GRAND RAPIDS, Mich., March 31, 1995 -- href="chap11.gantos.html">Gantos, Inc. href="(Nasdaq-NNM:" target=_new>http://www.secapl.com/cgi-bin/edgarlink?GTOSQ">(Nasdaq-NNM:
GTOSQ) a specialty retailer of quality women's apparel and accessories,
today
emerged from Chapter 11 and declared its plan of reorganization effective.
Gantos closed today on a $40 million revolving credit and letter of credit
agreement (subject to a borrowing base), with href="dir.firm.natwest.html">NatWest
Bank, N.A. as Agent and LaSalle National
Bank as co-lender.
Mr. L. Douglas Gantos, Chairperson of the Board and Chief Executive Officer,
said that completion of the reorganization plan "will permit the Company to
concentrate on our business plan and continue its focus on financial stability
and increased profitability." Management's program for returning the company
to financial health included closing 45 stores, streamlining operations,
reducing corporate expenses and implementing merchandising and marketing
initiatives. "As our company's 16-month reorganization period draws to a
close, I want to praise the dedication and hard work of all of Gantos'
employees, as well as the loyalty of our customers, suppliers, advisors and
others who played such important roles in our reorganization," Mr. Gantos
said. "Beyond the numbers, the 'whole' effort has truly proven greater than
any sum of the parts."
Based on today's effective date all holders of secured and priority claims
will receive cash equal to the allowed amount of their claims, and unsecured
creditors will generally receive 50% of the allowed amount of each claim in
cash and 50% of the allowed amount of each claim in new common stock valued at
$4.16 per share.
Certain unsecured creditors will receive approximately $12.4 of their claim
in 6 year notes, bearing interest at 12.75%. The anticipated value to
creditors is equal to 100% of their allowed claim. The Company expects to
issue approximately 5.2 million shares of new common stock to the unsecured
creditors. Under the terms of the Plan of Reorganization, for every two old
common shares outstanding on the effective date the holder is entitled to
receive one share of new common stock. The Company has generally, up to 25
days to administer the cash, notes and stock distribution. The new shares are
expected to be traded on Nasdaq on Monday, April 3, 1995, under the symbol
GTOS." target=_new>http://www.secapl.com/cgi-bin/edgarlink?GTOS">GTOS.
The new reorganized Gantos board of directors, named as provided for in the
confirmation order, consist of the following individuals: L. Douglas Gantos
remains on the Board; Hannah H. Strasser, co-head of the high yield group for
Deltec Asset Management Corp.; Elizabeth M. Eveillard, Managing Director and
head of the retailing industry group for PaineWebber Incorporated; Betsy
Burton, Chairman of BB Capital, Inc.; Fred K. Shomer, Executive Vice President
and Chief Financial Officer for Gerber Products Company, a subsidiary of
Sandoz Corporation; S. Amanda Putnam, Vice President of Marketing Strategies
for Fitch, Inc.; and Erwin A. Marks, former Managing Director and Senior Vice
President of Heller Investments, Inc., consultant.
Headquartered in Grand Rapids, Michigan, Gantos currently operates 114
stores with over 2,000 employees in 23 states.
/CONTACT: Frederick H. Marx of Marx, Layne & Company, 810-855-6777,
for Gantos/
CHICAGO, March 31, 1995 -- Certain former employees of the
environmental and engineering consulting firm STS
Consultants, Inc. purchased
the company out of bankruptcy today for more than $7 million and other
consideration. Chief Bankruptcy Judge John D. Schwartz of the Northern
District of Illinois approved the sale on March 20. The Northern Trust
Company, the major creditor in the bankruptcy proceeding also consented to the
transaction.
STS Consultants, Ltd. employs more than 300 professionals and staff in 5
principal offices in the midwest. The firm is well-known for its engineering
and environmental-related services, including the expansion of McCormick Place
Exposition Center and the Chicago Board of Trade. In Michigan, the firm was
responsible for the engineering and feasibility planning for the renovation of
the stadium at Michigan State University.
According to STS president, Tom Wolf, the company will emerge from the
bankruptcy proceedings with its core business and customer contracts in place.
"We're a much more focused company today," Mr. Wolf commented, "and with a
more reasonable debt structure we will be able to concentrate our energies on
engineering services and client service. And while we have streamlined our
structure, we have retained all of the service lines for which we are
known."
Michael B. Solow, Bankruptcy partner at Chicago's Hopkins & Sutter,
represented the officers who purchased the firm. "We've been on an extremely
fast track," Solow commented. "The bankruptcy was only filed in late
December. The consulting firm is well positioned now with a substantially
reduced debt structure."
/CONTACT: Michael B. Solow, for STS Consultants, Inc., 312-558-6842/
NEW YORK, March 31, 1995 -- Aileen, Inc.
(NYSE:AEE),
debtor-in-possession under Chapter 11 of the United States Bankruptcy Code, a
manufacturer and retailer of women's apparel, today announced that it has
obtained interim Bankruptcy Court approval of a new $7 million
debtor-in-possession revolving credit facility with href="dir.firm.cit.html">The CIT Group/Business
Credit, Inc. Final approval of the $7 million line by the Bankruptcy
Court is
expected on April 5, 1995. The interim court order permits the Company to
borrow up to $5 million under the new credit facility, which was arranged for
the Company by its independent manager and management consultant, href="dir.firm.alco.html">Alco
Management & Consulting Group, Inc. The initial borrowings under the
facility
have been used to repay the Company's outstanding indebtedness of
approximately $3,600,000 under its debtor-in-possession revolving credit line
with Sterling National Bank & Trust
Company of New York, which was to expire
on March 31, 1995. The new facility will also provide the Company with working
capital to fund its operations and to supply its retail stores with new
merchandise. Available borrowings under the new $7 million line may be
limited from time to time by the value of the Company's finished goods
inventory and manufacturing assets and by certain allowed reserves.
After terminating its domestic manufacturing operations (the assets of which
are being offered for sale), the Company continues to operate 114 stores.
/CONTACT: Steve Delman of Aileen Inc., 212-398-9770/
NEW YORK, New York--March 31, 1995--Four months after its December
7th bankruptcy filing, Orange County has
made public a plan for financial recovery.
The plan results from the efforts of the county's legal and financial
advisors with the backing of the new Chief Executive Officer. County
supervisors have not yet endorsed the plan and although they voted to seek
voter approval of a half cent sales tax, at least two of the Supervisors have
expressed personal reservations against this central element of the overall
financial recovery plan. The plan, if implemented, would allow the county to
reach several goals:
Their Best Case Scenario Does Not Assure Default Avoidance
Even if all of the elements of the announced recovery plan are put into
place as expeditiously as possible, it appears impossible for the county to
make full and timely debt service payments this summer.
The county would additionally need to negotiate a debt deferral with
noteholders or obtain some sort of bridge financing to avoid default. A debt
deferral, achieved through voluntary extension or renewal negotiated through a
consensual process with existing noteholders, could represent a necessary and
acceptable element of the recovery.
Any such negotiations could last almost to the notes' maturity dates, as
noteholders will likely want to know the outcome of the sales tax vote prior
to agreeing to any debt deferral. A forced extension would be viewed by
Moody's as equivalent to a payment default, and as such, is not an acceptable
alternative. The Teeter notes may have the best potential to avoid default as
they could be refinanced separately on a self sustaining basis. A review of
each of the plan's elements illustrates how difficult this process will
continue to be over the coming months.
The Problem
The county has identified a deficit of almost $2 billion. This deficit
includes the loss of funds invested in the pool by the county and the pool
participants as well as the county's budget shortfall due to the loss of
interest income in 1994-95. Because of the deficit, the county will be unable
to repay $1 billion in short-term debt coming due this summer.
The recovery plan attempts to eliminate this deficit through a combination
of debt restructuring and fee increases. The county has also made extensive
budget cuts to balance its budget going forward. The county is also
considering asset sales and privatization as two additional means of raising
revenues and reducing expenditures; however, neither of these options are
viable in the short-term. While such alternatives may provide meaningful
relief over the long-term, they will take a long time to implement and their
financial potential is currently undetermined.
Another alternative under consideration by the Supervisors is to redirect
the Measure M sales tax that finances transportation programs. The Measure M
sales tax is pledged to bonds of the Orange County Transportation Authority
(OCTA), a legally distinct entity from the county.
Redirecting these revenues would violate that authority's bond indentures
and may require 2/3 voter approval, OCTA Board approval, as well as that of
the participating cities. Any actions taken to divert Measure M funds must
occur in conjunction with the defeasance of outstanding debt or must be
accomplished in such a way as to protect existing bondholders.
Otherwise, this would have severe negative consequences on the OCTA credit
rating; proposals to borrow funds from OCTA would similarly negatively affect
the Authority's credit quality.
While it is a worthwhile exercise for the county to pursue other options and
sources of revenue, there is a risk that these efforts may distract from the
urgency of passing a sales tax and implementing the other elements of the
proposed recovery plan.
The Restructuring Plan
The critical components of the recovery plan are four new debt issues, an
increase in solid waste tipping fees, an increase in the sales tax, and
significant General Fund budget restructuring.
The county has made some progress in reaching agreement with pool
participants over allocation of the remaining assets in the pool.
The creditors committee representing the participants has agreed to the
proposal; however, the settlement must still be voted on by the pool members
and is subject to bankruptcy court approval.
Of some concern is the sentiment that the proposal has been forced on the
participants; that is, if they do not agree to this particular settlement
which includes surrendering certain legal rights, they will not even receive
their pro-rata portion of the remaining pool assets in a timely manner.
The recovery notes are a critical element of the pool settlement. The county
has indicated to pool participants that they will be able to convert these
notes to cash. If the county cannot provide a means of converting them to
cash by June 5, the participants have the option to accept their pro-rata
portion of the pool's remaining assets while pursuing litigation for the
balance, or to walk away from the agreement altogether. The latter would
result in a long, complicated litigation which would delay indefinitely the
county's emergence from Chapter 9 as well as potentially pushing some of the
pool participants into insolvency themselves.
There are many obstacles to monetizing the recovery notes. These notes will
not have a specific revenue stream pledged to them; rather, they will have a
"super priority lien" on the county's General Fund. Although intended to be
strong security derived from the powers of the bankruptcy court, this is an
untested notion in the municipal market and it remains to be seen what level
of security a bondholder could take from this pledge. Further, the super
priority lien subordinates debt service on the notes to General Fund
operations which will be severely stressed in the coming years.
Without Sales Tax, County is Limited in Ability to Implement Other
Recovery Elements
The proposed half cent increase in the sales tax will allow the county to
maintain governmental operations while diverting an existing General Fund
revenue source to debt service on bonds.
Without this increase, it is unlikely that the county will be able to
proceed with a critical element of its recovery plan, the issuance of bonds
backed by Motor Vehicle License Fees. The proposed 1995-96 budget already
represents draconian reductions in service to county residents. It is
unlikely that General Fund operations could even continue if Motor Vehicle
License Fees, which provide approximately $100 million of the remaining $275
million budget, are diverted without a replacement revenue source.
On March 28, the County Board of Supervisors voted unanimously, but with
strongly expressed reservations, to seek voter authorization of a sales tax
increase. The tax measure, Measure R , will be placed before voters at a
special election to be held June 27.
If passed, the tax would not be collected until January 1, 1996. Voter
approval of Measure R is far from assured. Based on the experiences of other
entities in the state that have voted increases in the sales tax, advisors to
the county believe that the increase will likely be subject to legal
challenge, a process which could delay its implementation.
Passage of the sales tax in June would be important verification that county
leaders and residents are serious about meeting their obligations to
bondholders and resolving this fiscal crisis.
Credit Strength of Motor Vehicle License Fee Backed Bonds Depends on
Passage of Legislation
If the sales tax passes and is found to be valid, the county will have the
capacity to divert its existing stream of Motor Vehicle License Fees to
support up to $750 million in bonds. The recovery plan includes two changes
in state law designed to enhance security to bondholders. The first
strengthens the existing state intercept program to provide money directly to
the trustee or paying agent on the debt. The second attempts to provide
greater protection against future bankruptcy by providing a statutory lien on
pledged revenues. The legislative package does not appear to be progressing
very quickly through the legislature. The final version of the intercept must
still be enacted and it is to early to evaluate whether it will work properly
from legal and administrative viewpoints. Even if the legislation is passed
in a timely manner, it does not guarantee a level of security sufficient to
provide an investment grade rating on the bonds to be issued.
Leveraging of Solid Waste System
The other significant source of funding for the recovery plan involves fully
leveraging the integrated waste management system. In order to achieve the
financing goals, the county would have to both raise tipping fees and increase
the amount of garbage sent to its landfills by importing garbage from outside
of Orange County. Since this cannot be relied upon in the near term, the
county's financing plans should not anticipate receiving increased revenues
from imported garbage. The county would also have to refund outstanding debt
of the enterprise system.
The county asserts that raising tipping fees would be financially feasible
because the current $23 per ton rate is low for southern California and the
surrounding counties also prohibit importation of garbage to their landfills.
Raising the fee only requires a majority vote by county supervisors. There
already appears to be some resistance by cities in the county to raising these
fees since refuse collection is often subsidized by city General Funds. Early
action on this fee increase would be an appropriate step since it is one
source of additional financing that is completely within the county's control.
Importing garbage from outside the county would require the rescinding of an
existing ordinance that prohibits such importation. It would also require
environmental approval that could take an indefinite amount of time.
Teeter Plan Revisions Require Legislative Changes
The refinancing of outstanding Teeter Notes could proceed without
implementing the rest of the recovery plan. This would allow full payment of
$175 million of outstanding notes, generate approximately $10 million annually
for the county's General Fund, and release reserves of approximately $60
million. The proposed legislative changes in the program appear to be
reasonable and could be utilized by other counties in the state. The primary
obstacle to the Teeter revisions is the danger that the legislative changes do
not move forward in a timely manner.
The county must focus on getting its legislative `` tool box'' through the
state legislature in order to achieve this and other elements of its recovery
plan.
Conclusion
Given the numerous obstacles to the successful implementation of this plan,
the outlook for the county's noteholders is not good. The county can make
good faith efforts to achieve its goals; however, it must also design
contingencies to accommodate timing problems, and develop alternatives in case
key elements of the program are not successful.
To date, the county has not suggested alternative courses of action to be
used if this recovery plan is either not fully implemented or is not
implemented in time to avoid default. The financial markets and State
officials have called for the county to take appropriate action to resolve its
own financial problems. However, a breakdown in the recovery process has
implications that go beyond the county and its own noteholders.
The State of California may have to reconsider its role and take a more
active and direct role to prevent sizable defaults and potential disruption of
the municipal market in California.
CONTACT: Karen S. Krop, (212) 553-4860 or
Barbara Flickinger, (212) 553-7736
SAN ANTONIO, March 31, 1995 -- Solo Serve
Corporation href="www.secapl.com/cgi-bin/edgarlink?SOLOQ">(Nasdaq-NNM:SOLOQ) today
announced that it had filed with the United States Bankruptcy
Court for the Western District of Texas, San Antonio Division, a proposed Plan
of Reorganization (the "Plan") jointly sponsored by the Official Committee of
Unsecured Creditors and Texas Commerce Bank, N.A. The proposed Plan would
provide a cash distribution to unsecured creditors of $.725 for each dollar of
allowed unsecured claims. This distribution to unsecured creditors would be
funded principally from the company's existing resources and secondarily from
the proceeds of a proposed offering of the reorganized company's
securities.
Contemporaneously with filing the proposed Plan, the company filed a related
Disclosure Statement setting forth more detailed information regarding the
company and the Plan. Under applicable Bankruptcy Court rules and procedures,
a hearing will be scheduled by the Court to review and approve the Disclosure
Statement and to consider any objection that may be filed. After approval of
the Disclosure Statement, which is expected to occur in May, the Plan and
Disclosure Statement will be furnished to creditors and stockholders and votes
in support of the Plan will be solicited. The Court will then schedule a
hearing to consider entry of an order confirming the Plan. Approximately 10
days subsequent to confirmation, the Plan would become effective, with the
proposed offering to commence after the Effective Date of the Plan. It is
presently anticipated that the Effective Date of the Plan would be in July or
August 1995.
The offering contemplated by the Plan would be made only to existing
stockholders on a pro rata basis and would be in the aggregate amount of $2.5
million, which is equivalent to approximately $.45 per existing common share.
It is not expected that the interests of stockholders who subscribe for their
proportionate part of the $2.5 million offering would be diluted. The
percentage interests of stockholders who choose not to participate in the
offering would be diluted in an amount presently anticipated to be 50
percent.
In order to effectuate a reduction of the aggregate number of outstanding
shares in the reorganized company, the Plan contemplates that each stockholder
as of the close of business on the Effective Date of the Plan would receive
one share of common stock in the reorganized company for each three shares of
existing common stock as of that time. Each holder would also receive the
right to subscribe for one share of stock in the reorganized company for each
three shares of existing common stock. The subscription price in the proposed
rights offering would be adjusted to reflect the reduction in the number of
outstanding shares. The company has expressly reserved the right to further
evaluate the structure and terms of the proposed offering and to change the
structure and terms if it determines that an alternative structure is more
advantageous to the company.
Subject to certain conditions, the company's principal stockholders, which
owns approximately 45 percent of the outstanding common stock, has agreed to
subscribe for its pro rata amount of the offering and for any additional
amounts not subscribed for by other stockholders. As a result of this
agreement with the principal stockholder, the company expects the rights
offering to be fully subscribed. The proposed Plan is also subject to a
number of conditions, including negotiation of documentation setting forth the
details of the Plan and solicitation and approval in accordance with the
Bankruptcy Code.
Said Robert J. Grimm, chairman and CEO, "We've worked hard to achieve a
consensual plan or reorganization that will facilitate our exit from Chapter
11 and a viable, stronger company going forward. With the filing of this plan,
we can now focus on restoring the reputation of Solo Serve as a pre-eminent
off price retailer in its historical market.
Solo Serve Corporation operates a chain of off-price retail stores offering
a wide selection of name brand and other merchandise at prices 20-60 percent
below traditional department and specialty stores. The company currently has
30 Solo Serve stores in Texas, Louisiana, and Alabama.
/CONTACT: Timothy L. Grady, Solo Serve Corporation, 210-662-6262/
LOS ANGELES, March 31, 1995 -- Angeles
Mortgage Investment Trust
(AMEX:ANM)" target=_new>http://www.secapl.com/cgi-bin/edgarlink?ANM">(AMEX:ANM)(the
"Trust") today announced that the bankruptcy court having
jurisdiction over the Angeles Corp.
bankruptcy proceeding has entered its
order approving the Angeles Corp.'s Plan of Reorganization (the "Plan") which
includes a negotiated settlement with the Trust. The Trust will receive from
Angeles Corp., upon the effective date of the Plan (expected to occur on or
about April 14, 1995), the following:
"We believe the Plan is fair as it relates to the Trust and produces several
materially favorable effects including increasing shareholders' equity by 38
percent, from approximately $22.5 million to $31 million. In addition, the
Trust will receive 567,326 of the Trust's Class A shares which were held by
Angeles Corp. The receipt of these shares, having an approximate market value
of $4 million, will result in the Trust's book value per share increasing by
over 50 percent -- from approximately $6 1/2 per Class A share to over $10 per
Class A share. The settlement provides the Trust with cash in excess of $6
million with which debt will be retired."
Finally, Consiglio announced that the Trust has reached an agreement with
Lake Arrowhead Joint Venture to reset the 1995 semi-annual interest payment
dates to September 1995.
/CONTACT: Ann Merguerian of Angeles Mortgage Investment Trust,
805-449-1335/