to: (a) a determination of the value of the Movants' collateral; and (b) any contractual or statutory rights that the Movants may have under section 506(b) of the Bankruptcy Code or other applicable law to assert and be paid a claim for reasonable fees, costs or charges under the Loan Documents. (11) So long as the Debtors are in reasonable compliance with the terms of the Stipulation and Agreed Order, the Movants shall not seek any other or further relief under section 362 of the Bankruptcy Code. (12) The parties agree on the amounts of outstanding principal balance under each of the Promissory Notes, the interest that accrued under each of the Promissory Notes for the period from January 1, 1999 through and including May 31, 1999 and the interest that has accrued under each of the Promissory Notes for the period from June 1, 1999 through and including July 31, 2000 as set forth in the Stipulation and Order. (Loewen Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service, Inc., 609/392-0900) LONDON FOG: Seeks Fifth Exclusivity Extension to April 19 --------------------------------------------------------- London Fog Industries Inc. is seeking bankruptcy court authorization to extend the exclusive periods under which it can file its reorganization plan and solicit acceptances. A hearing on the matter is slated for Friday before the U.S. Bankruptcy Court in Wilmington, Del. The court has granted four previous exclusivity extensions to the company. Under the proposed 90-day extensions, the company's exclusive time to file a reorganization would be extended through April 19. During this period, other parties wouldn't be allowed to file competing plans. Currently, London Fog's exclusive plan-filing period expires Friday and its solicitation period to gather plan acceptances would expire March 20. (ABI World, January 23, 2001) LTV CORPORATION: Continues Workers Compensation Programs -------------------------------------------------------- The LTV Corporation maintain workers' compensation insurance coverage for current or former employees in numerous states, including Alabama, Arkansas, Connecticut, California, Georgia, Indiana, Illinois, Kentucky, Michigan, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, West Virginia and Wisconsin. By this Motion, the Debtors sought and obtained authorization to continue their workers' compensation programs in all of these jurisdictions and to pay certain related prepetition claims, premiums and expenses. In several states, including Ohio, Indiana, and Illinois, certain of the Debtors operate as self-insured employers. In addition, certain of the Debtors operate as self-insured employers for certain categories of employees under the federal Longshore and Harbor Workers' Compensation Act. As a result, these Debtors maintain a variety of self-insured workers' compensation programs under which they directly pay applicable workers' compensation claims as they arise. Certain of the self-insured states have required the Debtors to post various forms of collateral as security for the Debtors' obligations to pay the self-insured claims in these jurisdictions. For example, in Indiana the Debtors have contributed approximately $1 million to a trust fund maintained by the state, and in Illinois and Ohio the Debtors have provided the states with irrevocable letters of credit in the approximately amounts of $1,200,000 and $1,500,000, respectively. Based on historical experience, the Debtors estimate that the aggregate amount of self-insured claims accrued but not yet paid as of the Petition Date is approximately $41,800,000. In the State of Ohio, certain of the Debtors participate in a "monopolistic" workers' compensation insurance program funded through, and administered by, the Ohio Bureau of Workers' Compensation. Under this funded program, the Debtors pay certain premiums to the Bureau. The funded premiums generally are based on the participating Debtors' payroll for their employees in Ohio during the coverage period and are adjusted retroactively based on a final audit of the Debtors' payroll. The Debtors estimate that the aggregate amount of funded premiums accrued but not yet paid as of the Petition Date is approximately $50,000. In several states, including Alabama, Connecticut, Georgia, and others, the Debtors maintain certain high-deductible and no- deductible workers' compensation and employers' liability insurance programs with the American International Group and certain of its affiliates. Under the insured program, insurance coverage is provide for losses up to $2 million per claim, and the Debtors are obligated to pay an annual premium that is adjustable retroactively based on the Debtors' final audited payroll for the coverage period, and in addition, to reimburse AIG for the loss payments that AIG makes in respect of coverage deductibles and claims asserted against the debtors, all in accordance with the terms of the insured programs. The Debtors pay the insured premium in monthly installments of approximately $195,833 each. To secure the Debtors' obligations under their current workers' compensation and employers' liability insurance policies, as well as various other liability insurance policies issued to the Debtors by AIG, AIG has required the Debtors to post collateral in the form of irrevocable letters of credit for such liabilities. The aggregate amount of outstanding letters of credit posted by the Debtors in support of the insurance policies is approximately $42,300,000. (LTV Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-00900) NETROM INC: Hires James Toreson as New CEO ------------------------------------------ Netrom Inc., (Pink Sheets:NRRM) announced the appointment of James S.Toreson as the Company's new Chairman and Chief Executive Officer. A seasoned senior executive, Toreson brings extensive experience in restructuring and rebuilding small and medium size companies. He has a distinguished track record of accomplishment working in turnaround situations. As Chairman and CEO, Toreson will lead Netrom through the final phase of its turnaround. He will play a key role in the development and expansion of its recent acquisition, Networth Inc., d.b.a. BigRebate. "I am extremely excited to be joining Netrom at this particular time. The Company has made tremendous progress over the past nine months and is poised to complete its reorganization/turnaround," said Toreson. "We are now in a position to start moving forward, building a profitable, high growth company and delivering significant value to Netrom's shareholders. The Company's management will need the continued support and cooperation of its creditors and shareholders as it executes its plan to build a new Netrom." "Jim brings a lot of credibility to the executive management team of Netrom and he will have a major impact on executing and achieving our short and long term goals," said Ron Clark, president of Netrom. "His professional credentials, track record, leadership ability and business acumen will greatly strengthen investor confidence in Netrom and help put us on a fast track to making 2001 a successful year for the Company and its shareholders." Toreson has been CEO and president of Onshore Inc., a management consulting business he founded in 1990. Toreson recently served as President of Forte Systems Inc., Troy, Mich., a software consulting services and systems integration provider. Prior to Onshore Inc. he founded Xebec Inc., a designer and manufacturer of hard disk controllers. He served as its chairman, CEO and president over a 13-year period. Beginning with $5,000 in capital, he built the company to $150 million in revenue. About Netrom Inc. Netrom Inc. (Pink Sheets:NRRM), founded in 1996, is a development stage company, headquartered in Orange County, Calif. Since its inception, Netrom has been involved with the development of technologies related to the Internet, as well as developing new eBusiness models. In the first quarter of 2000, Netrom became insolvent and was forced into a major reorganization. The Company's short-term mission has been to complete a turnaround of its business, restore trading of its stock to the OTC BB market and fuel the growth of the Company through strategic acquisitions. OWENS CORNING: Enters Settlement Pact re GBF/Pittsburgh Landfill ---------------------------------------------------------------- Owens Corning sought Judge Walrath's approval of a proposed settlement of litigation pending in the United States District Court for the Northern District of California, styled "Members of the GBF/Pittsburg Landfill Respondents Group v. Contra Costa Waste Service". Fibreboard is one of the plaintiffs in this action. From the early 1960s through the end of 1974, the GBF site in Contra Costa County, California, included both solid and liquid waste storage and disposal areas. Various corporations or individuals, including Contra Costa Waste Service, Inc. and other Garaventa entities owned or operated the site during all times relevant to the GBF action. In October 1974 the site's liquid waste disposal ponds were closed in accordance with a closure plan approved by the California Regional Water Quality Control Board for the Central Valley Region. As part of this closure plan, Fibreboard waste products, including sawdust, wood pulp and other products, were diverted to the liquid waste ponds at the site for use as absorbent materials. In 1987, the State of California issued a Remedial Action Order, subsequently amended several times, in which it identified a number of entities alleged to be responsible for cleaning up the site. These entities included Fibreboard and other generators of waste products that were deposited at the site, as well as the operator of the liquid waste ponds, and the City of Pittsburg, California, and the Garaventa entities. Since 1987 the Respondents Group, including Fibreboard, has engaged in the investigation of the site in accordance with the State's directions. The Garaventa entities have refused to contribute to the site's investigation or clean-up. In the litigation, the Respondents' Group sought damages and restitution and alleged that the Garaventa entities were liable for all clean-up costs related to the site. The defendants in turn filed counterclaims against the Respondents' Group. The parties have reached a comprehensive settlement of the federal action. The significant terms of the settlement are: (a) TRC Companies, Inc., a company specializing in environmental management and infra-structure improvement, will take title to the site and undertake its remediation. TRC will assume all environmental liability that any of the parties may have with respect to the site and indemnify the parties against any further liability with respect to the site. (b) TRC will purchase an insurance policy that will guarantee financing for the site's clean-up. (c) TRC will receive a confidential amount, not disclosed in the Motion or attachments, from the Respondents' Group for taking title to the site and assuming its remediation. The Garaventa entities will pay a portion of the settlement amount to the Respondents' Group, which will forward it, together with the remaining portion of the settlement amount, directly to TRC. (d) The parties will exchange mutual releases. While at this time Fibreboard's share of the settlement amount remains approximate, pending finalization of the terms of the insurance policy to be obtained by TRC and resolution of the State of California's outstanding claim for oversight costs, but Fibreboard believes its share of the settlement amount will not exceed $1.2 million, and may be less. Fibreboard will not be obligated immediately to fund its share of the settlement amount. Certain members of the Respondents' Group have agreed to advance Fibreboard's share of the settlement amount to facilitate and permit consummation of the proposed settlement agreement, and will file a claim in Fibreboard's Chapter 11 case for reimbursement of such amount. That reimbursement claim will be an allowed general unsecured claim and will be paid under the Debtors' reorganization plan in the same manner as other claims in that class. (Owens Corning Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-0900) RG RECEIVABLES: S&P Raises VARIG Securitization Rating to B ----------------------------------------------------------- Standard & Poor's raised its rating on RG Receivables Co. Ltd.'s $100 million 9.6% notes to single-'B'-plus from triple-'C'-plus and removed the transaction from CreditWatch. The transaction, which was originally rated double-'B'-minus, was placed on CreditWatch with negative implications on Jan. 14, 1999, and later lowered to triple-'C'-plus on March 4, 1999, while remaining on CreditWatch. Subsequently, the CreditWatch designation was revised to developing in July 1999, where it remained until today's rating action. The RG Receivables notes are secured by the proceeds of credit and charge card receivables generated by the sale of airline tickets in the U.S. to Viacao Aerea Rio-Grandense S.A. (Varig) customers flying between Brazil and the U.S. The transaction is structured to capture offshore dollar-denominated payments generated from the sale of tickets on Varig flights between Brazil and the U.S. and between the U.S. and Tokyo, Japan. As is the case with all future flow transactions, the RG Receivables rating is closely linked to the underlying performance risk of the generator of the securitized assets, Varig. Thus, a major component of the transaction rating is Standard & Poor's assessment of Varig's creditworthiness, its ability to continue operating, and its willingness and ability to maintain sufficient service to designated U.S. destinations until the notes are fully paid. The rating upgrade reflects several developments. Varig has successfully completed a debt and operations restructuring plan over the past 24 months since Brazil underwent a significant devaluation of its currency. The company remains heavily indebted -- total debt amounts to about $2.4 billion against EBITDAR of about $550 million -- but has taken active measures to reduce this burden through renegotiation of selected debt and aircraft lease obligations and ongoing asset sales. In addition, capacity reductions by financially pressured competitors in the Brazilian airline industry has eased pricing pressures on domestic routes and allowed Varig to assume some of the international flights previously flown by Viacao Aerea Sao Paulo S.A., a competing Brazilian airline. Varig's international flight operations have also become more efficient through the use of smaller planes, producing higher load factors and increased scheduling flexibility. These efforts have been particularly important in light of cost pressures generated since 2000 by higher fuel prices. Overall, Varig controls about 43% of the domestic airline market and, among Brazilian carriers, 84% of the international market based on revenue passenger kilometers. International flights account for more than one-half of the company's passenger service revenue. Beyond the improved operating performance by the generator of the transaction assets, Varig, the transaction rating upgrade is supported by solid cash flow coverage, which remains in excess of 3 times quarterly debt service. The legal strength of the transaction was also demonstrated during the recent crisis in Brazil, as the transaction continued to perform as expected despite Varig's need to renegotiate much of its debt and several aircraft lease contracts. Although the transaction performed well through the worst of the most recent economic turbulence in Brazil, future performance remains highly dependent upon both the efforts of Varig to reduce its high debt level and the continued health of the Brazil-U.S. travel market. In addition, the future health and financial stability of the Brazilian economy will be key. Because much of Varig's debt is short term and there exists a corporate interest coverage performance covenant in the transaction -- violation of which triggers an event of default -- the transaction rating remains particularly sensitive to the interest rate environment in Brazil and the ability of Varig to manage its finances astutely until the transaction pays down fully in February 2005. Although an early amortization or redemption event triggered by a covenant violation would not, by itself, necessarily lead to a downgrade of the transaction rating, the liquidity impact on Varig's financial position of such an event could be significant and might, thereby, impact the transaction rating indirectly through the transaction's link to Varig's own corporate operational risk rating, Standard & Poor's said. SERVICE MERCHANDISE: Gets $35MM Committed Vendor Credit Line ------------------------------------------------------------ Service Merchandise Company, Inc. (OTCBB:SVCDQ) announced that in support of the Company's reorganization initiatives, CIT Commercial Services, a division of CIT (NYSE: CIT; TSE: CIT.U), has provided the Company with a committed $35 million three-year unsecured vendor line of credit, enhancing Service Merchandise's strong liquidity position and vendor relationships. The Company said that cash availability under its committed bank lines, exclusive of the new CIT vendor line, is expected to exceed $140 million at January 28, 2001 and should continue to be in the range of $90 to $230 million throughout 2001 which supports the Company's more targeted merchandise assortment following its planned exit last year from toys, electronics and sporting goods. "CIT, together with our other factors, lenders, vendors and other creditors, have been a great source of strength and support for our company as we continue to implement our strategic restructuring initiatives and prepare our business for emergence from chapter 11 reorganization in a timely fashion," said Chairman and Chief Executive Officer Sam Cusano. "CIT's commitment, together with our already strong availability under our bank agreement, should only enhance our relationships with our key vendors." Lawrence A. Marsiello, Group Chief Executive Officer of CIT Commercial Finance, stated, "We are pleased to provide this new level of committed credit support to Service Merchandise and its vendors. This credit line validates the substantial progress made by Service Merchandise in a difficult retail environment, and represents our vote of confidence in the Company." CIT Commercial Services, the nation's largest provider of factoring services, is a unit of Commercial Finance, an operating group of CIT. The commitment letter will be filed on Form 8-K with the Securities and Exchange Commission. SERVICE MERCHANDISE: Hires Michael E. Hogrefe as New SVP & CFO -------------------------------------------------------------- Service Merchandise Company, Inc. (OTCBB:SVCDQ) appointed Michael E. Hogrefe as Senior Vice President and Chief Financial Officer, effective February 4. Mr. Hogrefe, 40, joins Service Merchandise from Frontline Group, Inc. of Nashville, where he served as Executive Vice President, Chief Financial Officer and Secretary since 1999. Before that, he was Chief Financial Officer for Bright Horizons Family Solutions, Inc. (NASDAQ:BFAM) from 1996. Mr. Hogrefe is a former financial executive of Service Merchandise, serving in various positions of increasing responsibility from 1990 to 1996, including Treasurer. "Mike Hogrefe brings to Service Merchandise a proven track record in financial leadership and improved profitability through a wide range of industries," Mr. Cusano said. "We look forward to the benefits that his expertise will provide our company as we continue to implement our business plan and prepare the Company for negotiation of what we expect will be a consensual reorganization plan with our creditors." The Company said that Mr. Hogrefe's two-year employment agreement was approved earlier today without objection by the Bankruptcy Court at the monthly omnibus hearing held in the United States Bankruptcy Court for the Middle District of Tennessee. The Company also told the Court that it revised its earlier financial guidance upward regarding fiscal year 2000 preliminary financial performance previously announced on January 10. The Company said that its representatives reported to the Bankruptcy Court that the Company's final 2000 financial results, which are expected to be released early next month, will likely exceed the range of continuing EBITDAR (earnings before interest, taxes, depreciation, amortization and restructuring expenses) previously reported as $30 to $33 million for the 12 months ended December 31, 2000. The Company's continuing EBITDAR for 1999 was $25.9 million. The Company earlier said that its preliminary financial results were subject to physical inventory results, normal year- end adjustments and other matters. US AUTOMOTIVE: Selling All Assets to FDP Virginia ------------------------------------------------- US Automotive Manufacturing, Inc. and its wholly-owned subsidiaries, US Automotive Friction, Inc., and Quality Automotive Company, entered into an Asset Purchase Agreement for the sale of all of their assets to FDP Virginia, Inc. In order to effectuate the proposed sale, the Company filed a voluntary petition Monday under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. The proposed sale of such assets, if approved, would be free and clear of all liens, claims and encumbrances. The proceeds of sale are not expected to be sufficient to repay the Company's senior secured lender in full. FDP Virginia, Inc. is a subsidiary of Friction Division Products, Inc. and W&W Electronics, Limited. The Company has filed a motion for approval of the sale under Section 363 of the Bankruptcy Code and anticipates a hearing to be conducted thereon within approximately thirty (30) days. It is expected that closing of the sale will take place within fifty-five (55) days of the filing of the bankruptcy petition. The closing is subject to normal and customary conditions, and requires Bankruptcy Court approval. The Company has also announced that it has reached an agreement with its lenders to provide additional borrowing ability under a debtor-in-possession loan facility which will again allow the Company to purchase new inventory and operate the business in the ordinary course in order to satisfy the Company's customers' and employees' needs through the anticipated date of closing of the proposed sale. ********* Bond pricing, appearing in each Monday's edition of the TCR, is provided by DLS Capital Partners in Dallas, Texas. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.amazon.com/exec/obidos/ASIN/189312214X/internetbankrup t to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* 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 USA, and Beard Group, Inc., Washington, DC USA. Debra Brennan, Yvonne L. Metzler, Aileen Quijano and Peter A. Chapman, Editors. Copyright 2001. 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. 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