/raid1/www/Hosts/bankrupt/TCR_Public/010705.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, July 5, 2001, Vol. 5, No. 130
Headlines
360NETWORKS INC.: Bankruptcy Triggers S&P Ratings Dive To D
360NETWORKS INC.: Honoring Prepetition Employee Obligations
AMERICAN HOMESTAR: Plan Confirmation Hearing Set For July 24
AMF BOWLING: Files Voluntary Chapter 11 Petition in Virginia
AMF BOWLING: Case Summary & 30 Largest Unsecured Creditors
AMRESCO INC.: Files For Chapter 11 Protection in N.D. Texas
AMRESCO INC.: Chapter 11 Case Summary
CASTLE DENTAL: Elects James M. Usdan As New President & CEO
CONE MILLS: Extends Credit Facilities through November 7, 2001
CORRPRO COS.: Delays Form 10-K Filing Due To Restructuring Talks
CROWN BOOKS: Seeks Plan-Filing Extension Through July 30
CROWN CRAFTS: Lenders Agree To Amend And Extend Loan Terms
EPIC RESORTS: S&P Slashes Corporate & Senior Note Ratings to D
EPIC RESORTS: Moody's Cuts Senior Secured Note Rating to Caa1
FOSTER & GALLAGHER: Files Chapter 11 Petition in Wilmington
FOSTER & GALLAGHER: Case Summary & Largest Unsecured Creditors
FREEREALTIME.COM: Releases Unaudited Financials For FY 2001
FRUIT OF THE LOOM: Settles Ki Young Lee's Litigation Claims
FURRS SUPERMARKET: Fleming Buys Chain & Inventory for $107 Mil
GLOBAL TISSUE: The Creditors' Votes Are In
HECHINGER INVESTMENT: Resolves Claims Dispute With Committee
ICG COMMUNICATIONS: Rejects 8 Telecommunications Space Leases
IMPERIAL CREDIT: Completes Exchange Offer & Consent Solicitation
IMPERIAL CREDIT: S&P Drops Ratings to D From CC
LAIDLAW INC.: Paying Prepetition Employee Claims In Canada
LEINER HEALTH: Ratings Fall to D After Missed Interest Payment
LERNOUT & HAUSPIE: Summary Of Belgian Recovery & Payment Plan
LOEWEN GROUP: Settles Frank Duane Schaefer's Employment Claims
LUBY'S INC.: Amends Loan Facility & Issues Notes to Pappas Bros.
METRICOM: Files Chapter 11 Petition in San Jose, California
METRICOM, INC.: Chapter 11 Case Summary
NAVIGATOR GAS: S&P Downgrades Corporate Credit Rating to CCC-
ORIUS CORP.: Fitch Cuts NATG's Senior Sub Notes To CCC+ from B
OWENS CORNING: Asks For More Time To Decide On Leases
PILLOWTEX: Toyota Wants Decision On Two More Forklift Leases
PSINET INC.: Paying Prepetition Critical Trade Vendors
RETROSPETTIVA INC.: Ceases Operations in Wake of Macedonian War
RITE AID: Completes $3 Billion Refinancing
SGPA, INC.: U.S. Trustee Throws Chanin Some of Her Grenades
STAGE STORES: Plan Confirmation Hearing Scheduled For August 8
STROUDS INC: Exclusive Period To File Plan Extended To July 6
SUNBEAM: Voting Deadline for Chapter 11 Plans Extended To Aug.31
SUN HEALTHCARE: Sells German Operations To Curanum
TELEGEN CORPORATION: William M. Swayne Owns Majority Stake
USG CORP.: Obtains Court Nod To Maintain Existing Bank Accounts
US INDUSTRIES: Fitch Lowers Senior Secured Debt to B from BB+
VLASIC FOODS: Wachovia Bank Seeks Relief From Automatic Stay
WARNACO GROUP: Moves For Injunction Against Utility Companies
WASHINGTON GROUP: Documents Show Raytheon Owes $469 Million
WEBLINK WIRELESS: Bankers Trust Resists Funding Bonus Plans
WINSTAR COMM: Moves To Adopt Employee Retention & Severance Plan
*********
360NETWORKS INC.: Bankruptcy Triggers S&P Ratings Dive To D
-----------------------------------------------------------
Standard & Poor's lowered its ratings on 360networks Inc.'s 13%
senior unsecured notes due 2008 and 12% senior unsecured notes
due 2009 to 'D' from double-'C' and removed them from
CreditWatch negative.
At the same time, Standard & Poor's lowered its rating on
360USA's $1.2 billion secured bank loan to 'D' from triple-'C'-
minus. The corporate credit rating on 360USA was also lowered to
'D' from triple-'C'-minus. These ratings were simultaneously
removed from CreditWatch negative.
These rating actions follow 360networks' announcement that the
company and certain of its operating subsidiaries have
voluntarily filed for protection under the Companies' Creditors
Arrangement Act (CCAA) in the Supreme Court of British Columbia.
360USA and affiliates have also filed for protection under
Chapter 11 of the U.S. Bankruptcy Code.
In addition, the corporate credit ratings on Globenet
Communications Group Ltd. and Globenet Communications Holdings
Ltd. and the rating on Globenet Communications Holdings' $400
million secured bank facility due June 2005 were lowered to
double-'C' from triple-'C'-minus and remain on CreditWatch
negative. Although these subsidiaries of 360networks have not
filed for bankruptcy protection, the rating downgrades reflect
the high likelihood of default on Globenet Communications
Holdings' bank facility, of which about $200 million has been
drawn.
The corporate credit rating on 360networks and the rating on
360networks' 12.5% senior unsecured notes had been lowered to
'D' on June 15, following an announcement that the company would
not make its scheduled $10.9 million interest payment on its
12.5% senior unsecured notes due 2005.
Ratings Lowered And Removed From CreditWatch Negative
360networks Inc. TO FROM
$600 million 13% senior unsecured notes due 2008 D CC
$500 million 12% senior unsecured notes due 2009 D CC
360USA
Corporate credit rating D CCC-
$1.2 billion senior secured bank loan D CCC-
Ratings Lowered And Remaining On CreditWatch Negative
GlobeNet Communications Group Ltd. TO FROM
Corporate credit rating CC CCC-
GlobeNet Communications Holdings Ltd.
Corporate credit rating CC CCC-
$400 million senior secured bank loan CC CCC-
360NETWORKS INC.: Honoring Prepetition Employee Obligations
-----------------------------------------------------------
Prior to the Petition Date, 360networks inc. paid their
employees' wages, salaries and other compensation and benefits
in the ordinary course of their Debtors' businesses. As
employee obligations accrue on an ongoing basis, but are paid
periodically in arrears, the intervening chapter 11 filings
signify there are accrued unpaid prepetition wages, salaries,
commissions, incentive compensation and/or other compensation
owed to the Debtors' employees and related third-parties, such
as employee benefit plan administrators.
By Motion, the Debtors seek immediate authority to honor the
Prepetition Employee Obligations because payment of these
obligations "is critical to maintaining the morale and stability
of the Debtors' workforce," Vanessa A. Wittman, the Debtors'
Chief Financial Officer, told Judge Gropper.
"It is axiomatic that continued loyalty of a debtor's employees
is a necessary component to any successful reorganization," Alan
J. Lipkin, Esq., at Willkie, Farr & Gallagher says. The filing
of a chapter 11 petition is a stressful and uncertain time for a
debtor's employees, most of whom are not schooled in the nuances
of bankruptcy that certain practitioners often take for granted.
Such stress and uncertainty often causes poor employee morale
just at that critical time when a debtor most needs its
employees' loyalty. Such low morale may be compounded if certain
employees perceive themselves to have received less favorable
treatment than others. Moreover, many employees would suffer
severe adverse personal economic consequences if they failed to
receive full compensation. All those concerns are magnified here
because the Debtors made substantial employee layoffs just prior
to the chapter 11 filings -- 800 positions were cut the day
before the filing. Mr. Lipkin notes that the severance payments
to such employees were funded and issued prepetition.
360's Prepetition Employee Obligations
A. Wages, Salaries, and Other Compensation
Historically, the Debtors' employees have been paid every
other Friday for the two week period ending the preceding
Saturday. The Debtors' workforce is divided, as of the date
hereof, into approximately 360 "Network" employees and 130
"Fiber" employees. The Network employees and the Fiber employees
are paid on alternate weeks. The Debtors' approximate gross bi-
weekly payroll for all Network employees aggregates $1,000,000
and for Fiber employees aggregates $195,000. Approximately 3%
of the Debtors' payroll costs represent compensation paid to
Senior Executives:
Weekly
Name Title Compensation
---- ----- ------------
Greg Maffei President $3,846.15
Vanessa Wittman Director 4,326.92
Jimmy Byrd COO and Treasurer 5,096.15
Patrick Summers Vice President, General
Counsel & Secretary 3,327.29
with the balance representing compensation to "rank and file"
employees.
Historically, prior to each pay date, the Debtors transferred
funds to payroll accounts maintained by ADP, Inc., the Debtors'
payroll processor, in the name of ADP, and other Plan
Administrators.
Prior to the Petition Date, the Debtors transferred to the
payroll accounts funds the Debtors believe were sufficient to
pay all employees for compensation owing through the Petition
Date. Accordingly, the Debtors believe they are substantially
current with respect to prepetition payroll obligations.
B. Reimbursable Business Expenses
Prior to the Petition Date and in the ordinary course of
their businesses, the Debtors reimbursed employees for certain
business expenses incurred in the scope of their employment.
The Debtors estimate that, as of the Petition Date, the Debtors'
employees had incurred unreimbursed expenses aggregating
approximately $150,000, relating to, among other things,
business travel, business meals, car rentals, and miscellaneous
related expenses All the Reimbursable Expenses were incurred on
the Debtors' behalf in connection with employment by the Debtors
and in reliance upon the understanding such expenses would be
reimbursed. The Debtors estimate that no one employee is owed
more than $15,000 of Reimbursable Expenses.
C. Employee Benefits
In the ordinary course of their businesses, and as is
customary for most large companies, the Debtors have established
various employee benefit plans and policies that provide
employees with medical, dental, disability and life insurance,
employee savings, and other similar benefits. 360's Employee
Benefits include:
(i) Employee Health Insurance Plans -- An important
element of the Employee Benefits is medical and dental
insurance. To offer an appropriate level of Health Benefits to
their employees and their families, the Debtors maintain four
self-insured health plan options, each administered by CIGNA.
The Health Benefit plans are fully funded by the Debtors with
respect to coverage for individual employees. Employees are
entitled to elect dependent coverage upon payment of up to $30
per month, which amount is deducted directly from the employee's
compensation. As is typical with most self-insured health
benefit plans, after a claim has been filed with CIGNA and
processed, the Debtors, through CIGNA, either: (a) reimburse the
employee for the cost of the services; or (b) pay the health
benefits provider for services rendered to the employee.
Payments of these Self-Insured Claims are made by CIGNA who
draws directly, on an as and when-needed basis, from an account
maintained by the Debtors for such purpose. The Debtors fund
such account from time to time. Ordinarily, there is a lag time
between when an employee submits a claim and when such claim is
paid by CIGNA. If the Debtors fail to pay any Self-Insured
Claim, the employee generally is directly liable to the
provider. Based upon an average in recent months, the projected
Self-Insured Claims, including any Pipeline Claims, paid by the
Debtors aggregate up to $300,000 per month, with an average
three month accrual of $600,000 to $900,000. The Debtors seek
authorization to continue paying the prepetition Pipeline Claims
and Self-Insured Claims in the ordinary course. The Debtors
also maintain a "stop-loss" and insurance policy that limits the
Debtors' exposure an account of self-insured Health Benefits
offered. The average monthly premium for the Stop-Loss Policy
is approximately $22,000.
(ii) Employee Life and AD&D Insurance -- The Debtors
provide employees with fully funded life and accidental death
and dismemberment insurance. The Debtors make monthly payments
of approximately $26,000 on account of such insurance. The
Debtors believe they are substantially current on all such
payments; however, to the extent that any premiums remain unpaid
as of the Petition Date or any portion of the current month's
payment may be characterized as a prepetition obligation, the
Debtors seek to be authorized, but not directed, to pay those
amounts.
(iii) Vision Insurance -- The Debtors provide employees
with fully funded vision insurance. The Debtors make monthly
payments of approximately $14,000 on account of such insurance.
The Debtors believe they are substantially current on all such
payments; however, to the extent that any premiums remain unpaid
as of the Petition Date or any portion of the current month's
payment may be characterized as a prepetition obligation, the
Debtors seek to be authorized, but not directed, to pay those
amounts.
(iv) Short and Long-Term Disability Insurance -- The
Debtors provide employees with fully funded short-term and long-
term disability insurance. The Debtors make monthly payments of
approximately $17,000 and $11,000, respectively, on account of
such insurance. The Debtors believe they are substantially
current on all such payments; however, to the extent that any
premiums remain unpaid as of the Petition Date or any portion of
the current month's payment may be characterized as a
prepetition obligation, the Debtors seek to be authorized, but
not directed, to pay those amounts.
(v) Withholdings From Employee Paychecks -- The Debtors
deduct certain amounts from their employees' paychecks for the
payment of flexible medical spending amounts, 401(k)
contributions and other miscellaneous amounts, for which the
employees contribute one hundred percent of the costs. The
Employee Deductions comprise property of the Debtors' employees.
The Employee Deductions are forwarded by the Debtors to
appropriate third-party recipients at varying times. Employee
Deductions total approximately $40,000 per week. The Debtors
also may be in possession of various other withholdings, such as
payroll taxes, social security, garnishments, child support
payments, and the like. It is likely that such funds have been
deducted from employee wages but have not yet been forwarded to
the appropriate third-party recipients.
D. Workers' Compensation
The Debtors are liable to current and former employees under
various workers' compensation policies. Each workers'
compensation policy is designed to provide coverage to the
Debtors' employees for injuries sustained during the policy
year. As is true for all workers' compensation programs,
however, the insurer may be required to make payments to injured
employees for months or years beyond the policy year. The
Debtors purchase premium-based workers' compensation insurance
with annual retrospective adjustments. The Debtors' monthly
payment on account of their premium based workers' compensation
insurance is approximately $250,000. The Debtors believe they
are current on all such payments; however, in the unlikely event
that the Debtors have amounts owing due to prepetition workers'
compensation obligations or to the extent that a portion of the
current payments may be characterized as prepetition
obligations, the Debtors seek authority to pay such amounts.
E. Miscellaneous
The Debtors may determine there are additional de minimis
prepetition obligations which have not been identified in the
motion. For example, although the Debtors have in the past
agreed to reimburse certain employees for tuition costs, the
Debtors are unaware of any such obligations at this time that
would qualify for reimbursement. The Debtors, however, may learn
of such amounts subsequent to the date hereof. Accordingly, the
Debtors request authority to pay any such additional
obligations, up to an aggregate of $150,000, upon five days'
prior written notice to counsel to any statutory committee
appointed herein, counsel to their prepetition bank lenders, and
the Office of the United States Trustee, setting forth the
nature and amount of the additional obligation sought to be
paid. If an objection is interposed within such five-day period,
the Debtors would be required to seek authority from this Court
to make such payment. The Debtors also reserve their rights to
seek authority from the Court to pay any obligations in excess
of the aforementioned cap.
Absent prompt payment of amounts owed in connection with the
Prepetition Employee Obligations, it is likely employee morale
and support would be impaired, 360 argues. Further, as many of
the Debtors' employees rely on the timely receipt of their
paychecks and/or reimbursement for expenses, any delay in paying
amounts owed in respect of the Prepetition Employee Obligations
could cause such employees serious hardship. Also, many
employees rely on their employee benefits, such as Health
Benefits, without which they would be forced to pay for or go
without insurance coverage and healthcare for themselves and
their families. Any such adverse consequences at this critical
time undoubtedly would have a devastating impact on the value of
the Debtors' estates. Amounts withheld by the Debtors from
employees' paychecks, represent, in many cases, employee
earnings specifically designated by employees or, in the case of
garnishments, by judicial authorities, to be deducted from
employee paychecks and paid accordingly. The failure to make
these payments would result in hardship to certain employees.
The Debtors expect numerous inquiries from garnishors and other
designated recipients regarding the Debtors' failure to submit,
among other things, taxes, child support and alimony payments
which are not the Debtors' property, but rather have been
withheld from employee paychecks. Moreover, if the Debtors are
unable to remit certain of these amounts, the employees could
face legal action and/or imprisonment.
The Debtors' employees are an essential component of a
successful Reorganization, Ms. Wittman and Mr. Lipkin stressed
to Judge Gropper. Any deterioration in employee morale and
welfare at this critical time undoubtedly would have a
devastating impact on the Debtors and their ability to
reorganize, they emphasized.
Persuaded by these arguments, Judge Gropper granted 360
authority to honor these obligations. Judge Gropper finds that
the relief sought by 360 is in the best interests of their
estates and will enable the Debtors to continue to operate their
businesses with minimal disruption and proceed with the
important task of stabilizing their operations. Judge Gropper
makes it clear that the decision to honor any particular pre-
petition employee-related obligation rests solely on the
Debtors' discretion to make the payment. Nothing in Judge
Gropper's Order compels the Debtors to make a payment nor grants
any employee a right to payment. Further, nothing in the
Debtors' Motion or the Court's Order shall be construed as an
assumption of any executory contract pursuant to 11 U.S.C. Sec.
365. (360 Bankruptcy News, Issue No. 1; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
AMERICAN HOMESTAR: Plan Confirmation Hearing Set For July 24
------------------------------------------------------------
American Homestar Corporation (HSTRQ - National Quotation Bureau
-Electronic "Pink" Sheets) announced that its Disclosure
Statement and Proposed Plan of Reorganization has been approved
by the Bankruptcy Court for mailing and that such mailing to all
creditors commenced on June 27, 2001.
The Company and 21 subsidiaries filed their original petitions
under Chapter 11 of the Bankruptcy Code on January 11, 2001.
The Company believes that its proposed reorganization plan will
be approved by a sufficient number of creditors to allow the
Company to emerge from Court supervision as early as the first
week in August. The deadline for casting ballots is July 17 and
the confirmation hearing is scheduled for July 24.
Commenting on these recent developments, the Company's Chairman,
President and CEO, Finis F. Teeter, said, "We have accomplished
a great deal since our filing, including the systematic
downsizing of non-core operations and adjusting the cost
structure of our core operations in the Southwest region so they
are profitable at today's lower sales levels. Through the
resolve of our management team and field operations staff and
the continued support of our creditors, we have adjusted to the
realities of the marketplace. I look forward to the formal
adoption and confirmation of our reorganization plan on July 24
as it will mark the beginning of a new and successful era for
the Company."
American Homestar Corporation is a vertically integrated
manufacturer and retailer of manufactured housing that also
provides transportation, insurance and financial services to its
customers. The Company is currently in reorganization and is
downsizing its operations to focus on its core southwest market,
consisting of three manufacturing plants and 39 company-operated
retail centers. All non-core operations are being sold or
discontinued.
AMF BOWLING: Files Voluntary Chapter 11 Petition in Virginia
------------------------------------------------------------
AMF Bowling Worldwide and its U.S. subsidiaries filed for
reorganization under Chapter 11 of the U.S. Bankruptcy Code. The
filings, in Richmond, Virginia, will enable AMF to maintain
ordinary course operations while it finalizes and implements a
reorganization plan to significantly reduce its long-term debt
and interest expense.
AMF announced in April that it would likely take this action in
order to facilitate an orderly financial restructuring. The
company has reached an agreement in principle with the steering
committee of its senior lenders on a new capital structure and
the terms of a plan of reorganization. AMF expects to submit
this plan and a disclosure statement in early August after the
approval of the agreement in principle by the requisite majority
of its senior lenders. The plan of reorganization will reduce
outstanding debt and provide improved financial flexibility for
AMF.
Debtor-in-Possession Financing Arranged
Members of AMF's current senior lending group have agreed to
provide the company with a $75 million debtor-in-possession
financing facility, subject to court approval that is expected
later today. These funds will be available to supplement the
company's operating cash flow for funding business operations,
including payment under normal terms to suppliers and vendors
for all goods and services that are provided to the company
during Chapter 11.
AMF Conducting Business in the Ordinary Course
Roland Smith, AMF's President and Chief Executive Officer, noted
that the court filing is not expected to have any significant
impact on AMF's day-to-day operations: "We will continue
welcoming customers at our bowling centers, and we will continue
to make and sell our bowling products. While the refinancing
will be an important step towards a more successful future, our
primary focus will continue to be our customers and their
satisfaction with our products and services."
All 518 of the company's bowling centers around the world remain
open and will be conducting normal business operations. League
play and all other activities at the bowling centers, such as
corporate parties and special promotions, will continue as
planned. All three of the company's manufacturing facilities are
open and will operate on regular schedules.
Proposed Reorganization Plan
Under the terms of the plan to which AMF and the steering
committee of senior lenders have agreed in principle, the senior
lenders will receive a combination of cash, debt and common
stock of the reorganized company. Based on a hypothetical
reorganization value of $700 million, these distributions will
provide payment in full to the senior lenders for their secured
claims of approximately $625 million. Unsecured creditors will
receive the remainder of the reorganized company's common stock,
as well as warrants to purchase additional shares. The
reorganized company will implement a management stock option
program tied to the company's future performance.
AMF Bowling Worldwide will not make a distribution to AMF
Bowling, Inc., the parent company. As a result, while AMF
Bowling, Inc. has not yet filed for Chapter 11 protection, it is
expected that the common stock and the zero coupon convertible
debentures of AMF Bowling, Inc. will ultimately be cancelled.
The details of AMF Bowling Worldwide's proposed capital
structure will be contained in a plan of reorganization and a
disclosure statement that the company expects to file with the
court in early August. The plan and the disclosure statement are
subject to the approval of the creditors and the bankruptcy
court.
"We have negotiated a plan of reorganization with the bank group
steering committee that will position AMF for long-term
success," said Smith. "We intend to use this court-supervised
process to implement a plan of reorganization that reduces our
long-term debt and interest expense and allows us to redirect
our operating cash flow toward more productive uses. At the same
time, we will continue to implement our strategic business plan,
which is focused on improving operations in the future."
Strategic Changes Continue at AMF
"Over the past year, we have implemented a number of actions to
strengthen AMF's business operations and enhance financial
performance," said Smith. "While AMF continues to generate
positive cash flow from operations, today's court filing is a
necessary step in the refinancing process to make AMF a
stronger, financially sound company in the years to come."
During the past year, AMF has made a number of strategic
personnel and organizational changes in both its Centers and
Products businesses. These changes included initiatives that
streamlined the U.S. Bowling Centers' organization and
instituted a new operating model focused on the bowling center
manager. In conjunction with this model, the company created new
training schools for center and facility managers and also
established new performance-based compensation and benefits
programs for center managers and staff. John Suddarth, the new
Chief Operating Officer for Bowling Products, began
implementation of organizational changes in May to reduce costs
and improve both product quality and customer service. Upon
completion of the operational turnaround currently underway, the
company believes that its Products business will be positioned
to deliver improved results.
Mr. Smith emphasized that AMF remains committed to long-term
growth of its business in the U.S. and its global markets:
"Bowling is fundamentally a good business. With almost 54
million Americans bowling at least once last year, it is the
largest participatory sport in the U.S. Around the world, we
estimate that over 100 million people in 90 countries went
bowling last year."
AMF
As the largest bowling company in the world, AMF owns and
operates 518 bowling centers worldwide, with 400 centers in the
U.S. and 118 centers in ten other countries. AMF is also a world
leader in the manufacturing and marketing of bowling products.
In addition, the company manufactures and sells the PlayMaster,
Highland and Renaissance brands of billiards tables. Additional
information about AMF is available on the Internet at
http://www.amf.com,as well as on a new toll-free AMF
Refinancing Hot Line at 866-743-2625.
AMF BOWLING: Case Summary & 30 Largest Unsecured Creditors
----------------------------------------------------------
Lead Debtor: AMF Bowling Worldwide, Inc.
8100 AMF Drive
Mechanicsville, VA 23111
Debtor affiliates filing separate chapter 11 petitions:
AMF Group Holdings Inc.
AMF Bowling Holdings Inc.
AMF Bowling Products, Inc.
AMF Bowling Centers Holdings Inc.
AMF Worldwide Bowling Centers Holdings Inc.
AMF Bowling Centers, Inc.
AMF Beverage Company of Oregon, Inc.
AMF Beverage Company of W.VA, Inc.
Bush River Corporation
King Louie Lenexa, Inc.
300, Inc.
American Recreation Centers, Inc.
Michael Jordan Golf Company, Inc.
MJG - O'Hare, Inc.
AMF Bowling Centers (Aust.) International Inc
AMF Bowling Centers (Hong Kong) International Inc.
AMF Bowling Centers International Inc.,
AMF BCO-UK One, Inc.
AMF BCO-UK Two, Inc.
AMF BCO-France One, Inc.
AMF BCO-France Two, Inc.
AMF Bowling Centers Spain Inc.
AMF Bowling Mexico Holding, Inc.
Boliches AMF, Inc.
Type of Business: AMF Bowling Worldwide, Inc. and its direct and
indirect subsidiaries are the largest owners
and operators of bowling centers in the world.
The Company also owns the Michael Jordan Golf
Company, a business formed to build and
operate state-of-the-art golf practice and
teaching ranges in select U.S. locations. AMF
is also a leader in the manufacturing and
marketing of bowling products, directly or
indirectly supplying over 10,000 bowling
centers worldwide. Additionally, AMF
manufactures and markets the PlayMaster,
Highland and Renaissance brands of billiards
tables.
Chapter 11 Petition Date: July 3, 2001
Court: Eastern District of Virginia (Richmond)
Bankruptcy Case Nos.: 01-61119 to 01-61143
Debtors' Counsel: Slayton Dabney, Jr., Esq.
Dion W. Hayes, Esq.
McGuireWoods LLP
One James Center
901 East Cary Street
Richmond, VA 23219
(804) 775-1000
and
Marc Abrams, Esq.
Rachel Strickland, Esq.
Willkie, Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
(212) 728-8000
Total Assets: $1,682,675,000
Total Debts: $1,265,609,000
Consolidated List Of Debtors' 30 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Firstar of Minnesota, N.A. Publicly Held $277,000,000
Attn: Mr. Frank Leslie Debt
Indenture Trustee
101 East Fifth Street
St. Paul, MN 55101-1860
Tel: 651-229-2600
Fax: 651-229-6415
The Bank of New York Publicly Held $250,000,000
Attn: Giovanni Barris Debt
Indenture Trustee
101 Barclay St. -21W
New York, NY 10286
Tel: 212-815-5084
Fax: 212-815-5915
Bernal Investments Trade $834,862
Attn: Marty Echen
11875 Dublin Boulevard
Suite B138
Dublin, CA 94568
Tel: 510-828-4166
Fax: 510-828-4168
New England Plastics Trade $597,780
Attn: Tony Trembley
310 Salem Street
Woburn, MA 01801
Tel: 781-933-6004
Fax: 781-933-2726
Columbia 300, Inc. Trade $478,817
Attn: Tony Frankowiac
P.O. Box 13430
5005 West Avenue
San Antonio, TX 78213
Tel: 800-531-5540
Fax: 210-344-0479
Malet Realty, LTD Trade $450,000
Attn: Saul A. Scherl
Marina City Hotel Enterprises
900 W. Jackson Boulevard,
#4-W Chicago, IL 60607
Tel: 312-243-5353
Fax: 312-243-0080
Sysco Corporation Trade $400,000
Attn: Dean Ramos
1390 Enclave Parkway
Houston, TX 77077
Tel: 281-584-1447
Fax: 281-584-1447
Ron Dobin Litigation $400,000
Wohl, Sammis,
Christian & Perkins
Attn: Christopher Wohl, Esq.
1006 4 th St. 4 th floor
Sacramento, CA 95814
Tel: 916-446-2000
Fax: 916-447-6400
KBC Bank Litigation $350,000
Attn: Jan De Lat
Ms. Inge Jonkers
Eiermarkt 20
2000 Antwerpen
Belgium
Tel: 011-32-14-21-14-21
Fax: 011-32-14-21-32-72
Morich Enterprises, Inc. Trade $259,487
Attn: Rich Saddles
P.O. Box 1836
Grafton, VA 23692
Tel: 757-868 6800
Fax: 757-868-9317
Centimark Corporation Trade $234,351
Temperature Masters Trade $180,000
Peak Contracting Trade $155,156
FAME/SFX Royalties $130,260
The Delco Group, LTD. Trade $129,579
Coca Cola Fountain Trade $123,000
Engineering Dev. Lab, Inc. Trade $114,856
Birdcage Properties, LP Trade $107,000
Stahl's Seventys Trade $104,720
Mack Lane Service Trade $95,690
Tempest Mechanical Trade $93,200
Contractors
Riggs Plaza Shopping Cntr Trade $77,700
NXT Bowler Trade $77,390
Piece Management Trade $73,674
Boise Cascade Trade $71,721
Dynaire Service Trade $70,486
Corporation
Chicago Miniature Lamp, Trade $64,480
Inc
Air Specialists, Inc Trade $60,871
Hub City, Inc Trade $53,034
New England Mechanical Trade $51,080
Serv.
AMRESCO INC.: Files For Chapter 11 Protection in N.D. Texas
-----------------------------------------------------------
AMRESCO, INC. (Nasdaq: AMMB) has filed a voluntary petition for
reorganization relief pursuant to Chapter 11 of the United
States Bankruptcy Code. In conjunction with the filing, the
company has entered into an asset purchase agreement with NCS I
LLC, a limited liability company, the members of which are
Renewal Partners LLC, affiliates of Fortress Investment Fund
LLC and Goldman Sachs Mortgage Company, an affiliate of Goldman
Sachs Group Inc., whereby, subject to Bankruptcy Court approval
and a mandatory auction process, the company will sell
substantially all of its assets, exclusive of its cash and cash
equivalents, for a purchase price of $309 million, subject
to certain adjustments. The purchase price is comprised of $151
million of cash, subject to adjustment, a $25 million six-month
note and the replacement of current warehouse indebtedness of
$133 million. The Company's two operating subsidiaries, AMRESCO
Commercial Finance, Inc. and AMRESCO Independence Funding, Inc.
are not included in the bankruptcy filing. These subsidiaries
have received commitment letters for up to $275 million of
warehouse financing from NCS II LLC, an affiliate of NCS I LLC,
to provide capital to refinance existing warehouse facilities
and support the ongoing funding requirements of each entity. The
replacement warehouse financing is subject to Bankruptcy Court
approval as it will be guaranteed by AMRESCO and secured by its
assets.
Randy Brown, AMRESCO's Chairman and CEO said: "During the recent
proxy contest, the company's board of directors approved and the
company entered into a letter of intent, subject to due
diligence, for a loan from Renewal Partners and Fortress, two of
the members of NCS I LLC, which if consummated would have
provided funds for the company to grow its operations and
continue repurchasing its senior subordinated notes.
Shareholders would have retained a majority of the outstanding
common stock of the company.
"Subsequently, the company's portfolio of business lending
residuals experienced significantly reduced cash flows and
deterioration in value due to continued increases in
delinquencies and projected credit losses. After the 2001
meeting of stockholders, the company was informed that Renewal
and Fortress would be unable to proceed with such transaction.
Given the projected losses and anticipated default under the
company's outstanding senior subordinated notes caused by the
devaluation of the business lending residuals, the company
believes a Chapter 11 filing, in conjunction with an auction
process, will maximize the value to stakeholders and provide a
process for other potential buyers to bid for the company.
Because the company has been unsuccessful to date in finding
traditional warehouse financing to fund loan origination
activities, this process will also allow AMRESCO to preserve the
value of its loan origination franchise."
The ultimate approval and timing of the auction process is
subject to Bankruptcy Court order. If such approval is granted,
further details and information will be made available to
prospective buyers through Greenhill & Co., Inc., the company's
financial advisor.
AMRESCO, INC. is a small and middle market business lending
company. Based in Dallas, AMRESCO has offices nationwide. For
more information about AMRESCO, visit the website at
http://www.amresco.com
AMRESCO INC.: Chapter 11 Case Summary
-------------------------------------
Lead Debtor: Amresco, Inc.
700 N. Pearl St.
Suite 1900, LB 342
Dallas, TX 75201-7424
Debtor affiliates filing separate chapter 11 petitions:
Amresco Equities Canada, Inc.
Amresco Equity Investments, Inc.
Amresco Financial I, L.P.
Amresco Funding Canada, Inc.
Amresco Investments, Inc.
Amresco Management, Inc.
Amresco New England II, L.P.
Amresco New England, L.P.
Amresco Principal Managers II, Inc.
Amresco Residential Capital Markets, Inc.
AMREIT Holdings
BEI Portfolio Investments, Inc.
Chapter 11 Petition Date: July 2, 2001
Court: Northern District of Texas (Dallas)
Bankruptcy Case Nos.: 01-35326, 01-35332, 01-35336, 01-35339,
01-35342, 01-35346, 01-35349, 01-35352,
01-35356, 01-35359, 01-35361, 01-35364,
01-35367
Judge: Steven A. Felsenthal
Debtors' Counsel: Robin E. Phelan, Esq.
Haynes and Boone
901 Main St., Ste. 3100
Dallas, TX 75202-3789
214-651-5000
CASTLE DENTAL: Elects James M. Usdan As New President & CEO
-----------------------------------------------------------
Castle Dental Centers, Inc. (OTC Bulletin Board: CASL) announced
James M. Usdan has been elected president and chief executive
officer and appointed to serve on the board of directors of the
company. Mr. Usdan replaces Ira Glazer, of Getzler & Co., who
has been serving as interim CEO since February 2001. Mr. Glazer
will continue to advise the company on its restructuring plans
in a consulting capacity.
Mr. Usdan, 51, has most recently been president and chief
executive officer of NextCARE Hospitals, Inc., an Austin, Texas
based, privately-owned provider of long-term acute care services
in hospitals. NextCARE Hospitals was sold to LifeCare Management
Services in May 2001. From 1990 until May 1998, Mr. Usdan was
president and chief executive officer of RehabCare Group, Inc.,
a provider of physical therapy, rehabilitation staffing and
healthcare outsourcing services. Prior to that, Mr. Usdan was a
founder, president and chief executive officer of American
Transitional Care in Houston. Mr. Usdan serves on the boards of
directors of Metro One Telecommunications and D&K Healthcare
Resources.
Mr. Usdan commented, "I am pleased to join Castle Dental as
president and chief executive officer and welcome the
opportunity to lead the company in its turnaround. There are
many challenges ahead but Castle Dental has a strong base
business upon which to build. I have been impressed by the
dedication of our dental professionals and their commitment to
providing quality dental services to our patients. I would also
like to commend Ira Glazer for the accomplishments of the last
several months in laying the groundwork for a successful
restructuring of Castle Dental."
Castle Dental Centers, Inc. develops, manages and operates
integrated dental networks through contractual affiliations with
general, orthodontic and multi-specialty dental practices in the
U.S. Castle manages 89 dental centers with approximately 200
affiliated dentists in Texas, Florida, Tennessee and California
with annual patient revenues of approximately $100 million.
CONE MILLS: Extends Credit Facilities through November 7, 2001
--------------------------------------------------------------
Cone Mills Corporation (NYSE: COE) has amended its agreements
with its lenders extending existing credit facilities through
November 7, 2001. The terms of the amended agreements are
essentially unchanged except for the deferral of scheduled
principal payments until November 7, 2001. The company and its
lenders entered into the extension to allow sufficient time for
implementation of the company's previously announced Reinvention
Plan and completion of due diligence related to successor credit
facilities.
Chief Financial Officer, Gary L. Smith commented: "The company's
target is to complete the due diligence process with our lenders
and enter into new, longer term credit facilities during the
next few months. In regard to a status report on the
implementation of the Reinvention Plan and the realization of
projected savings from the plan, we are proceeding according
to schedule with the completion of initiatives related to about
two thirds of the expected benefits. With the benefits of the
Reinvention Plan the company has a sound plan to weather present
economic conditions, reduce debt substantially and position
itself to prosper over the long-term."
Founded in 1891, Cone Mills Corporation, headquartered in
Greensboro, NC, is the world's largest producer of denim fabrics
and the largest commission printer of home furnishings fabrics
in North America. Manufacturing facilities are located in North
Carolina and South Carolina, with a joint venture plant in
Coahuila, Mexico.
CORRPRO COS.: Delays Form 10-K Filing Due To Restructuring Talks
----------------------------------------------------------------
Corrpro Companies, Inc. (NYSE: CO), the leading provider of
corrosion protection engineering services, systems and
equipment, has filed a Notification of Late Filing with the
Securities and Exchange Commission relating to its Form 10-K for
the fiscal year ended March 31, 2001.
Chairman, President and CEO Joseph W. Rog stated, "As previously
announced, based on our results for the fourth quarter and
fiscal year ended March 31, 2001, we were not in compliance with
financial covenants included in our debt agreements. We had
previously obtained waivers of the covenant violations through
the end of June 2001, and we are currently finalizing
negotiations with our lenders to amend our debt agreements and
reset the financial covenants. Because of the on-going
negotiations with our lenders, we were unable to finalize the
description of our debt and other portions of our financial
statements included in our Annual Report on Form 10-K by the
June 29, 2001 due date. Therefore, we have filed a fifteen-day
extension for submitting our Form 10-K, as provided by
Securities and Exchange Commission regulations. While we can
provide no assurances, we would anticipate completing the
amendments and filing our Annual Report on Form 10-K within the
fifteen-day extension period."
Corrpro, headquartered in Medina, Ohio, with over 60 offices
worldwide, is the leading provider of corrosion control
engineering services, systems and equipment to the
infrastructure, environmental and energy markets around the
world. Corrpro is the leading provider of cathodic protection
systems and engineering services, as well as the leading
supplier of corrosion protection services relating to coatings,
pipeline integrity and reinforced concrete structures.
CROWN BOOKS: Seeks Plan-Filing Extension Through July 30
--------------------------------------------------------
Crown Books Corp. is asking a bankruptcy court to extend the
exclusive periods during which only the company may file a
chapter 11 plan and solicit acceptances to that plan. The
retailer has requested an extension of its exclusive plan-filing
period through July 30. If the company files a plan before that
date, third parties would be further prohibited from filing
competing plans through Sept. 28, while Crown Books solicits
plan votes. The U.S. Bankruptcy Court in Wilmington, Del., has
scheduled a hearing on the matter for July 9. Objections to the
request are due Monday. (ABI World, July 2, 2001)
CROWN CRAFTS: Lenders Agree To Amend And Extend Loan Terms
----------------------------------------------------------
Crown Crafts, Inc. (OTC Bulletin Board: CRWS) has executed
definitive agreements with its lenders to amend the covenants
and extend the expiration date of its loans from June 30, 2001
to August 6, 2001. The company and its lenders are working on a
longer term restructuring which is expected to be completed by
August 2001.
The Company also filed a notification with the Securities and
Exchange Commission that it will be late in filing its annual
report on Form 10-K for the fiscal year ended April 1, 2001. In
the filing, the Company stated that the final results for the
year would not be available until the audit is completed.
Crown Crafts, Inc., headquartered in Atlanta, Georgia, designs,
manufactures and markets home textile furnishings and
accessories. The Company's two major product groups are bedroom
products and infant & juvenile products.
EPIC RESORTS: S&P Slashes Corporate & Senior Note Ratings to D
--------------------------------------------------------------
Standard & Poor's lowered its rating on Epic Resorts' LLC US$130
million senior secured notes due 2005, to 'D' from single-'B'-
minus. The company's corporate credit rating was also lowered to
'D' from single-'B'-minus.
The rating action is based on Epic's failure to remit the
interest payment on its senior secured notes, which was due June
15, 2001, although it had enough funds to do so. The monies were
not held, as required by the terms of the notes, in a separate
escrow account. Epic is continuing discussions with Credit
Suisse First Boston to provide a timeshare receivables purchase
facility.
Based in King of Prussia, Pa, Epic is a developer and marketer
of timeshare properties.
EPIC RESORTS: Moody's Cuts Senior Secured Note Rating to Caa1
-------------------------------------------------------------
Moody's Investors Service downgraded the ratings of Epic
Resorts, LLC, a developer and marketer of timeshare resorts, and
its co-issuer and subsidiary, Epic Capital Corporation. All
ratings remain on review for further possible downgrade while
approximately $130 million of debt securities are affected.
The rating actions are as follows:
* 13% $130 million senior secured redeemable notes due 2005
lowered to Caa1 from B3
* senior implied rating lowered to Caa1 from B3
* senior unsecured long-term issuer rating lowered to Caa2
from Caa1.
The rating agency said that it recognizes Epic's significant
debt service obligations and necessity to obtain outside sources
of liquidity to support ongoing operations. Moody's also reckons
that Epic's actual financial performance is extensively less
than what it expected at the time the rating was first assigned.
FOSTER & GALLAGHER: Files Chapter 11 Petition in Wilmington
-----------------------------------------------------------
Foster & Gallagher, Inc. (F&G), a premier direct marketer of
horticulture and gift products, and 21 of its domestic
subsidiaries have filed for protection under Chapter 11 of the
United States Bankruptcy Code in the United States Bankruptcy
Court for the District of Delaware.
The Company said that it and its subsidiaries filed for Chapter
11 in order to wind-down their businesses and sell all or
substantially all of their assets.
The Company said that its management team, board of directors
and bank lenders explored a number of alternatives, including a
financial restructuring, operational reorganization of its core
businesses and a sale of strategic assets. The Company said that
it has been determined, however, that a sale of assets and an
orderly wind-down of the businesses offered the best possibility
of maximizing the creditors' recoveries.
F&G said that as a result of its discussions with its lenders,
it was determined that, effective immediately, its Spring Hill
Group, Michigan Bulb Group, Gurney's Group and all of their
subsidiaries will be closed.
The Company said that its management team and board of directors
are in the process of seeking potential purchasers for the
orderly sale of some of Foster & Gallagher's remaining
operations under the supervision of the Bankruptcy Court,
including the Gift Group. As part of the Chapter 11 proceeding,
F&G has arranged for short-term financing from certain of its
existing lenders, which helps ensure that F&G will be able to
effectuate an orderly wind-down of its remaining operations.
In the past two years, F&G has taken steps to address its
financial and operational challenges, such as divesting non-core
businesses and assets, consolidating operations and reducing
management and employee headcount while initiating new marketing
strategies. However, F&G said that its significant financial and
operational challenges, coupled with a difficult marketplace
prompted the conclusion that a traditional restructuring would
not sufficiently address F&G's obligations.
FOSTER & GALLAGHER: Case Summary & Largest Unsecured Creditors
--------------------------------------------------------------
Lead Debtor: Foster & Gallagher, Inc.
1950 Waldorf N.W.
Grand Rapids, MI 49550
Debtor affiliates filing separate chapter 11 petitions:
MBC Greenhouse Co.
Drake Acquistion Company
Flower of the Month Company
Gurney Seed & Nursery Corp.
Health Group, Inc.
HearthSong, Inc.
Henry Field Seed & Nursery Company
Home Marketplace, Inc.
Learn & Play, Inc.
Magic Cabin Dolls, Inc.
Michigan Bulb Company
mySEASONS.com, Inc.
mySEASONS Holdings, Inc.
New Holland Bulb Co.
NEWCO Holdings, Inc.
Sand Lake Realty, Co.
Spring Hill Nurseries Company
Stark Bro.'s Wholesale Co.
Stark Brothers Nurseries and Orchards Company
Stark Nursery Co. (d/b/a/ Agri Sun)
Vermont Wildflower Farm, Inc.
Chapter 11 Petition Date: July 2, 2001
Court: District of Delaware
Bankruptcy Case Nos.: 01-02175 through 01-02196
Debtors' Counsel: James H.M. Sprayregen, Esq.
Kirkland & Ellis
200 East Randolph Drive, Chicago, IL 60601
(312) 861-2000
and
Laura Davis Jones, Esq.
Pachulski, Stang, Ziehl, Young & Jones P.C.
919 North Market Street, 16 th Floor,
Wilmington, DE 19899-8705
(302) 652-4100
Estimated Assets: More than 100 million
Estimated Liabilities: More than 100 million
Consolidated List Of Debtors' 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
R.R. Donnelley Inc. Trade Debt $2,537,306
c/o Bob Creech
77 W. Wacker Drive, Suite 7715
Chicago, IL 60601-1696
Tel: (312) 326-7049
Quimby-Walstrom Paper Co. Trade Debt $1,565,978
c/o Rick Tietema
2944 Walker Drive
Grand Rapids, MI 49501
Tel: (616) 784-4700
Fax: (616) 784-7813
World Color Direct Trade Debt $868,067
c/o Paul Runko
340 Pembrerwick Road
Greenwich, CT 06831
Tel: (203) 532-4304
Fax: (203) 532-4378
Conklin Rose Co. Trade Debt $820,388
c/o Henry Conklin
7011 N. Sarival
P.O.Box 3
Litchfield Park, AZ 85340
Tel: (623) 935-5667
Spencer Press, Inc. Trade Debt $613,687
c/o Stephen P. Spenlinhauer
90 Spencer Drive
Well, MA 04090
Tel: (207) 646-9926
Valassis Communications Trade Debt $545,152
c/o Jeff Blackman
19975 Victer Parkway
Livonia, MI 48152
Tel: (734) 591-3000
Fax: (734) 462-2513
Walters Gardens, Inc. Trade Debt $516,195
c/o John Walters
1992 96th Ave
PO Box 137
Zeeland, MI 49464-0137
Tel: (616) 772-4697
Fax: (616) 772-5803
Midland Paper Trade Debt $464,639
c/o Donald D. Cooke
1825 Greenleaf Ave
Elkgrove, IL 60007
Tel: (847) 981-7300
Fax: (847) 981-0216
Morrow Macke Trade Debt $377,551
c/o Glen Morrow
340 O'Neill Drive
Hebron, OH 43025
Tel: (614) 928-1580
Fax: (614) 928-2900
Parade Publications Inc. Trade Debt $348,960
711 Third Ave
NY, NY 10017-4014
Tel: (212) 450-7065
Fax: (212) 450-7282
GBF Graphics Inc. Trade Debt $324,921
c/o Ron Marek
7300 Niles Center Rd
Skokie, IL 60077
Tel: (847) 667-1700
Fax: (847) 677-2598
Mail Well Envelope Trade Debt $311,862
c/o John Roberts
3001 N. Rockwell
Chicago, IL 60618
Tel: (773) 267-3600
Fax: (773) 267-2440
Systems Management Trade Debt $307,336
Specialists, Inc.
c/o Sue Collazo
3 Hutton Center Drive
Suite 100
Santa Anna, CA 92707
Tel: (714) 850-6605
Fax: (714) 850-6629
Widen Enterprises, Inc. Trade Debt $289,901
c/o Reed Widen
2614 Industrial Drive
Madison, WI 53716
Tel: (608) 222-1296
Fax: (608) 223-1526
American Litho Trade Debt $255,730
c/o Mark Dzuiban
160 East Elk Trail
Carol Stream, IL 60188
Tel: (630) 462-1700
Fax: (630) 462-3800
AT&T Trade Debt $234,268
1100 Walnut, 16th Floor
Kansas City, MO 64106
Tel: (877) 212-9500 or
(800) 222-0400
Cottage Hill Nursery Trade Debt $220,493
c/o Gary Cobb
9960 Padgett Switch Rd
Irvington, (Mobile) AL 36544
Tel: (334) 957-2535
Fax: (334) 957-2575
USA Weekend Trade Debt $215,528
535 Madison Ave
NY, NY 10022
Tel: (212) 715-2100
Burton Flower Garden Trade Debt $213,850
c/o Bob Hornak
14500 Kinsman Road
Burton, OH 44021
Tel: (440) 834-1883
Fax: (440) 834-1885
Cox Target Media Sales, Trade Debt $190,250
Inc.
8575 Largo Lakes Drive
Largo, FL 33773
Tel: (727) 393-1270
Fax: (727) 398-5018
FREEREALTIME.COM: Releases Unaudited Financials For FY 2001
-----------------------------------------------------------
As previously reported, on April 24, 2001, FreeRealTime.com,
Inc. (OTC Bulletin Board: FRTI) filed a voluntary bankruptcy
petition under Chapter 11 of the United States Bankruptcy Code
in the United States Bankruptcy Court for the Central District
of California. Freerealtime's wholly-owned subsidiary
Freerealtime.com-Canada was included in the petition.
Freerealtime's other subsidiaries were not included in the
petition (i.e. RedChip.com, Inc.; RedChip Review, Inc.; RedChip
Partners, Inc.; RedChip Online, Inc.; and Digital Offering,
Inc.) Since the April 24, 2001 petition date, Freerealtime has
operated as a debtor in possession and is in compliance with all
bankruptcy reporting requirements.
Since the petition date, Freerealtime has been principally
engaged in dealing with bankruptcy-related matters, and,
together with its outside advisors, has been formulating a
reorganization plan. The plan incorporates various cost
reduction strategies, asset sales, and new revenue lines.
Freerealtime also plans to explore opportunities to sell its
various businesses as a whole. Freerealtime has significantly
reduced its staff, and its remaining management and employees
now devote a significant portion of their time to developing and
implementing Freerealtime's reorganization plan, and to
administering the bankruptcy proceeding, including assembling
various reports that are required to be filed periodically with
the Bankruptcy Court and the Office of the United States
Trustee.
The burden on Freerealtime resulting from the need to focus on
reorganization-related matters, as well as to preserve capital,
no longer permits for allocating limited financial and human
resources to the preparation of a Form 10-K or the cost of an
audit. Traditional reporting costs in complying with the
Securities Exchange Act would detract from serving its
stakeholders' best interests and would utilize limited capital
currently available for the execution of the reorganization
plan.
As a result of the above, Freerealtime has notified the
Securities and Exchange Commission that it will follow the
modified reporting procedure pursuant to Staff Legal Bulletin
No. 2 (1997) in lieu of filing the periodic reports required
under the Securities Exchange Act of 1934, as amended.
Freerealtime intends to file with the Securities and Exchange
Commission, under cover of a Form 8-K, copies of its Monthly
Operating Reports within 15 calendar days following their
submission to the Bankruptcy Court and the United States
Trustee. This modified reporting procedure will replace the
periodic reports required under the Securities Exchange Act.
Freerealtime believes that the modified reporting requirements
will best serve the interests of its creditors and stockholders.
Unaudited Earnings for the Year Ended March 31, 2001
Freerealtime reported its unaudited financial results for the
fiscal year ended March 31, 2001, as follows. For the year ended
March 31, 2001 revenues increased by 27% over the prior year to
$9.13 million from $7.20 million. Gross profit increased by 86%
over the prior year to $3.15 million from $1.6 million. Gross
margin improved to 35% in the current year as compared to 23% in
the prior year. Net loss for the current year, before goodwill
impairment and other non-cash and non-recurring charges, was
$8.76 million as compared to $3.03 million in the prior year.
Net loss for the current year was $28.52 million (including
$19.76 million of goodwill impairment and other non-cash and
non-recurring charges), or $2.13 per diluted share on 13.34
million weighted-average shares outstanding, as compared to
$4.38 million, or $0.69 per diluted share on 6.39 million
weighted-average shares outstanding in the prior year.
Revenue for the fourth quarter ended March 31, 2001 was $1.63
million as compared to $2.73 million in the comparable quarter a
year ago, a decline of 40%. Net loss for the fourth quarter was
$20.38 million (including goodwill impairment and other non-cash
and non-recurring charges of $17.10 million), or $1.34 loss per
diluted share on 15.23 million weighted-average shares
outstanding, as compared to a net loss in the comparable quarter
a year ago of $323,000, or $0.05 loss per diluted share on 6.9
million weighted-average shares outstanding.
FRUIT OF THE LOOM: Settles Ki Young Lee's Claims
------------------------------------------------
In 1994, Fruit of the Loom, Ltd. acquired Pro Player from Ki
Young Lee and David Strumeier for $42,000,000. At the time, Pro
Player entered employment and non-compete agreements with both
individuals. As part of Mr. Lee's employment agreement with
Fruit of the Loom, he was to receive bonuses for 1998 and 1999
if Pro Player met certain performance objectives. The contingent
obligation of Pro Player was secured by a letter of credit,
which provided for two draws of $5,000,000 each. With the
District Court's approval, a bond replaced the first of these.
Around October 8, 1998, Pro Player commenced the Civil Action
against Mr. Lee, Mr. Strumeier, and others, asserting various
claims. By order, dated as of July 17, 2000, this Court granted
relief from the automatic stay under section 362(a) to permit
the civil action to proceed.
Pursuant to an order dated August 29, 2000, the District Court
directed Fruit of the Loom to deposit $5,000,000 into the
registry of the District Court in lieu of the bond; a second
deposit of $5,000,000 into the Registry was made by the issuer
of the letter of credit in lieu of a second draw under the
Letter of Credit. On March 28, 2001, Mr. Lee filed a motion
seeking this Court's approval of the release of Court Registry
funds.
The Settlement Agreement
The parties have entered a settlement agreement, which is
expressly conditioned on Fruit of the Loom obtaining this
Court's approval of its terms and conditions. Fruit of the Loom
seeks entry of an order under Rule 9019 approving the settlement
agreement. The agreement provides that:
(a) Mr. Lee will release any claims he has against Fruit of
the Loom, the Letter of Credit, and the bond for any bonus
payments due for the years 1998 and 1999;
(b) Mr. Lee will pay Fruit of the Loom $450,000 and deliver
sufficient collateral to secure the performance of such payment
obligation in full and final settlement and compromise of any
and all claims Fruit of the Loom and Venator may have in the
civil action;
(c) Mr. Lee will release all claims against the Court
Registry funds and will direct the District Court to release
such funds, including any accrued interest thereon, to Fruit of
the Loom; and
(d) Mr. Lee will withdraw any proof of claim filed by him
in these cases and will consent to the entry of an order
directing that such claims be removed from the schedule of
unsecured claims.
The settlement agreement also provides that it is not considered
to be an admission of any improper acts or conduct or of any
liability of either party.
The settlement agreement was negotiated based upon Mr. Lee's
representation of his financial condition. He is required to
provide Fruit of the Loom with an affidavit of financial
condition upon Mr. Lee's representation that he has not made any
fraudulent conveyances since August 1, 1998. If additional
assets of Mr. Lee are discovered, which were not disclosed in
the affidavit of financial condition, Fruit of the Loom will be
entitled to 50% of the value of such assets, in addition to the
payments provided for in the settlement agreement. Mr. Lee will
also pay Fruit of the Loom 50% of any fraudulent conveyances
made by him after August 1, 1998, in addition to the payments
described below.
The settlement agreement also provides that, to the extent
permitted by law, and without admission by Mr. Lee of any
wrongdoing on his part, he will receive a credit for the amount
paid to Fruit of the Loom under the settlement agreement against
any court-ordered restitution that may result from any possible
criminal prosecution.
Under Court approval of the settlement agreement, the parties
will execute a stipulation to dismiss with prejudice the civil
action and related proceedings against Mr. Lee. With the further
exceptions of the obligations and covenants set forth in the
settlement agreement, the parties will fully and forever release
and discharge "any and all claims" each has or may have in the
future against each other. Notwithstanding the mutual releases
set forth in the settlement agreement, the parties have not
entered into any agreement regarding restitution, except that
Fruit of the Loom shall not initiate communication with the
District Court or others advocating or otherwise concerning
restitution.
Ms. Stickles states that the amounts paid by Mr. Lee are only a
fraction of what Fruit of the Loom believes are its actual
losses resulting from his wrongful acts. However, the amount of
payment under the settlement agreement is a fair approximation
of the amount that it may ultimately be able to collect from Mr.
Lee, assuming a favorable judgment, based on Mr. Lee's assets
and overall financial condition. Therefore, Fruit of the Loom
believes that the settlement agreement is in the best interests
of all parties involved.
Ms. Stickles relies on Rule 9019(a) which "empowers the
Bankruptcy Court to approve compromises and settlements if they
are in the best interests of the estate." Vaughn v. Drexel
Burnham Lambert Group Inc., (In re Drexel Burnham Lambert Group
Inc.), 134 B.R. 499, 505 (Bankr. S.D.N.Y. 1991). In addition,
the Supreme Court has stated that in determining a settlement's
fairness, the bankruptcy court should apprise itself of "all
facts necessary for an intelligent and objective option of the
probabilities of ultimate success should the claim be
litigated." Protective Comm. for Indep. Stockholders of TMT
Trailer Ferry Inc. v. Anderson, 390 U.S. 414, 425 (1968). (Fruit
of the Loom Bankruptcy News, Issue No. 32; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
FURRS SUPERMARKET: Fleming Buys Chain & Inventory for $107 Mil
--------------------------------------------------------------
Furrs Supermarkets Inc. received approval from the United States
Bankruptcy court to sell its 66 stores in New Mexico and West
Texas including inventory to Fleming Foods of Lewisville, Texas.
The sale includes $57 million for real estate, equipment leases,
contracts and licenses, as well as inventory with an additional
value of $50 million. Both the secured creditors and unsecured
creditors committees approved the sale to Fleming.
As a part of the approved agreement, Fleming will take control
of all 66 stores in West Texas and New Mexico. The Texas-based
company will retain a minimum of 40 stores. Fleming officials
have the right to carve out up to 26 stores prior to the closing
without the purchase price being adjusted. Any stores not taken
by Fleming will be retained by Furrs, who would then market the
stores. "We are pleased with the Fleming sale. We believe it
provides the greatest value to the company and creditors with
the least impact on our associates and communities," said Furrs
President and Chief Operating Officer Steve Mortensen. "The
Furrs management team will work closely with Fleming to provide
for as many jobs as possible."
Furrs' El Paso Warehouse was not included in any of the bids
submitted through the auction process. As a result, the
warehouse will be marketed through the open real estate market.
Based on today's approval by the U.S. Bankruptcy court,
officials with Furrs anticipate it will take 60 to 90 days to
close the sale and another six to nine months to close the
remaining operations of the 97-year-old Albuquerque-based
company.
The approvals initiate a closing to the sequence of events that
started on February 8th when Furrs filed for debt protection
under Chapter 11 of the U.S. Bankruptcy Code.
Headquartered in Albuquerque, New Mexico, Furrs is the state's
largest privately held company, operating stores in New Mexico
and west Texas.
GLOBAL TISSUE: The Creditors' Votes Are In
------------------------------------------
Creditors of Global Tissue LLC, reorganizing under chapter 11
before the U.S. Bankruptcy Court for the District of Delaware
have cast their ballots on the Company's plan of reorganization.
The Debtors' legal team from Saul Ewing LLP -- Jeffrey C.
Hampton, Esq., Robyn Forman Pollack, Esq., Norman L. Pernick,
Esq., and Mark Minuti, Esq. -- advise the Court of the voting
results:
Plan Description of Dollars Number
Class Claimants' Class Accepting Accepting
----- ---------------- --------- ---------
1 Priority Wage Claims N/A N/A N/A N/A
2 Priority Benefit Claims N/A N/A N/A N/A
3 Priority Tax Claims N/A N/A N/A N/A
4 Secured Bank Group $36,000,000 100% 1 100%
5 Shelby County Tax Claim N/A N/A N/A N/A
6 City of Memphis Tax Claim N/A N/A N/A N/A
7 Other Secured Claims 126,694 45% 2 40%
8 General Unsecured Claims 4,955,359 81% 117 92%
9 Equity Interests N/A N/A N/A N/A
HECHINGER INVESTMENT: Resolves Claims Dispute With Committee
------------------------------------------------------------
Kmart Corporation is a member of the Official Committee of
Unsecured Creditors of Hechinger Investment Company of Delaware,
Inc., et al. Kmart had asserted claims against the debtors'
estates relating to, among other things, the debtors' real
estate lease and sublease agreements with Kmart. Specifically,
Kmart filed prepetition unsecured claims for, among other
alleged claims, lease rejection damages in excess of $230
million, cure obligations of $1.7 million and administrative
claims in the amount of $3.4 million. The debtors and the
Committee dispute the validity and extent of the Kmart claims.
The Committee has requested that the debtors assign to the
Committee the rights of the debtors' estates to reconcile,
object to or challenge the Kmart claims and to prosecute any
claims or causes of action against Kmart.
The Committee requests that the court grant the motion approving
the stipulation and order between the Committee and the debtors.
The Committee is represented by David B. Stratton, David M.
Fournier and Aaron A. Garber of Pepper Hamilton LLP and Scott L.
Hazan and Lorenzo Marinuzzzi of Otterbourg, Steindler, Houston &
Rosen, PC.
A hearing on the motion will be held on July 10, 2001 at 9:30 AM
before the Honorable Peter J. Walsh, District of Delaware.
Simultaneously with the filing of this motion, the Committee has
filed a motion seeking allowance of a stipulation and order
proposing a settlement of Kmart's prepetition claim against each
of the debtors in the aggregate amount of $150 million; and an
administrative claim in the amount of $2.4 million.
In addition, the Committee will file a consolidated liquidating
plan that will provide for the substantive consolidation of the
debtors' estates. AS part of the settlement, Kmart will agree to
waive any right to share in the first $25 million of net
litigation recoveries (in the aggregate) from the Bondholder
Action and certain estate Actions.
ICG COMMUNICATIONS: Rejects 8 Telecommunications Space Leases
-------------------------------------------------------------
ICG Communications, Inc. asks Judge Walsh for authority to
reject leases of real property effective as of June 4. The
Debtors assure Judge Walsh that the Creditors' Committee has
reviewed this Motion and agrees that the proposed relief should
be granted.
Under these eight leases and contracts which are the subject of
this Motion, the Debtors utilize office, warehouse and
telecommunications sites. The Debtors have determined that
these sites are not necessary to the Debtors' ongoing
operations, but remain currently obligated under these leases
and contracts.
The Debtors do not believe that there is any value in these
leases and contracts which would warrant their assumption and
assignment to third parties. Accordingly the Debtors believe
that rejection is in the best interests of these estates and
their creditors.
The leases are:
Site Landlord Lessee Debtor
---- -------- -------------
3406 Oakcliff Rd. Carmel Property Mgmt. ICG Telecom Group, Inc.
Suite D-8 2814 Spring Rd., Ste. 102
Atlanta, Georgia Atlanta, Georgia
50 Glenlake Pkway. Highlands/Forsyth LTP ICG Telecom Group, Inc.
Atlanta, Georgia 2200 Century Pkway
Atlanta, Georgia
17415 Monterey Hwy Rafael & Mary Lopez ICG Telecom Group, Inc.
Suite 207 17415 Monterey Hwy
Morgan Hill, CA Morgan Hill, CA
333 W. Santa Clara McCanan Investments ICG Telecom Group, Inc.
San Jose, CA 333 S. Santa Clara
San Jose, CA
201 E. Commerce St. Ohio One Redevelopment ICG NetAhead, Inc.
Atrium Level 100 Federal Plaza East
Youngstown, OH Youngstown, OH
1164 Monroe St. Monterey Cty. Laurel Prof. ICG NetAhead, Inc.
Suite 10-A Center Park Prof. Ctr.
Salinas, CA Morgan Hill, CA
7 Loudon St. SE Bert Harrison ICG NetAhead, Inc.
Suite B-1 7 Loudon St. SE
Leesburg, VA Leesburg, VA
906 G Street LKL Properties ICG Telecom Group, Inc.
Sacramento, CA 711 Ninth Street
Sacramento, CA
By his Order, Judge Walsh authorizes the Debtors to reject these
8 leases. (ICG Communications Bankruptcy News, Issue No. 7;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
IMPERIAL CREDIT: Completes Exchange Offer & Consent Solicitation
----------------------------------------------------------------
Imperial Credit Industries, Inc. (Nasdaq: ICII) announced the
successful completion of the exchange offer for all of its
outstanding senior notes. As of the close of the exchange offer
on June 28, 2001 $39,995,000 of the total outstanding
$41,035,000 of Remarketed Redeemable Par Securities, Series B of
Imperial Credit Capital Trust I, due in June 2002, $144,352,000
of the total of $165,939,000 of 9.875% Series B Senior Notes due
January, 2007 and $3,443,000 of the total outstanding
$10,932,000 of 9.75% Senior Notes due January 2004, have been
validly tendered.
H. Wayne Snavely, Chairman stated, "The exchange offer has
reduced the principal balance of the Company's senior debt by a
total of $60,323,000 and marks the completion of the second of a
three phase financial restructuring at ICII. The third phase of
the restructuring is the issuance of up to $20,000,000 of
convertible debt, the net proceeds of which will be used to
invest additional capital into the company's subsidiary,
Southern Pacific Bank. The third phase of the restructuring is
expected to be completed during the month of July. As of June
29, 2001, $10,000,000 of new convertible debt had been issued by
the Company with additional closings expected in July."
All questions with respect to the exchange offer and consent
solicitation may be directed to ICII at (310) 373-1704 (attn:
Brad Plantiko, Chief Financial Officer or Paul Lasiter,
Controller).
IMPERIAL CREDIT: S&P Drops Ratings to D From CC
-----------------------------------------------
Standard & Poor's lowered the senior debt rating of Imperial
Credit Industries Inc. (ICII) and its unit Imperial Credit
Capital Trust I to single-'D' from double-'C'.
The Torrance, Calif.-based specialty finance company's long-term
counterparty credit rating is also lowered to 'D' from double-
'C'. The company's ratings are removed from CreditWatch, where
they were placed with negative implications on Feb. 9, 2001.
The downgrade reflects the company's announcement that it has
executed a recapitalization agreement in which the two rated
issues have been tendered in exchange for newly issued debt that
is less than the par value of the original debt. The new notes
would be supplemented with shares of ICII stock and warrants to
purchase additional common stock of ICII. While the transaction
will provide the company with much needed debt relief and
provide additional cash through a separate issuance of secured
debt, the restructuring comes at the expense of holders of
existing unsecured debt, who are receiving a significant
discount on the face value of their debt. Moreover, it is
uncertain whether the value of the stock and associated warrants
would maintain sufficient value by the maturity date of the
original debt to compensate bondholders for the discount taken.
Standard & Poor's considers such an exchange a default. The cash
raised by the transaction will be invested in ICII's main
operating subsidiary, Southern Pacific Bank. The additional
capital will help the bank to meet its requirements under its
agreement with its regulators and allow the bank to continue to
support its core business, Standard & Poor's said.
Ratings Lowered And Removed From Credit Watch:
To From
Imperial Credit Industries Inc.
Long-term counterparty credit rating D CC
Senior unsecured debt D CC
Imperial Capital Trust I
Senior unsecured debt D CC
LAIDLAW INC.: Paying Prepetition Employee Claims In Canada
----------------------------------------------------------
Laidlaw Inc.'s Canadian affiliates sought and obtained authority
at a First Day Hearing, in accordance with the Company's stated
policies, as such policies may be modified from time to time,
and in their sole discretion, to pay:
$30,472 for wages, salaries and contractual compensation;
55,031 for earned and accrued vacation pay;
8,200 for reimbursements of employee business expenses;
7,394 for withheld retirement savings deposits; and
964 for miscellaneous employee payroll deductions.
The Applicants currently employ approximately 50 workers in
Canada.
"The continued and uninterrupted service of these Employees is
essential to the Applicants' continuing operations and to their
ability to reorganize," Jay A. Carfagnini, Esq., from Goodmans
LLP. told Mr. Justice Farley at the First Day Hearing. Mr.
Carfagnini explains that Laidlaw filed for chapter 11 protection
in the midst of a regular payroll period. Payroll checks need to
be issued this week. Telling employees to file proofs of claim
is not something for which Laidlaw management is prepared and
management is convinced that the Company's failure to honor the
first postpetition payroll would destroy employee morale.
Persuaded by these arguments, Mr. Justice Farley granted Laidlaw
authority to honor these obligations. (Laidlaw Bankruptcy News,
Issue No. 1; Bankruptcy Creditors' Service, Inc., 609/392-0900)
LEINER HEALTH: Ratings Fall to D After Missed Interest Payment
--------------------------------------------------------------
Standard & Poor's lowered its corporate credit rating on Leiner
Health Products Inc. to D from single-B-minus. The rating on the
company's bank loan was lowered to double-C from single-B-minus,
and the subordinated debt rating was lowered to D from triple-C.
The ratings are removed from CreditWatch, where they were placed
Feb. 16, 2001.
The outlook is N.M. (not meaningful).
These actions reflect the announcement by Carson, Calif.-based
Leiner that it will not make its interest payment due July 2,
2001, on its subordinated notes that mature 2007. On June 28,
2001, Leiner received a formal notice of default under its bank
agreement. Subsequently, the bank lenders have prohibited the
subordinated notes interest payment. The company is currently in
discussions with the bank lenders regarding a forbearance
agreement.
Leiner is a manufacturer of vitamins, minerals, supplements, and
over-the-counter pharmaceutical products. The company leads the
mass-market private label channel, with about a 50% market
share. Operating performance has been adversely impacted by
negative publicity about vitamins, eroding margins from lower
selling prices, and high debt leverage, Standard & Poor's said.
LERNOUT & HAUSPIE: Summary Of Recovery & Payment Plan
-----------------------------------------------------
Lernout & Hauspie Speech Products NV assures the Belgian Court
that it intends to meet the legal requirements of both Belgium
and the United States, and that its Recovery and Payment Plan,
although a separate document from a chapter 11 plan, aims for
the "same philosophy" and effects identical treatment of
creditors in both reorganization processes. No payment will be
made prior to approval of a plan by the United States Court;
hence execution of the Belgian plan will be commenced upon
approval of a United States plan.
L&H NV intends to jointly transfer all assets and activities of
the speech and language technology division. These assets
belong to L&H NV, wholly-owned subsidiaries of L&H NV, and L&H
Holdings USA, Inc. The "debt rate" of Holdings is considerably
limited in comparison with its assets. L&H NV assures the
Belgium court that it intends to submit a recovery and payment
plan for Holdings to its creditors. To the extent this plan is
approved, this will allow L&H NV to transfer the assets of L&H
NV and Holdings, jointly or not. In support, L&H NV provides
financial information only through December 31, 2000, saying
these are its most recent financial statements.
L&H NV advises the Court that the list of claims verified by the
commissioners has been submitted to the Commercial Court, and
that disputed claims have been resolved. A separate repayment
plan is presented with respect to each class of creditors,
determined by objective criteria, and in accord with the spirit
and objectives of the Bankruptcy Code in the United States.
The plan is said to cover all claims against L&H NV, existing or
based on facts prior to January 5, 2001.
The Debtor says it is understood that unsecured claims in both
jurisdictions will be reduced to the lowest priority and the
lower amount admissible in one or both jurisdictions.
I. Preferential Creditors as referred to in Article 30 of the
Judicial Composition Act:
(a) Unpaid sellers benefiting from a clause suspending
the transfer of property until payment of the full price.
No payments will be made to the sellers who have reclaimed the
movables on the basis of a clause of retention of title to the
extent that these movables were/will be returned to them.
(b) Creditors benefiting from rights under a mortgage.
(c) Creditors benefiting from rights under a pledge.
Artesia Banking Corporation NV alleges to have a pledge on the
business of L&H NV to guarantee the payment of a principal
amount 1.004.250.000 BEF, plus three years of interest, and an
amount equal to 10% of the principal amount for various costs.
L&H NV disputes the validity/applicability of the pledge on the
business and a procedure has been initiated to obtain a judgment
by the Court in this respect. In the event the pledge on the
business in favor of Artesia is declared valid and applicable by
a judgment against which no further appeal is available, then
the debt owed to Artesia for the guaranteed amount (the amount
which will be determined by a judgment) will be paid over a
period of 18 months and the interest will be paid at the
contractual interest rate.
(d) Creditors benefiting from a special privilege.
(e) Fiscal administration.
L&H NV has a number of debts to tax authorities. In accord with
applicable law, L&H NV will ask to obtain a waiver from payment
of interest, any applicable increases, and fines. These debts
will be paid over a period of 18 months in accord with the
Judicial Composition Act. If no waiver of interest can be
obtained, then the interest at the applicable legal interest
rate will be paid.
Unless otherwise provided in this Plan, the claims of the
Preferential Creditors in this class will be paid in full for
the guaranteed/privileged amount within a period of 18 months
(as of the first day of the period of definitive suspension) and
interest will be paid at the legal, or, as the case may be,
contractual interest rate. By contractual interest rate, L&H NV
means the normal interest rate, excluding any possible default
interest rates.
II. Prepetition General Unsecured or General Privileged Claims
of Euro 25,000.00 or less or prepetition general unsecured
or general privileged claims voluntarily reduced to that
amount.
Each holder of an allowed or non-disputed general unsecured or
general privileged claim of up to Euro 25,000.00, or which has
been voluntarily reduced to Euro 25,000.00, will receive a cash
payment of up to 75% of the allowed amount of such claim within
30 days following the date of confirmation of a Chapter 11 plan
in the United States in full satisfaction of such claim,
provided, however, that the total amount of cash to be
distributed to the holders of claims in this class will not
exceed Euro 1,500,000.
Holders of a claim that exceeds 25,000 Euro must notify L&H NV
on or before June 30, 2001, if they are willing to voluntarily
reduce their claim to 25,000 Euro in order to be treated under
this class.
According to the claims currently allowed by the Commercial
Court of Ypres, with the exception of the claims provisionally
accepted for 1 Euro, 170 creditors fall under this category for
a total amount of 866.255.57 Euro. The amounts of the claims
will be determined and the payments ill be made excluding
interest and liquidated damages.
III. Prepetition General Unsecured and General Privileged
Claims
(1) All prepetition general unsecured claims and claims
benefiting from a general privilege, other than those claims
receiving treatment under Sections I - III above, are in a
single class. These claims include the prepetition claims of
the banks under the prepetition revolving credit facility of May
2, 2000 (without prejudice to possible securities or privileges)
and the non-securities fraud claims (as far as it is or will be
ascertained that they are unsecured or benefit from a general
privilege), with the exception of claims otherwise dealt with in
the Plan. All inter-company claims are in this category, as are
trade debts and in general all debts with regard to general
unsecured and general privileged creditors, other than
bondholders.
Holders of general unsecured and general privileged claims will
receive, for the principal amount of these claims, a pro rata
distribution of 93% of the available cash of L&H NV. Holders of
prepetition general unsecured claims will not receive any
distributions after they have received 100% of the principal
amount of their claim.
On May 2, 2000, Dictaphone Corporation has given a limited
guarantee (as modified on November 8, 2000) in favor of the
Banks which are parties to the revolving credit agreement. Any
recoveries by the Banks in execution of the guaranty given by
Dictaphone Corporation will be included in determining whether
the Banks have received 100% payment of the principal amount of
their claims.
If the holders of prepetition general unsecured claims have
received 100% repayment of the principal amount of their
prepetition general unsecured claims, all further distributions
will be:
(i) 93% will be distributed to holders under section 4
(ii) 3.5% will be distributed to holders under section 5
(iii) 3.5 will be retained by L&H NV
IV. Bondholders, Preferred Income Equity Redeemable Trust
Securities, and Convertible Subordinated Notes.
All claims of the bondholders of (i) PIERS relating to the L&H
NV 4.75% convertible subordinated debentures, and (ii) L&H NV's
8% convertible subordinated notes are in this class. Holders of
these claims will receive a pro rata distribution of 4%, based
on the principal amount outstanding on such instruments, of the
available cash.
V. Claims for supposed fraud during the sale/emission of shares
and securities.
All claims and causes of action against L&H NV arising from
rescission of a purchase, sale or issue of stock, warrants,
options or other securities of L&H NV, or an affiliate, for
damages arising from the purchase or sale of a security, or for
reimbursement or contribution, are in this class, as are all
claims for damages, including claims of actual or former holders
of stock, warrants, options, and other securities of L&H NV for
misrepresentation, false annual accounts, fraud, violation of
securities laws, company law, and other similar claims. L&H NV
believes that these claims include, without limitation, the
claims for damages or rescission arising out of the purchase of
L&H NV stock like the claims asserted by Stonington management
and its affiliates, James and Janet Baker, and Seagate
Technologies, or similar types of claims.
This class specifically excludes the shareholders or holders of
warrants, options, and any other security which "have no claim
as meant in this class".
Holders of these claims will receive a pro rata distribution of
1.5% of the available cash.
Means of Implementation
L&H NV will make distribution from the net proceeds it obtains
(i) from the sale/transfer/contribution of activities and
assets, and (ii) from the payments resulting from causes of
action against third parties. Causes of action against third
parties include, without limitation, the claims for damages
against responsible third parties, claims on insurance companies
by virtue of insurance policies entered into by L&H NV to cover
the responsibilities of directors and managers, and the company,
and other similar claims.
To the extent that L&H NV receives shares as consideration for a
contribution, L&H NV will endeavor to distribute such shares
among the creditors of categories 3, 4 and 5 in accord with the
distribution scheme contemplated in this Plan, it being
understood that the rounds up or rounds down will be made
necessary for the distribution of the shares.
L&H NV will retain 1.5% of each distribution of available cash,
which retained cash (i) will be placed in a segregated account,
and (ii) will not be included in any further calculation of
available cash.
Available Cash
For purposes of this Plan, available cash means, at any time,
the cash held by L&H NV, including the net proceeds from any
sale/transfer/contribution of activities and assets, and the
liquidation of any cause of action, but excluding any retained
cash, minus (i) the amount of cash necessary to satisfy or
reserve for all allowed administrative expenses (among others,
obligations toward the personnel and the management), priority
claims (among others, claims during the period of provisional
suspension or definitive suspension), claims of preferential
creditors in I, claims of creditors mention in II, and the cash
held in any disputed claims reserve, and (ii) the amount of cash
determined from time to time by L&H NV to be necessary to fund
adequately the administration of the Plan, including its pursuit
of causes of action against third parties. L&H NV intends, if
legally possible, to assign claims against third parties to a
limited company or trust which will, under control of the
creditors, prosecute the causes of action. Such assignment will
have no effect on the distributions to the creditors as
specified in this Plan.
Distributions will be made after the approval of this plan by
the United States Bankruptcy Court (expected before September
15, 2001), and as soon as there is available cash. The
distributions will run over a maximum period of 24 months.
To the extent that the United States Bankruptcy Court does not
confirm the Plan, L&H NV will apply to the Ypres Commercial
Court to modify the Belgian Plan to address the issues hindering
confirmation of the Plan by the United States Bankruptcy Court.
Financing Needed to Continue Activities
L&H NV has concluded at the end of February 2000 a contract of
bridge financing with Ableco Finance, a company part of the
American Cerberus group. The credit facility concerns an amount
of $60,000,000 with a maximum term of 13 months. In principle,
this credit facility should be sufficient to bridge the period
until the transfer of the activities and assets.
Discharge & Release
Following execution of this Plan, as it may be amended, L&H NV
will completely and definitively be released from all claims,
whether filed or not, which are referred to in this Plan.
(L&H/Dictaphone Bankruptcy News, Issue No. 8; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
LOEWEN GROUP: Settles Frank Duane Schaefer's Employment Claims
--------------------------------------------------------------
The Loewen Group, Inc. seeks the Court's approval of a
Stipulation that sets forth the Settlement on consensual
cessation of employment of Frank Duane Schaefer who was employed
as Vice President - Asset Development for LGII on or about
petition date, who later entered into a Key Employee Retention
Program Release Agreement, and subsequently held discussions
with the Company on his possible relocation to a different
office upon the Company's consolidation exercise but the
discussions for relocation did not materialize and the parties
reached the consensual decision on the cessation of employment.
Events Giving Rise to the Settlement
In connection with LGII's purchase of Paragon Family Services,
Inc., on or about October 15, 1990, LGII, TLGI and Schaefer
entered into an Employment Agreement/Covenant Not to Compete.
Pursuant to that, Schaefer agreed to not compete against TLGI or
LGII through 2010, at a minimum, in exchange for the payment of
a total of $6,217,520 to be paid at various times between 1990
and 2010.
On or about June 15, 1994, Schaefer became a participant in the
Loewen Companies' 1994 Management Equity Investment Plan (the
"MEIP") and entered into numerous related agreements in
connection with the MEIP.
On or about August 1, 1996, Schaefer and TLGI entered into an
Option Agreement pursuant to which TLGI granted to Schaefer the
option to acquire 7,776 shares of common stock of TLGI for the
price of $26.8 125 per share.
Between 1990 and the Petition Date, Schaefer was employed by the
Debtors in various capacities. On or about the Petition Date,
Schaefer was employed as the Vice President - Asset Development
for LGII.
The Debtors' Key Employee Retention Program (the "KERP"),
approved by the Court, provides that Schaefer, as a Vice
President, would receive 12 months' salary upon the termination
of his employment with the Loewen Companies for any reason other
than cause, death or disability. The KERP also provided Schaefer
with the potential to become entitled to various other payments
including a potential bonus upon the Debtors' emergence from
chapter 11.
On or about November 29, 1999, LGII and Schaefer entered into
the "KERP Release Agreement" pursuant to which the parties,
among other things, agreed to terminate the Employment Agreement
-- but not for the "Benefits Provision" and the "Installment
Provisions" -- and Schaefer released and waived all rights and
entitlement under the terminated portions. In addition, the
Noncompetition provision of the KERP Release Agreement provides
that, for two years after the termination of his employment,
Schaefer shall not (i) render Personal Services to any Competing
Business within a 25 mile radius of the Company-owned site to
which [Schaefer] regularly reported at the time of [his]
termination of employment with the Company or (ii) have any
investment in a Competing Business other than a de mimmis
investment. A Competing Business is defined as an entity which
is in competition with any significant line of business
conducted by the Loewen Companies.
In December 1999, Schaefer filed various proofs of claim against
the Debtors' estates based upon
(a) the Employment Agreement,
(b) the MEIP (Management Equity Investment Plan),
(c) the Option Agreement and
(d) Schaefer's right to indemnification.
Asserted Asserted
Claim No. Debtor Claimed Amount Classification
--------- -------- -------------- --------------
(a) 2142 LGII $2,055,000 unsecured
nonpriority
2144 TLGI $2,055,000 unsecured
nonpriority
(b) 2141 LGII $ 90,120 plus unsecured
unliquidated nonpriority
2143 TLGI $ 90,120 plus unsecured
unliquidated nonpriority
2146 LMIC $ 90,120 plus unsecured
unliquidated nonpriority
8828 LGII $136,937 plus unsecured
unliquidated nonpriority
8829 TLGI $136,937 plus unsecured
unliquidated nonpriority
8830 LMIC $ 90,120 plus unsecured
unliquidated nonpriority
Proofs of claim numbers 8828, 8829 and 8830 are identified on
their face as amending and replacing the other three MEIP
Claims.
Schaefer filed proof of claim number 2145 against TLGI's estate
asserting liabilities in respect of the Option Agreement. The
amount asserted is $0.
Schaefer also filed 35 proofs of claim in unliquidated amounts,
numbered consecutively from 1613 through 1647, against various
of the Debtors' chapter 11 estates asserting liabilities in
respect of contingent indemnification obligations (collectively,
the D&O Indemnification Claims.
In connection with their consolidation and restructuring
efforts, the Loewen Companies determined to close their
corporate offices located in Conroe, Texas. As a result, the
offices in which Schaefer was located were scheduled to be
closed. The Loewen Companies and Schaefer thus discussed the
potential relocation of Schaefer to a different office of the
Loewen Companies but the parties ultimately determined that it
was in both parties' interests to discontinue Schaefer's
employment with the Loewen Companies.
The Settlement
The parties then entered into negotiations which culminated in
the execution of the Stipulation and Settlement, the principal
terms of which are as follows:
(A) Termination of Employment
Schaefer's employment by the Loewen Companies will
terminate in all respects at 12:0 1 a.m., Central Time, on
June 1, 2001 or such later date as shall be fourteen
calendar days following the date that the Stipulation is
entered by the Court.
(B) Payment and Retention of Certain Benefits
In accordance with the KERP and the KERP Release Agreement
and the Benefits Provision of the Employment Agreement:
(1) LGII shall pay Schaefer $114,000.00 (the "Severance
Amount"); and
(2) Schaefer is entitled to participate in the Loewen
Companies' medical plan until November 30, 2001; and
(3) Schaefer is eligible to participate in any benefit
programs of the Loewen Companies as are provided under
COBRA.
(C) Obligations of Schaefer
Schaefer reaffirms certain commitments made by him in the
KERP Release Agreement.
In addition, Schaefer agrees, for two years following the
Effective Date, to not (a) directly or indirectly work on,
manage, advise upon or provide consulting services in
respect of an asset disposition or business disposition
transaction or transactions or program (as or assisting a
seller) in the funeral service or cemetery industries; or
(b) directly or indirectly work, manage or consult for
Service Corporation International, Stewart Enterprises,
Inc., Carnage Services, Inc. or Prime Succession, Inc., or
any of their respective subsidiaries, affiliates,
successors or assigns (collectively, the "Renegotiated
Noncompetition Provision").
The noncompetition provision of the Stipulation expressly
supersedes the noncompetition provisions of the KERP
Release Agreement.
(D) Treatment of Bankruptcy Claims
The Stipulation provides for the disallowance of the Option
Agreement Claim and certain of the MEIP Claims that have
been amended and superseded by others of the MEIP Claims.
The Stipulation further clarifies the liabilities asserted
by Schaefer in the Employment Agreement Claims. The
Stipulation does not otherwise affect the parties' rights
in respect of the Employment Agreement Claims, the D&O
Indemnification Claims and the MEIP Claims.
(E) Release and Covenant Not to Sue
Schaefer agrees not to file any additional proofs of claim
in the Debtors' chapter 11 cases. In addition, Schaefer has
agreed to release and discharge the Loewen Companies from
any and all liability of any kind, subject to certain
exceptions for certain of the Bankruptcy Claims asserted by
Schaefer and the compensation and benefits payable to
Schaefer in connection with the Stipulation Bankruptcy
Court Approval.
* * *
The Debtors have concluded that entry into the Stipulation will
result in cost savings to their estates and provide them with
additional protections against competition from Schaefer. In
addition, the Settlement embodied by the Stipulation resolves
certain of the disputes between the Loewen Companies and
Schaefer.
The Debtors believe that the Stipulation satisfies the four
factors by which courts should evaluate the reasonableness of a
proposed compromise and settlement: "(1) the probability of
success in litigation; (2) the likely difficulties in
collection; (3) the complexity of the litigation involved, and
the expense, inconvenience and delay necessarily attending it;
and (4) the paramount interest of the creditors."
Accordingly, the Debtors submit, in the exercise of their sound
business judgment, that entry into the Stipulation is in the
best interests of their estates and creditors. (Loewen
Bankruptcy News, Issue No. 41; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
LUBY'S INC.: Amends Loan Facility & Issues Notes to Pappas Bros.
----------------------------------------------------------------
Luby's, Inc. (NYSE: LUB) has reached an agreement with its bank
syndicate to amend the Company's senior credit facility. The
facility as amended has a maturity date of April 2003 (with
provisions for extensions under certain conditions), requires
scheduled payments of principal which are linked to
corresponding reductions on credit available under the facility,
places limits on capital expenditures, requires the payment of
certain fees to the lending group, and is to be secured by
substantially all of the Company's owned real estate. The credit
facility had an outstanding balance of $124.1 million (including
existing letters of credits) as of June 29, 2001. Existing
letters of credit supported by the facility will remain
outstanding, but the Company will no longer borrow additional
funds under the facility.
The Company also announced that it had issued $10 million of
convertible subordinated notes to Harris J. Pappas, Chief
Operating Officer, and Christopher J. Pappas, President and
Chief Executive Officer, as contemplated by the previously
announced Purchase Agreement with those individuals dated March
9, 2001. The Pappas brothers have satisfied their obligation to
purchase notes from the Company under the terms of the Purchase
Agreement.
Chris Pappas said, "We are pleased that we could reach an accord
with our lenders, and we thank them for working closely with us.
All of Luby's employees can now focus their energies on
excellence in execution and delivery of our product. Harris and
I are excited about the future of Luby's."
The Company reiterated that operating results through February
28, 2001, resulted in its non-compliance with two financial
covenants of the credit facility. There was no payment default
and the non-compliance did not reflect an inability of the
Company to pay its debts as they became due in the ordinary
course. The financial covenants have been amended to be
consistent with the Company's current business plan by
eliminating existing covenants and replacing them with covenants
relating to the Company's EBITDA (earnings before interest,
taxes, depreciation and amortization). Management believes that
cash from operations, together with the proceeds from the Pappas
notes, will be sufficient to provide for the Company's
operational needs through the term of the credit facility.
Because the amendment to the credit facility had not been
completed when the Company filed its Quarterly Report on Form
10-Q on March 15, 2001, the Company was required to classify its
outstanding borrowings under the credit facility as current
liabilities. As a result of the amendment to the credit
facility, borrowings under the facility will be reclassified as
long-term liabilities. The amendment to the credit facility and
all ancillary documents will be filed as exhibits to the
Company's Quarterly Report on Form 10-Q for the quarter ended
May 31, 2001, which will be filed on or before July 16, 2001.
The San Antonio-based company operates 215 Luby's in ten states,
and its stock is traded on the New York Stock Exchange (symbol
LUB).
METRICOM: Files Chapter 11 Petition in San Jose, California
-----------------------------------------------------------
Metricom (Nasdaq:MCOM), a high-speed wireless data services
company, has filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy
Court in San Jose, California. Under the protection of Chapter
11, the Company will seek to restructure its operations and debt
obligations while maintaining the operation of its wireless
network and continuing to provide services and access to its
many resellers, channel partners, and direct customers in the 15
metropolitan markets that it currently serves. Metricom is
working with its resellers and channel partners to maintain
network access services for their end user subscribers.
Commenting on the announcement, Interim CEO Ralph C. Derrickson
said, "As a result of the depressed state of the capital
markets, we have been unable to raise necessary additional
capital. Consequently, management and the Board of Directors
decided this action would be in the best interests of all of
Metricom's stakeholders. Although there are certainly many
challenges ahead, we believe that the prospects for our
outstanding technology remain strong. We will continue to work
hard to preserve the value inherent in our technology, while
evaluating the options before us."
The petition allows Metricom to continue its operations and to
explore financial alternatives, while working with its creditors
to restructure its debt obligations. The law firm of Murphy
Sheneman Julian & Rogers has been engaged as reorganization
counsel for Metricom.
The Company and its Board of Directors also announced the
appointment of Kevin I. Dowd as chief restructuring officer, a
newly created position. Mr. Dowd, a corporate turnaround
specialist who has been serving as an outside advisor to
Metricom for the last several weeks, will be overseeing the
Company's restructuring efforts, as well as working with the
Company to evaluate options for financing the Company's
continuing operations, as well as other strategic alternatives.
"It is clear to me that Metricom's wireless Internet access
product is viable and that its Ricochet service offering
provides the fastest mobile wireless communications solution on
the market today," said Mr. Dowd. "The Company believes that
today's filing is the best means to preserve these assets moving
forward."
Mr. Dowd is a Principal of Nightingale & Associates, LLC with
more than 25 years of U.S. and international sales, marketing,
operations, administrative and general management experience. In
addition to having held a variety of operating management
positions in the communications, office products, computer,
consumer banking and investment banking industries, he has
served as interim president and chief executive officer for more
than 28 companies, including an $800 million microelectronics
distributor, $350 million financial services conglomerate, and a
major international shipping concern.
About Nightingale & Associates, LLC
Founded in 1975 and based in Stamford, Conn., Nightingale &
Associates, LLC helps clients implement its recommendations on
turnaround and profit-improvement projects. The Company has a
strong record of performance in implementing divestiture and
asset-recovery assignments. Many of the engagements it works on
are large and complex requiring a variety of management and
specialized disciplines.
About Metricom
Metricom, Inc. is a high-speed wireless data Company. With its
high-speed Ricochet mobile access, Metricom is making
"information anytime" possible-at home, at the office, on the
road, and on many devices. Founded in 1985, Metricom has spent
more than 15 years on the development of its distinctive
MicroCellular Data Network (MCDN) technology. That experience
has enabled Metricom to develop the fastest wireless mobile data
networking and technology commercially available today. Ricochet
has been operating since 1995 at speeds up to 28.8 kbps. The new
Ricochet, delivering user speeds of 128 kbps, is currently
available in thirteen markets and is connected to two other
service areas (Seattle and Washington DC) to increase coverage
for mobile professionals.
METRICOM, INC.: Chapter 11 Case Summary
---------------------------------------
Lead Debtor: Metricom, Inc.
333 W. Julian St.
San Jose, CA 95110
Debtor affiliates filing separate chapter 11 petitions:
Metricom DC, L.L.C.
Metricom Finance, Inc.
Metricom Investments DC, Inc.
Metricom New York, L.L.C
Chapter 11 Petition Date: July 2, 2001
Court: Northern District of California (San Jose)
Bankruptcy Case Nos.: 01-53291, 01-53297, 01-53300 to 01-53302
Judge: Arthur S. Weissbrodt
Debtors' Counsel: Margaret Sheneman, Esq.
Murphy, Sheneman, Julian and Rogers
101 California St. 39th Fl.
San Francisco, CA 94111
415-398-4700
NAVIGATOR GAS: S&P Downgrades Corporate Credit Rating to CCC-
-------------------------------------------------------------
Standard & Poor's lowered its ratings on Navigator Gas Transport
PLC and removed them from CreditWatch, where they were placed on
Feb. 10, 2000.
The downgrade reflects ongoing weak market conditions and
expectations that Navigator's majority indirect owner will
eventually conclude discussions with the bondholders regarding
restructuring options amid weak market conditions for
petrochemical gas transport. Arctic Gas S.A., part of the Italy-
based Cryofin Group, is an 80% owner of the common equity of
Navigator Gas Holdings PLC, which in turn owns Navigator Gas
Transport. The remaining 20% of Navigator Holdings is owned by
Tractebel Gas Engineering (an indirect subsidiary of Tractebel
S.A.) and MarLink Schiffahrtskontor GmbH (MarLink), a German
ship management company that had been responsible for technical
and commercial management of the Navigator vessels. These
contracts have been terminated by the owning companies.
The corporate credit rating reflects continued weaker-than-
expected worldwide market conditions for liquefied gas transport
due to depressed demand, with no long-term employment
established as yet, and a leveraged capital structure. All five
vessels are now delivered and operating. The carriers were
constructed at the Jiangnan Shipyard in Shanghai, China, and
delivered during 2000.
Due to current weak rates and volumes, cash flow from operations
have been insufficient to fully pay interest on the rated bonds
since late 2000, without use of the debt service reserve. In
current estimated market conditions, reduced operating cash
flow, combined with debt service reserve draws, should be
sufficient to pay interest into 2002. The debt service reserve
is an irrevocable letter of credit from Credit Suisse First
Boston equal to two years debt service. Up to two years of
interest payments on the second-priority notes can be deferred.
The shipyard's remaining 12-month warranty on vessel operating
efficiency and materials is guaranteed by the state-owned
Chinese Export-Import Bank and Generale de Banque S.A.
Construction of the gas plant was done by Tractebel Gas
Engineering (an indirect subsidiary of Tractebel S.A.), an
experienced engineering firm which built eight other gas plants
for vessels constructed at the Jiangnan yard. Standard & Poor's
views the gas carrier business as riskier than average, despite
a much more concentrated industry structure compared to crude
oil or bulk shipping. In addition, producers, refiners, and end
users of petrochemical gases typically do not own their own
vessels.
Outlook: Negative
Ratings could be lowered if a restructuring occurs or if
continued weak cash generation eventually results in an
inability to meet scheduled interest or principal payments,
Standard & Poor's said.
Ratings Lowered, Off CreditWatch
To From
Navigator Gas Transport PLC -- ----
Corporate credit rating CCC- CCC+
1st priority ship mortgage notes due 2007 CCC- CCC+
2nd priority ship mortgage notes due 2007 CC CCC-
ORIUS CORP.: Fitch Cuts NATG's Senior Sub Notes To CCC+ from B
--------------------------------------------------------------
Fitch has downgraded the rating for NATG Holdings, LLC's
(NATG's) $150 million 12.75% senior subordinated notes due 2010
(Notes) from 'B' to 'CCC+'.
NATG is a wholly owned subsidiary of Orius Corporation and is
the issuer of the notes. The rating action is based on
materially below plan revenue and pro forma EBITDA generation
levels and the unfavorable conditions prevailing in the telecom
and broadband infrastructure services market. The notes remain
on Rating Watch Negative.
This reflects Fitch's view that without forbearance from senior
secured lenders for the anticipated June 30, 2001 covenant
violations and an improvement in market demand, further
downgrades may be warranted.
The company has made two downward revisions to projected results
since the notes rating was originally issued in October 2000.
The downward revisions reflect weakening demand for
infrastructure services from the core cable television and
telecommunications customer base. A seasonal improvement in
demand from the broadband customer base did not occur as
expected. Major telecommunications customers have reined in
capital spending due to slowdown in their markets and the lack
of capital market appetite for new issuance from some of the
newer market participants. Management does not forecast any near
term recovery in market conditions.
Revenues for the second quarter of 2001 are expected to be
approximately $155-$160 million, which is about sequentially
flat compared to the first quarter of 2001 and down 30-34%
relative to the second quarter of 2000. The second quarter 20001
pro forma EBITDA margin is estimated at 12-13% ($18.6-$20.8
million).
Orius expects that it will violate the maximum 4 times (x)
leverage and 2.25x minimum interest coverage covenants contained
in its bank credit facilities for the last twelve months ending
June 30, 2001. The company is in negotiations with lenders to
obtain covenant relief and is dependent upon forbearance to
avoid technical default. As of June 30, 2001, Orius had
remaining borrowing capacity under its $100 million revolving
credit facility of about $14 million, (including letters of
credit outstanding), plus cash on hand of $25 million.
The company estimates annual fixed charges of approximately $75
million if capital spending is held to $2 million per quarter.
In order to conserve cash, quarterly capital spending has been
reduced to the minimum maintenance level of $2 million. The
company also expects to increase liquidity by lowering its
accounts receivables days outstanding from the current 105-day
level and improving operational efficiencies.
Fitch notes that a new senior management team was put in place
on June 26, 2001. Each of the new members has extensive industry
experience. Members include; Ron Blake, Chairman and CEO, whose
previous experience includes financial and executive management
positions at Ameritech and SBC and Bob Wasserman, Chief
Operating Officer, who spent the bulk of his career at AT&T and
Ameritech.
Orius is a holding company, headquartered in West Palm Beach,
FL, with operating subsidiaries engaged in the provision of
telecommunications and broadband network infrastructure on a
national basis. Services include the design, engineering, and
installation of central office telecom equipment, premise-
wiring, and cable. Willis Stein and Partners, a private equity
investor, is the company's majority owner.
OWENS CORNING: Asks For More Time To Decide On Leases
-----------------------------------------------------
Owens Corning and its affiliated and subsidiary Debtors ask
Judge Fitzgerald for a second extension of their time during to
decide whether they should assume, assume and assign, or reject
executory contracts and non-residential, unexpired leases of
real property to and including December 4, 2001, for an
extension of an additional six months.
As of this date, the Debtors are lessees under hundreds of
unexpired leases of nonresidential real property. Most of these
spaces are used for conducting the production, warehousing,
distribution, sales, sourcing, accounting, and general
administrative functions that comprise the Debtors' businesses,
and are assets of the Debtors' estates. The unexpired leases are
thus integral to the Debtors' continued operations as they seek
to reorganize. Although the Debtors expect that they may
ultimately seek the Court's permission to reject some of the
unexpired leases before the conclusion of these Chapter 11
cases, and in fact have already sought authority to do so with
respect to certain leases, many, if not most, of the unexpired
leases will prove to be desirable - or necessary - to the
continued operations of the Debtors' businesses. The Debtors
will likely seek to assume such unexpired leases.
Still other unexpired leases, while not necessary for the
Debtors' ongoing operations, may prove to be "below market"
leases that may yield value to the estates through their
assumption and assignment to third parties. Until the Debtors
have had the opportunity to complete a thorough review of all of
the unexpired leases, however, they cannot determine exactly
which unexpired leases should be assumed, assigned or rejected.
In short, although the Debtors have been diligently evaluating
leases, and have moved this Court to assume or reject certain
unexpired leases, given the extremely large numbers of unexpired
leases, the scope and complexity of the Debtors' Chapter 11
cases, and the size of the task of evaluating the unexpired
leases, the Debtors simply have not yet been able to assess the
value or marketability of the large number of unexpired leases
and make determinations with respect to which unexpired leases
should be assumed, and which, if any, should be rejected. As a
result, many unexpired leases remain to be evaluated and the
Debtors cannot adequately assess whether to assume or reject
the unexpired leases before the expiration of their current
deadline.
In addition, The Debtors' decision whether to assume, assume and
assign, or reject particular unexpired leases, as well as the
timing of such assumption, assignment or rejection, depends in
large part on the Debtors' business plans for the future (i.e.,
whether the leased premises will play a role in the Debtors'
strategic operating plans going forward). Due to the enormity of
the task and the complexity of these Chapter 11 cases, it is not
yet possible for the Debtors to determine whether each of the
locations covered by the unexpired leases will play a part in
the Debtors' businesses going forward.
The Debtors are also conducting informal market analyses at some
of the leased locations to determine whether "there is
sufficient value to the Debtors to merit assignment of certain
unexpired leases rather than rejection." These decisions cannot
be made responsibly, however, without an extension of time
within which the unexpired leases must be assumed or rejected.
The Debtors argue that their cases are large and complex, and
that the leased premises are vital to their reorganization
efforts, constituting an integral part of the Debtors' business
plan. Even if a particular location is slated for closure, the
unexpired lease at such location may contain favorable terms
that would allow the Debtors to assume and assign the lease for
value. The Debtors simply need more time to evaluate which sites
they will close, if any, and whether any of the unexpired leases
have any value to the Debtors and their estates.
The Debtors assure Judge Fitzgerald that they have, since the
Petition Date, been and remain current on all of their
postpetition rental obligations. Thus this relief will not
prejudice landlords of the unexpired leases.
Highway 290 Warehouse LLC objects
Appearing through John D. Demmy of the Wilmington firm of
Stevens & Lee, Highway 290 Warehouse LLC objects to any further
extension of time during which the Debtors may assume, assume
and assign, or reject the leases. Highway tells Judge Fitzgerald
that it and the Debtors entered into a lease of real property,
together with improvements to be constructed, located at 201
Commerce Court, Duncan, South Carolina. The building on the
property consists of approximately 100,000 square feet of usable
space.
In January 2000, the parties entered into a lease extension and
modification agreement for the enlargement of the existing
building and its environs to provide an additional 50,000 square
feet of manufacturing and office space, plus the expansion of
truck access and employee parking area. The Debtors are
responsible for the costs incurred by Highway under the
modification agreement.
The work under the modification agreement was completed in
September 2000 (except for the punch list completed in October).
Accordingly, Highway sent the Debtors a November letter stating
that the total bill for the work performed under the
Modification Agreement was in the amount of $36,376. The Debtors
have not paid this bill.
In November 2000 Highway also received a property tax notice
from the Treasurer for Spartenburg County, South Carolina, in
the amount of $54,564.51 for property taxes which the Debtors
are obligated to pay under the lease. Highway has paid this
bill, not the Debors.
In March 2001 Highway received a refund from the Treasurer for
Spartenburg in the amount of $12,970.13 for the property taxes.
The amount of unpaid prepetition rent is $7,385.08.
The total of all of these items, which are owed by the Debtors
but not paid, is $85,355.46.
Although the Debtors have been under bankruptcy court protection
for eight months, and continue to conduct substantial operations
out of this property, they say they need more time to determine
whether to assume or reject this lease. Presumably the Debtors
would not have entered into the modification agreement to expand
the size of the property in January 2000 if they did not expect
to continue their operations on the property. Highway has had to
pay the costs for the improvements under the modification
agreement and the property taxes, and has been substantially
prejudiced by the delay, and will be further prejudiced by any
more extensions of the time period to assume or reject.
* * *
For non-objecting landlords, the Court will grant an extension
through December 4, 2001, and sever the Highway 290 lease from
the Debtors' Motion. If the Debtors are unable to reach a
consensual resolution with Highway 290, the Court will convene a
hearing to entertain the merits and the Debtors' response, if
any, to Highway 290's objection. (Owens Corning Bankruptcy News,
Issue No. 12; Bankruptcy Creditors' Service, Inc., 609/392-0900)
PILLOWTEX: Toyota Wants Decision On Two More Forklift Leases
------------------------------------------------------------
Aside from the 17 forklift lease agreements, Toyota Motor Credit
Corporation also wants to know if Pillowtex Corporation will
assume or reject 2 other forklift leases.
The Debtors owe Toyota $504.88 for rent of the two forklifts.
By motion, Toyota asks Judge Robinson to compel the Debtors to
decide whether it will assume or reject the leases. The decision
should be immediately relayed to Toyota. At the same time, the
Debtors should promptly file a motion for approval of its
decision with the Court so it will be scheduled for hearing.
But if the Court denies this motion, Toyota seeks a relief from
the automatic stay citing that the Debtors failed to provide
adequate protection of Toyota's ownership interest in the
forklifts. Robert T. Aulgur, Jr., Esq., at Whittington & Aulgur,
notes that the Debtors failed to:
(a) Keep current with post-petition payments;
(b) Permit inspection of the forklifts;
(c) Submit maintenance records of the forklifts or arrange
servicing; and
(d) Provide proof of continuing insurance.
Besides, Mr. Aulgur says, the Debtors have no equity interest in
the forklifts because the forklifts are not necessary to an
effective reorganization.
Debtors Object
Michael G. Wilson, Esq., at Morris, Nichols, Arsht & Tunnell, in
Wilmington, Delaware, informs Judge Robinson that the Debtors
have complied with the leases and there are no compelling
reasons to require the Debtors to assume or reject the leases
prior to confirmation.
Mr. Wilson argues that Toyota's purported reasons for requesting
the Court to lift the automatic stay or to compel the Debtors to
hastily determine whether they will assume or reject the leases
are baseless.
The Debtors kept providing maintenance and insurance information
to Toyota, both before and after the Petition date, Mr. Wilson
relates. And the Debtors never prevented Toyota from inspecting
the forklifts, Mr. Wilson adds. As to the alleged failure to pay
postpetition rent, Mr. Wilson notes, Toyota did not mention what
exact rent payments were not made. The Debtors are conducting
their own investigation on the status of their rent payments to
Toyota. If the Debtors find they were not able to pay the rent,
Mr. Wilson assures, the Debtors will promptly fulfill their
obligations.
For these reasons also, Mr. Wilson tells Judge Robinson,
Toyota's contention that cause exists to lift the automatic stay
is erroneous.
The Debtors ask Judge Robinson to deny Toyota's motion that
compels them to make a premature decision. Mr. Wilson asserts
that the Debtors should be given a reasonable amount of time to
determine whether to assume or reject any unexpired lease, as
provided in the Bankruptcy Code.
Mr. Wilson adds that Toyota's interests will not be adversely
affected if the Court denies this motion because the Debtors
promises to continue providing Toyota with maintenance and
insurance information as well as postpetition payments.
(Pillowtex Bankruptcy News, Issue No. 8; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
PSINET INC.: Paying Prepetition Critical Trade Vendors
------------------------------------------------------
The PSINet, Inc. Debtors recognize that their ability to
continue to operate their business and to preserve value for
their creditors through bankruptcy depends on the continued
support of vendors offering support and maintenance for critical
hardware and software. The Debtors also believe that the
Critical Vendors will continue to provide goods and services to
them on Acceptable Supply and Credit Terms if prepetition
amounts are paid.
From January through April 2001, invoices from the Critical
Vendors typically amounted to approximately $275,000 per month
in the aggregate. That amount, in the Debtors' view, is
insignificant in comparison with (i) the value that the Debtors'
estates will receive from the uninterrupted supply of critical
goods and services on normal business terms in the postpetition
period and (ii) the approximately $4.5 billion in prepetition
unsecured claims against the Debtors as of the Petition Date.
Moreover, failure to pay the Critical Vendor Claims would cause
damage to the Debtors and the estates that would far exceed the
amount at issue.
Accordingly, the Debtors sought and obtained the Court's
authorization to pay the Critical Vendor Claims of those
Critical Vendors or their wholly-owned subsidiaries that supply
the equipment and services required for Debtors to maintain
communication channels and to provide reliable customer service.
Judge Gerber sets a cap of $325,000 in the aggregate for the
amount that the Debtors are authorized to pay Critical Vendor
Claims to the Critical Vendors. Judge Gerber also makes it clear
that the payment is subject to the provision of terms on which a
Vendor receiving such payments agrees to supply the Debtors with
postpetition goods and services on Acceptable Supply and Credit
Terms.
At the Debtors' behest, the Court also authorized the Debtors to
obtain written confirmation of the postpetition credit terms and
limits to be provided by a Critical Vendor prior to paying such
vendor's Critical Vendor Claim. Judge Gerber also directed all
banks and financial institutions to act accordingly pursuant to
the authorization.
The Debtors' motion, which has been granted, covers payment of
Critical Vendor Claims with respect to:
(A) Technical Support and Equipment Maintenance for Web-Hosting
Services
Webhosting services accounted for approximately 28 percent
of the Debtors' revenue in the first quarter of 2001. If the
Critical Vendors were to cease to provide services and
technical support, the Debtors could experience critical
failures in their service to customers, which would seriously
damage the Debtors' business and efforts to reorganize. Thus,
the Debtors have included in their motion payment to:
(1) Lee Technologies
Lee provides facilities maintenance and monitoring for
all of the Debtors' hosting centers in the United States. This
Vendor helped implement and commission the centers, continuously
monitors the facilities and maintains personnel on site or on
call at all times to respond to facility problems and ensure
uninterrupted hosting operations. The Debtors believe that no
other vendor has the specialized knowledge about and experience
with the Debtors' particular facilities that would be necessary
to replace Lee in this capacity.
(2) Sun Microsystems
Sun provides equipment maintenance and support for
several thousand servers used to provide managed web-hosting
services. The Debtors believe Sun is uniquely suited to maintain
and support its proprietary hardware and to support its Unix-
based Solaris operating system software. The Debtors' ability to
provide web-hosting services to their customers would be
severely impaired without such continued support.
(B) Technical Support for Back-Office Operations
The Debtors also depend on certain Critical Vendors to
support "backoffice" operations that are critical to serving
their customers, processing receivables and payables, tracking
sales and handling all financial information. Most of the
Debtors' back-office software has been custom-designed or
modified to meet the Debtors' particular needs. The support
personnel the Critical Vendors have specialized knowledge of and
substantial experience with the Debtors' back-office systems.
The Debtors name two Critical Vendors whose support personnel
have unique and specialized knowledge of the Debtors' systems,
implementation and interfacing, accumulated over several years
of constant involvement in developing, modifying and supporting
the Debtors' back-office software. In many cases, there is no
documentation for those customized systems. The Debtors notes
that if these Critical Vendors were to cease to provide services
and technical support, the Debtors could experience critical
failures in their billing and service to customers and in their
handling of receivables and payables, which would seriously
damage the Debtors' business and efforts to reorganize.
(1) Guident Technologies, Inc. designed and supports two
essential applications that interface with one another to
coordinate payables and receivables and customer care with
respect to leased circuits. Guident:
- developed the Account and Circuit Tracking ("ACT")
application to store customer and circuit information in a
database format;
- developed the Circuit and Billing Reconciliation
application to reconcile invoices from telecommunications
carriers with the circuit information in the ACT database and to
push the invoice information to the Oracle Financials accounting
system;
- co-designed the Master Billing Application, the
primary billing system for the Debtors' U.S. domestic business;
- designed and supports the Revenue Recognition
Application, which replaces manual calculation of revenue
deferrals particular to the Debtors' billing practices, and
Customer Centric, a database of customer-specific information.
(2) Megasoft Consultants, Inc. and Guident customized and
support the Oracle Financials accounting package to meet the
Debtors' particular needs. The Debtors rely on the Oracle
Financials system to handle all receivables and payables
information. In addition, Megasoft designed and supports the
Remedy Customer Care ("RCC") application to meet the customer
care needs for the U.S. domestic wholesale business and the
Canadian and European business units. RCC is intended to replace
ACT in the future. (PSINet Bankruptcy News, Issue No. 3;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
RETROSPETTIVA INC.: Ceases Operations in Wake of Macedonian War
---------------------------------------------------------------
Retrospettiva Inc. (Bulletin Board "RTRO") said that recent
events, primarily the war in Macedonia, has forced the company
to cease operations and liquidate its assets.
The three month long NATO bombing of Yugoslavia in April of 1999
resulted in two out of four of the company's selling seasons
being negatively impacted -- causing a loss of anticipated sales
in excess of $10 million.
The NATO bombing was followed by the current civil war in
Macedonia that started several months ago and has prevented the
company from producing goods there.
The company's day-to-day business has been interrupted by a lack
of electric power, shortages of water and fighting between
Albanian rebels and Macedonian forces that has reached the
cities. This is preventing employees from coming to work and
making it practically impossible to produce goods. As a result,
the company has lost most of its orders for goods, is unable to
ship completed goods and is unable to access its inventory in
Macedonia.
Following the NATO bombing, two of the company's major customers
ceased operations, causing the company to realize significant
losses.
As a result of these events, the company has suspended further
operations and intends to liquidate its assets in order to pay
creditors. It is unlikely that the company will generate
sufficient cash resources to continue in business following the
end of hostilities in Macedonia.
RITE AID: Completes $3 Billion Refinancing
------------------------------------------
Rite Aid Corporation (NYSE, PCX: RAD) has completed its
previously announced $3.0 billion refinancing, resulting in
substantially reduced debt and the retirement of the majority of
the company's debt due in 2002. As a result of the refinancing,
the company now has no significant debt maturing before 2005.
In conjunction with the refinancing, the company said it intends
to reclassify approximately $850 million of capitalized leases
to operating leases. As a result of the reclassification and the
refinancing, Rite Aid said its total debt will be approximately
$3.7 billion.
"This is a milestone in our turnaround plan," said Bob Miller,
Rite Aid chairman and chief executive officer. "We have
strengthened our balance sheet by reducing debt by $2.9 billion
since the end of fiscal 2000 and by eliminating any major debt
payments until 2005. We also raised an additional $200 million
for our turnaround. We can now devote all of our energy to
continuing to improve operating results."
The refinancing consists of a $1.9 billion senior secured credit
facility, which matures in March 2005; the sale of 80.1 million
shares of Rite Aid common stock for $551.3 million; the issuance
of 44.3 million shares of Rite Aid common stock for $303.5
million of previously outstanding debt; the exchange of $152
million of debt due in 2002 for debt due in 2006, the sale of
$150 million of new notes due 2008 and $107 million raised in
lease financing.
The company said that as a result of the refinancing, its only
remaining debt due before March 2005 is $288 million of notes
and $140 million of amortization of the new credit facility,
which the company said it will satisfy using internally
generated funds.
Rite Aid Corporation is one of the nation's leading drugstore
chains with annual revenues of more than $14 billion and more
than 3,600 stores in 30 states and the District of Columbia.
Information about Rite Aid, including corporate background and
press releases, is available through the company's website at
www.riteaid.com
SGPA, INC.: U.S. Trustee Throws Chanin Some of Her Grenades
-----------------------------------------------------------
Patricia M. Staiano, the United States Trustee for Region III,
objects to the application of the Official Committee of
Unsecured Creditors of SGPA, Inc., et al., to retain Chanin
Capital Partners as its financial advisor on three bases:
(A) nunc pro tunc retention is most always inappropriate,
but especially when the retention relates back to a date prior
to appointment of the Committee, whether or not Chanin was
representing an unofficial committee from which five of seven
members of the official committee were drawn;
(B) the proposal that any disputes be arbitrated and
governed by New York law "seeks to usurp the Bankruptcy Court's
power and authority" to review estate expenditures and should be
stricken; and
(C) Chanin's attempts to limit liability by getting the
Debtors to contribute the value of any cost/benefit analysis of
services rendered to the Debtors and limiting liability to fees
actually paid are "unreasonable, are not in the best interest of
the estate and are inconsistent with the fiduciary duties
imposed on financial advisors retained to provide services to a
bankruptcy estate."
SGPA's chapter 11 case pends before the U.S. Bankruptcy Court
for the Middle District of Pennsylvania in Harrisburg.
STAGE STORES: Plan Confirmation Hearing Scheduled For August 8
--------------------------------------------------------------
Stage Stores Inc. (OTCBB:SGEEQ) said that, on June 29, 2001, the
U.S. Bankruptcy Court for the Southern District of Texas,
Houston Division approved the Company's Amended and Restated
Disclosure Statement Under 11 U.S.C. Section 1125 in Support of
Third Amended Plan of Reorganization, as Modified as containing
adequate information. As a result of the Court's approval of the
Disclosure Statement, the Company will commence solicitation of
votes from creditors for approval of the Third Amended Plan of
Reorganization, as Modified.
The Court has scheduled a hearing on August 8, 2001 for
consideration and confirmation of the Plan and set August 1,
2001 as the deadline for filing objections to confirmation of
the plan and for completion and delivery of the ballots. In
addition, the Court established July 16, 2001 (the "Distribution
Record Date") as the record date for the purpose of determining
which creditors may be entitled to receive distributions under
the Plan. Further, as of the close of business on the
Distribution Record Date, all trading in the Company's debt
instruments and common stock will permanently cease.
Stage Stores Inc. brings nationally recognized brand name
apparel, accessories, cosmetics and footwear for the entire
family to small towns and communities throughout the south
central United States. The Company currently operates stores
under the Stage, Bealls and Palais Royal names.
STROUDS INC: Exclusive Period To File Plan Extended To July 6
-------------------------------------------------------------
The US Bankruptcy Court, District of Delaware, entered an order
on June 18, 2001, extending the exclusive right of Strouds Inc.
to file a plan of reorganization through and including July 6,
2001 and extending the debtor's exclusive right to solicit
acceptances of any plan of reorganization filed on or prior to
July 6, 2001 through and including September 4, 2001. The court
also provided that no further extensions will be granted.
SUNBEAM: Voting Deadline for Chapter 11 Plans Extended To Aug.31
----------------------------------------------------------------
Pursuant to orders of the United States Bankruptcy Court for the
Southern District of New York, dated April 30, 2001, the
deadline to vote on Sunbeam Corporation's Second Amended Plan of
Reorganization Under Chapter 11 of the Bankruptcy Code and its
chapter 11 debtor subsidiaries' Second Amended Plan of
Reorganization Under Chapter 11 of the Bankruptcy Code, both
dated April 26, 2001 (Plans), originally scheduled to expire on
June 28, 2001, has been extended to August 31, 2001.
SUN HEALTHCARE: Sells German Operations To Curanum
--------------------------------------------------
As previously reported, despite the efforts of Sun Healthcare
Group, Inc.'s International Holding Companies and Lazard Freres
to market the German operations in connection with the marketing
of the Spanish, Israeli and U.K. operations, by the end of the
year 2000, no formal agreement with any potential purchaser with
respect to the terms and conditions of any such sale had been
executed.
Sun Healthcare Group, Inc. (Sun) holds 100% of the common stock
of Sun Healthcare Group International Corp. (International)
which in turn holds 100% of the common stock of Sun Healthcare
(Europe) B.V. (Sun BV), a Netherlands holding company for the
Debtors' European and Israeli operations. With respect to the
German operations, Sun BV in turn owned, as of the commencement
date, 100% of Sun Healthcare (Deustchland) GmbH, a German
holding and operating company that, in turn, owns, among other
things, (1) 100% of PROCEDO Stocker GmbH, a German company that
provides medical supplies to the German long-term care
facilities, and (2) 91.67% of HEIM-PLAN Dienstleistung GmbH
(Heimplan), a German company that owns and operates 16 nursing
homes in Germany.
In order to accommodate the sale of Sun BV and the U.K.
operations, Sun BV entered into a transaction with Sun in
October of 2000, pursuant to which Sun BV transferred its 100%
ownership interest in GmbH to SHG in exchange for DM1. Such
transaction did not involve the assumption by Sun, SHG, or any
of the other Debtors of any GmbH liabilities.
Following the transfer, Lazard continued to expend substantial
efforts marketing the German operations to strategic and
financial buyers, located within Germany as well as in the
United States and the United Kingdom. As a result, at least four
entities expressed interest in acquiring GmbH or certain of its
assets, but only one entity - Dreibundersiebenundzwanzigste
Vermogensverwaltungsgesellschaft mbH (to be renamed CURANUM Nord
Betriebs-GmbH) - completed the necessary due diligence and put
forth a final offer for the purchase of the GmbH equity from SHG
and the purchase (at a discount) of more than US$14.5 million in
intercompany debts owing from GmbH and Heimplan to Sun (the
Intercompany Debt).
After extensive negotiations, Sun and SHG reached an agreement
with Curanum for the sale of GmbH. The sale agreement
contemplates the sale by SHG of the stock of GmbH and the sale
by Sun of the Intercompany Debt free and clear of all liens,
claims and encumbrances to Curanum for the following
considerations:
(a) DM1 for the shares of GmbH
(b) DM8.8 million for the Intercompany Debt to be paid as
follows:
(1) DM3.3 million in cash at closing, and
(2) DM5.5 million in deferred consideration payable in
cash on or before December 31, 2001.
To secure its obligation to pay the Deferred Consideration, the
Sale Agreement provides that Curanum must put 1 million shares
of its own stock (currently valued at approximately DM9.8
million) into escrow for the benefit of SHG. The Sale Agreement
further provides that:
(1) in the event that Curanum fails to pay the Deferred
Compensation on or before December 31, 2001, ownership of the
Curanum shares will pass automatically to SHG, and SHG will be
entitled to immediately sell and liquidate such shares (which
are expected to be publicly-traded and freely salable in June
2001); and
(2) in the event that the value of the Curanum shares
placed in escrow falls below DM5.5 million at any time prior to
December 31, 2001, Curanum is obligated to settle the difference
in cash.
The Debtors believe that, the offer as set forth in the Sale
Agreement, received after nearly one year of significant
marketing efforts vis-.-vis the German operations, represents
the highest and best offer. As the total compensation to be paid
pursuant to the Sale Agreement aggregates less than DM9 million,
Sun and SHG believe that, when the Intercompany Debt is taken
into account, GmbH has no equity value. GmbH and Heimplan owe
Sun an intercompany payable in excess of US$14.6 million (or
approximately DM32.4 million).
Moreover, Sun's board of directors has determined that it is in
the best interests of the Debtor's estates for Sun to divest the
International Operations, including the German operations.
Rather than divert its resources, both in terms of personnel and
financial support, and efforts for a turnaround, Sun believes
that its resources are better spent focusing on Sun's efforts
with respect to its core businesses in the U.S.
Accordingly, pursuant to sections 363(b) and 363(f) of the
Bankruptcy Code, and Rule 6004 of the Federal Rules of
Bankruptcy Procedure, the Debtors sought and obtained the
Court's approval of the Sale Agreement and related transactional
documents and the authority for SHG's sale of its interest in
GmbH and Sun's sale of the Intercompany Debt, both free and
clear of all liens claims and encumbrances, but subject to
higher and better offers at 104% of the total price to be paid
to Sun and SHG pursuant to the Sale Agreement. (Sun Healthcare
Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
TELEGEN CORPORATION: William M. Swayne Owns Majority Stake
----------------------------------------------------------
William M. Swayne II has beneficial ownership of 1,154,967
shares of Telegen Corporation's common stock with shared voting
and dispositive powers. Swayne's principal occupation is
President and Chief Operating Officer of Telegen Corporation.
The aggregate numbers stated above reflects the greatest number
of beneficial ownership of Telegen's common stock that Swayne
has the right to acquire in the next sixty days. Of these
shares, William M. Swayne II shares his beneficial ownership
with his wife Candace K. Swayne as community property. She is
the President of WMS Financial Planners, Inc. located in
Seattle, Washington. She shares the right to vote or to direct
the vote, to dispose or to direct the disposition, to receive or
the power to direct the receipt of dividends, if any, and the
right to receive or the power to direct the receipt of the
proceeds from the sale of the beneficially owned securities.
The purpose of the acquisition of Telegen's common stock,
options and warrants by Swayne was to compensate him for
services rendered to Telegen as an officer and director and for
services in connection with Telegen's "1999 Reg D" offering
which closed 7/7/00. Swayne was issued three-year warrants in
two tranches.
USG CORP.: Obtains Court Nod To Maintain Existing Bank Accounts
---------------------------------------------------------------
Operating guidelines established by the United States Trustee
require USG Corporation to close all pre-petition bank accounts
and open three new "Debtor-in-Possession" accounts -- one
general operating account, a payroll account and one account to
segregate tax payments. USG can't run its multi-billion dollar
business from three bank accounts, Richard H. Fleming, Executive
Vice President and Chief Financial Officer for USG, tells Judge
Farnan. Closing and reopening hundreds of bank accounts won't
work either. The Debtors have no difficulty guarding against
improper transfers from a bank honoring pre-petition checks
post-petition.
It is obvious, Judge Farnan observed at the First Day Hearing,
that the Debtors could not close their existing bank accounts
and open new "debtor-in-possession" accounts without causing
severe disruption to their normal operating procedures and to
their ability to pay normal post-petition operating expenses in
the ordinary course. Existing relations with vendors -- with
whom good relations are critical to the Debtors' ability to
continue to operate their businesses -- could be adversely
affected by the inevitable delays resulting from the Debtors'
need to establish new accounts from which post-petition payments
would be made after the Petition Date. "The Debtors' Motion is
granted," Judge Farnan ruled. (USG Bankruptcy News, Issue No. 2;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
US INDUSTRIES: Fitch Lowers Senior Secured Debt to B from BB+
-------------------------------------------------------------
Fitch has lowered its rating on US Industries, Inc.'s (USI) $375
million senior secured notes to B from BB+ reflecting the
significant amount of debt due within the next six months. USI
currently has approximately $250 million outstanding under a
364-day revolving facility, which matures on Oct. 26, 2001 and
about $470 million outstanding under a five-year credit
facility, which matures on Dec. 12, 2001. Without forbearance
from its bank lenders, the company cannot meet this maturity
schedule. The ratings remain on Rating Watch Negative.
USI had been pursuing new financing arrangements, however, the
company was unable to complete a new bank agreement and
subordinated notes offering in April 2001. Currently, USI has
made a proposal to its lenders and the lenders to Rexair, Inc.,
the obligations of which USI has guaranteed, regarding asset
sales, refinancing, and strategic options. Fitch expects USI to
have agreements to extend the maturities on the bank debt in
place within the next 30 days and subsequently to pursue asset
sales and other strategic options to meet its financing needs.
Fitch will continue to closely monitor the company's ability to
extend the maturities on its debt beyond 2001 and subsequently
meet required debt repayments. The Rating Watch Negative
recognizes that an unfavorable outcome regarding its
refinancing, asset sales or strategic options could lead to
default.
VLASIC FOODS: Wachovia Bank Seeks Relief From Automatic Stay
------------------------------------------------------------
Vlasic Foods International Inc. executed an Application and
Agreement for Standby Letter of Credit in favor of Wachovia Bank
in March 1999.
Carl N. Kunz, III, Esq., at Morris James Hitchens & Williams, in
Wilmington, Delaware, relates that Vlasic asked Wachovia to
issue a $2,700,000 Standby Letter of Credit for the benefit of
The Travelers Indemnity Company. In return, Vlasic granted
Wachovia the right of reimbursement. According to Mr. Kunz, this
allowed Wachovia to collect from Vlasic any and all amounts paid
under the letter credit by Wachovia to Travelers on the account
of Vlasic.
In February 2000, Mr. Kunz informs the Court that Vlasic
executed a collateral assignment of deposit agreement in favor
of Wachovia. According to Mr. Kunz, Vlasic pledged and granted
Wachovia a security interest in a deposit account they
maintained with Wachovia in the amount of $2,000,000. Vlasic
executed another collateral assignment of deposit agreement
again on August 2000. This time, Mr. Kunz notes, Vlasic pledged
and granted Wachovia a security interest in a deposit account
they maintained with Wachovia in the amount of $700,000.
In May 2001, Mr. Kunz says, Travelers presented its sight draft
at Wachovia's counters for payment under the letter credit. So
Wachovia immediately wire-transferred the sum of $2,700,000 to
Travelers. This meant that Wachovia's reimbursement claim with
Vlasic became due.
By motion, Wachovia asks Judge Walrath to grant relief from the
automatic stay because the bank wants to foreclose its perfected
security interest in two cash deposit accounts held to secure
Vlasic's reimbursement obligation. If the Court won't grant the
bank relief from the stay, Wachovia seeks to setoff mutually
owing debts and claims between Vlasic and Wachovia instead.
(Vlasic Foods Bankruptcy News, Issue No. 7; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
WARNACO GROUP: Moves For Injunction Against Utility Companies
-------------------------------------------------------------
The Warnaco Group, Inc. use natural gas, water, electric,
telephone, waste management, and other services provided by not
less than 240 utility companies located in the United States.
The utility companies service the Debtors' offices and
manufacturing, marketing and distribution operations.
By this motion, the Debtors seek an order:
(i) Providing that Utility Companies be prohibited from
altering, refusing or discontinuing services to, or
discriminating against, the Debtors on the basis of the
commencement of these cases or on account of any unpaid invoice
for service provided prior to the Petition Date;
(ii) Providing that any Utility Company seeking adequate
assurance from the Debtors in the form of a deposit or other
security be required to make a request in writing, setting forth
the location for which utility services were provided, so that
the request is actually received by the Debtors' counsel: Sidley
Austin Brown & Wood, 875 Third Avenue, New York, New York 10022,
Attn: Elizabeth R. McColm, within 20 days of the date of the
order granting this motion;
(iii) Providing that the Debtors be required to file a
motion for determination of adequate assurance of payment and
set such motion for hearing if a utility company timely and
properly requests from the Debtors additional adequate assurance
that the Debtors believe is unreasonable;
(iv) Providing that if a determination motion is filed or a
determination hearing scheduled, utility companies be deemed to
have adequate assurance of payment under section 366 of the
Bankruptcy Code until this Court enters a final order finding
otherwise;
(v) Providing that any utility company that does not timely
request in writing additional adequate assurance pursuant to the
above procedures be deemed to have adequate assurance under
section 366 of the Bankruptcy Code; and
(vi) Authorizing the Debtors to supplement the list of
Utility Companies not listed, but subsequently discovered.
Shalom L. Kohn, Esq., at Sidley Austin Brown & Wood, in New
York, notes, utility services are essential to the ability of
the Debtors to sustain their operations while these Chapter 11
cases are pending.
Any interruption of utility service would severely disrupt such
operations, Mr. Kohn says, and reduce the Debtors' chances for a
successful reorganization.
The Debtors assure the Court they can pay their post-petition
utility services. As of Petition Date, Mr. Kohn relates, the
Debtors are current in paying their utility bills.
Southern California Edison Objects
Southern California Edison (SCE) asks Judge Bohanon to direct
Debtors to pay post-petition deposits equal to two months in
utility services. In SCE's case, a two-month deposit is equal to
$142,010.
Robert T. Barnard, Esq., at Gould & Wilkie, in New York, says it
is unfair for the Debtors to single out the utility companies
for an injunction order.
Like other creditors, Mr. Barnard notes, SCE is already
prohibited from collecting its pre-petition debts by the
automatic stay of the Bankruptcy Code. Now, Mr. Barnard states,
the Debtors want harsher treatment for utility companies by
seeking to deny them post-petition deposits.
Deposits, Mr. Barnard emphasizes, are critical to utilities to
protect their rate-paying base. Mr. Barnard reminds Judge
Bohanon that the section 366(b) of the Bankruptcy Code grants
SCE the right to demand adequate assurance. A two-month deposit
for post-petition services will be sufficient to ease the
apprehensions of the utility companies, Mr. Barnard adds.
(Warnaco Bankruptcy News, Issue No. 3; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
WASHINGTON GROUP: Documents Show Raytheon Owes $469 Million
-----------------------------------------------------------
Washington Group International, Inc. has submitted detailed
financial schedules and supporting documentation which
demonstrate that Raytheon Company owes Washington Group $469
million pursuant to the purchase price adjustment clause of the
stock purchase agreement under which Washington Group acquired
Raytheon Engineers & Constructors (RE&C) in July 2000.
On June 1, 2001, the District Court of the Fourth Judicial
District of the State of Idaho ordered Raytheon Company to
produce the contractually-required April 30, 2000 balance sheet
of its former subsidiary, Raytheon Engineers & Constructors
(RE&C), by June 5, 2001, at 5:00 p.m. Raytheon Company delivered
an unaudited balance sheet and a cut-off balance sheet on
June 5.
The Raytheon Company documents, purported to be in compliance
with Generally Accepted Accounting Principles (GAAP), are not
only unaudited, but fail to account for hundreds of millions of
dollars of balance sheet adjustments recognized by Washington
Group after the acquisition and demonstrated in documentation
prepared by Washington Group with the assistance of the
internationally recognized accounting firm, Deloitte & Touche,
and provided to Raytheon Company.
Washington Group submitted its response to the Raytheon
Company's financial documents in compliance with the purchase
price adjustment process. The Raytheon Company documents
indicate that Raytheon Company is due $13.9 million. "Our
financial analysis of Raytheon Company's RE&C balance sheet
confirms that our dispute is in the hundreds of millions of
dollars," said Stephen G. Hanks, Washington Group President and
Chief Executive Officer. Washington Group's RE&C balance sheet
and financial schedules include a detailed accounting of 31
former RE&C projects for which Raytheon Company understated
costs, prematurely recognized revenue, failed to provide for
contingency costs, and thus failed to accurately represent the
true value of those projects. This information was available as
of April 30, 2000, when Raytheon Company still owned RE&C.
In the past six months, Washington Group has provided Raytheon
Company with a substantial volume of highly specific RE&C
project information confirming substantial balance sheet
adjustments, and more than 20,000 pages of detailed answers to
questions from Raytheon Company to assist it in auditing
a business that Raytheon Company owned on April 30, 2000 -- the
balance sheet cutoff date -- and continued to own for the next
67 days until the acquisition closed on July 7, 2000.
Examples of Raytheon Company's Understatement of Costs
Significant omissions by Raytheon Company on major projects
include:
* San Roque multipurpose project (Philippines). Understated
costs and failed to provide for contingency costs.
* Damhead Creek power project (United Kingdom). Failed to
provide for liquidated damages and understated subcontractor
costs and engineering and construction costs.
* Pine Bluff failed to provide for contingency costs and
understated instrumentation costs, project costs and understated
painting costs.
The adjustments on these three projects, together with material
omissions by Raytheon Company on 28 other projects, total $416
million, or nearly 90% of the $469 million purchase price
adjustment submitted by Washington Group.
On June 1, 2001 the District Court of the Fourth Judicial
District of the State of Idaho ruled in Washington Group's favor
and ordered Raytheon Company to produce an April 30, 2000,
balance sheet of its former subsidiary, Raytheon Engineers &
Constructors. The April 30, 2000 balance sheet is the triggering
document for the purchase price adjustment process. The Court
also set strict milestones for resolution of the matter and
appointed William J. Palmer & Associates to serve as the
independent accounting firm to resolve disputes. Washington
Group was given until June 30, 2001, to respond to Raytheon
Company's RE&C balance sheet. Washington Group and Raytheon
Company now have 30 days to provide support for their positions,
which will be submitted to William J. Palmer & Associates for
decision. According to the Court's order, William J. Palmer &
Associates then has 30 days to make its determination and
specify the amount of any cash adjustment to the purchase price.
The distribution of any cash adjustment to which Washington
Group may be entitled will be determined by the U.S. Bankruptcy
Court as part of Washington Group's financial restructuring.
Washington Group International, Inc. is a leading international
engineering and construction firm with more than 35,000
employees at work in 43 states and more than 35 countries. The
Company offers a full life-cycle of services as a preferred
provider of premier science, engineering, construction,
program management, and development in 14 major markets.
WEBLINK WIRELESS: Bankers Trust Resists Funding Bonus Plans
-----------------------------------------------------------
Weblink Wireless, Inc., and its debtor-affiliates have not shown
any evidence that Bankers Trust's collateral is adequately
protected, the Company does not have BT's consent to use its
cash collateral, and BT objects to the Company's proposal to use
$7.8 million of BT's cash collateral to fund key employee
retention and severance programs.
Martin A. Sosland, Esq., and Martin J. Beinenstock, Esq., at
Weil, Gotshal & Manges LLP, tell Judge Felsenthal in Dallas that
the Debtors must first demonstrate that BT's collateral is
adequately protected before the company is legally entitled to
dip into it. Weblink hasn't offered any evidence that the value
of its collateral is intact and has made no offer to provide
adequate protection.
Even if the Debtors can show that BT is adequately protected,
the Key Employee Retention and Severance Programs are flawed
because it does not address the unstable and uncertain
circumstances under which the Debtors are now operating. The
KERP does not provide real incentives for employees to stay and
work toward a reorganization. The Motion, BT says, should be
denied.
Separately, BT also objects to the Debtors' proposal to pay $4.5
million to 41 so-called critical vendors. "Assuming arguendo
that section 105(a) allows a bankruptcy court to authorize
payment of prepetition claims, [Weblink has] failed to establish
that the relief requested is reasonable and necessary under the
circumstance [because it does not] ensure that there is no
disruption in the Debtors' ability to obtain goods and services
necessary to the operation of their businesses. . . ," Messrs.
Sosland and Beinenstock argue.
WINSTAR COMM: Moves To Adopt Employee Retention & Severance Plan
----------------------------------------------------------------
By motion, Winstar Communications, Inc. is seeking approval of
and authority to implement their employee retention program,
severance benefits program, and performance bonus program.
In connection with the restructuring, M. Blake Cleary, Esq., at
Young Conaway Stargatt & Taylor, in Wilmington, Delaware,
relates, the Debtors' senior management recognized the need to
implement a program to help retain employees. After consulting
with their advisors, the Debtors formulated an employee
retention program, severance benefits, and a performance bonus
program.
After over 6 weeks of intensive and extensive negotiations over
the terms of the Retention Programs, the Debtors' Prepetition
Senior Secured Lenders and Post-Petition Secured Lenders
indicated they support the approval of the Retention Programs.
The creditors' committee was also consulted.
The Debtors propose to implement a multi-faceted employee
retention program designed to provide incentives to employees to
remain in the Debtors' employ and to work toward a successful
reorganization of the Debtors' estates.
Mr. Cleary explains it is imperative that the Debtors retain
their current workforce in order to successfully navigate their
financial restructuring.
Despite the present problems in the telecommunications industry
and an overall economic slowdown, the Debtors believe that their
highly skilled and experienced employees could obtain employment
elsewhere should they decide to leave Winstar.
Winstar management believes that the immediate adoption of an
employee retention program is required to maximize future
resignations by employees and the resulting damage to Winstar
and its efforts to reorganize.
The need for such a program is evidenced by the recent dramatic
increase in the employee attrition rate, from an annualized rate
of near 20% prior to the Petition Date to an annualized rate of
approximately 40% today.
Winstar management has taken a number of dramatic actions over
the last several months to position the company for future
profitability. While these actions are based on sound business
judgments, they have adversely impacted employee morale and
motivation.
Two actions in particular mandate the need for immediate
adoption of the Retention Programs:
(a) The reduction in force announce on April 5, 2001, by
which the Debtors' workforce was reduced by about
2,000 employees (comprising approximately 40% of the
Debtors' workforce); and
(b) The Debtors' failure to pay bonuses for the year 2000.
In addition, Mr. Cleary relates, the stock options held by
employees no longer have any value and the Debtors have
suspended their 401(k) matching and employee stock purchase plan
as a result of the Debtors' financial situation and chapter 11
filing.
Because there are fewer employees, the remaining employees had
to shoulder heavier workloads. Their normal weekly hours were
increased. The Retention Programs will ensure that the remaining
employees with increased burdens will not depart.
All full-time Winstar employees are eligible to participate in
the Employee Stay Bonus Program. The Employee Stay Bonus
Program covers all of the Debtors' 2,600 employees including
senior management, middle management, legal department,
operations personnel, and staff. Employees will receive payments
totaling the percentage of their base salary:
Number of Percentage Projected
Position Participants of Basic Salary Retention Cost
-------- ------------- --------------- --------------
CEO 1 0 $0
VP 2 20% to 80% 6,696,608
Directors 1,951 7.5% to 15% 11,374,523
----- -----------
Total 2,034 $18,071,132
Each Stay Bonus will be payable in three installments:
* The first installment of 25% will be paid as soon as
practicable after court approval of the Employee Stay Bonus Plan
and following the effective date of an increase of at least
$125,000,000 in the commitment under the DIP Credit Agreement to
those employees who remain actively employed by Winstar on the
date of such payment.
* The second payment of 25% will be paid upon the 6-month
anniversary of the date the first installment was paid.
* The final installment of 50% will be paid upon the entry
of an order confirming a plan of reorganization for the Debtors
or approving a sale of all or substantially of the Debtors'
assets or capital stock.
Employees who voluntarily terminate their employment or those
who are terminated for cause will not be eligible to receive
Stay Bonus payments.
A Severance Program is being offered to ease the financial
impact on employees whose employment ends for reasons other than
job performance or misconduct. In order to be eligible for the
Severance Program:
(a) The employee must have been involuntarily terminated
from employment with the Debtors for reasons other than
discharge for cause, voluntary resignation, death, disability or
retirement.
(b) Within 30 days prior to termination, the employee must
not have been offered a comparable position within the Debtors'
organization for which such employee is qualified or as a
consultant to the Debtors or to a successor by purchase.
Determinations of what constitutes a "comparable position" and
employees qualifications shall be made by the administrator of
the plan.
(c) Employee of business units sold on or before August 1,
2001 shall not be eligible for the Severance Program based on
such employment.
Under the Employee Severance Program, employees will be entitled
to:
Employee Level Severance Benefits
-------------- ------------------
Senior Vice-Presidents 6 to 18 months
and above
Vice-Presidents and 2 to 2 1/2 months
Director
Exempt and Non-Exempt 2 weeks for every year of service
The Debtors ask that upon entry of an order approving this
motion, all severance benefits owed to employees, whether under
the Severance Program or otherwise, shall be deemed to be
administrative expenses of the Debtors' estates. Accordingly,
severance pay to all employees will be paid as administrative
claims on a bi-weekly basis. The Debtors believe this will give
employees greater financial security and encourage them to
remain in their employ.
To continue motivating employees to achieve the Debtors'
business objectives, the Debtors plan to implement a Performance
Bonus Program. This program is comprised of 3 discrete elements:
(1) The Executive Incentive Program;
(2) The Discretionary Incentive Award Program; and
(3) The Customer Satisfaction Incentive Program.
These programs are intended to provide additional incentives to
employees who help:
(a) Attain customer satisfaction levels,
(b) Attain operating performance results, and
(c) Achieve a successful reorganization through a stand-
alone plan of reorganization or sale.
Under the Executive Incentive Program, higher level employees
may be entitled to a cash bonus based on the Debtors' attaining
specified performance targets. The maximum amount payable under
this program is twice the aggregate target incentive bonus, or
approximately $31,000,000.
Under the Recovery Incentive bonus, an employee must be employed
by the Debtors as of the date of the entry of an order
confirming the plan of reorganization for the Debtors' or
approving a sale of all or substantially all of the Debtors'
assets or capital stock.
The Discretionary Incentive Award Program is designed to
motivate employees to achieve individual objective that
collectively benefit the Debtors' operations. All full-time
employees below director level who do not participate in a
commission plan are eligible for the Discretionary Incentive
Award Program. The estimate cost of this aspect of the
Performance Bonus Program is $3,000,000, with payment awarded to
be made in April 2002.
The Customer Satisfaction Incentive Award Program is intended to
motivate employees to achieve customer objectives. All full-
time employees below the director level are eligible for this
program. Target awards are one week's salary. The estimated
cost of the program is $2,000,000 at target and a maximum of
$3,000,000, and payments awarded under this program will be
payable in April 2002. (Winstar Bankruptcy News, Issue No. 6;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
*********
Bond pricing, appearing in each Monday's edition of the TCR, is
provided by DLS Capital Partners in Dallas, Texas.
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Wednesday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com.
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of interest to troubled company professionals. All titles are
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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
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Group, Inc., Washington, DC USA. Debra Brennan, Yvonne L.
Metzler, Bernadette de Roda, Aileen Quijano and Peter A.
Chapman, Editors.
Copyright 2001. All rights reserved. ISSN: 1520-9474.
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