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/raid1/www/Hosts/bankrupt/TCR_Public/971222.MBX T R O U B L E D C O M P A N Y R E P O R T E R Monday, December 22 1997, Vol. 1, No. 84 Headlines AMERICAN WESTERN: Bought for Scrap by Apex Subsidiary EVANSVILLE BREWERY: Michael Lynch Best Bidder FLAGSTAR: Sets Jan. 7 As Effective Date for Emergence FLOWIND: Subsidiaries Intend to Sell Inventory HARRAH'S JAZZ: Asks Court Approval of New Plan HARRAH'S JAZZ: Lawyers Want to Quiz Foster HEILIG-MEYERS: Plans Cuts, Closings HOLTRACHEM: Agreement with State Finalized INTERSCIENCE: Sells Xerox Maintenance Division LAMONTS: Court Approves Reorganization Plan MANHATTAN BAGEL: Recognizes Franchise Advisory Council MAX: Given 10 Days to Return Airplane MOLTEN METAL: Wants to Pay Employees' Prepetition Claims MONTGOMERY WARD: Fixed Fee to Arthur Andersen MONTGOMERY WARD: Requests Rejection of Equipment Leases MONTGOMERY WARD: Seeks More Professionals PHOENIX INFORMATION: Files Chapter 11 RICKEL HOME: Seeks Approval for Stalking Horse Agreement WESTERN PACIFIC: Announces Cash Infusion --------- AMERICAN WESTERN: Bought for Scrap by Apex Subsidiary ----------------------------------------------------- 21st Century Fuels reported on December 10, 1997 that St. Louis-based Clark Oil Trading Co. (COTC), a subsidiary of Apex Oil, has finalized a $9.5 million deal to buy the 86,000 b/d former American Western Refining refinery at Lawrenceville, IL, in a sale approved by the U.S. Bankruptcy Court. The closing was November 25, 1997. COTC (formerly affiliated with Clark Refining & Marketing) intends to sell the refinery for scrap, rather than restart it, according to COTC spokesman Neil Miller. The refinery was formerly operated by Castle Refining. Its operation was tied to a crude-for-products hedging scheme with former partner MG Refining & Marketing. The refinery became economically problematic after MG's hedging division lost nearly $2 billion a few years ago in the biggest-ever oil market trading fiasco in history. EVANSVILLE BREWERY: Michael Lynch Best Bidder --------------------------------------------- According to the Evansivilee courier, on December 17, 1997, Michael Lynch, CEO of Michigan Avenue Partners promises to have beer flowing again in late January. Sterling, Falls City, Wiedemann and Gerst beers are alive and still living at Fulton Avenue and Lloyd Expressway. Michigan Avenue Partners of Chicago, whose confident, brash CEO Michael Lynch offered in October to buy the ailing Evansville Brewing Co. while pledging to keep its operation here, was ruled best bidder Tuesday by U.S. Bankruptcy Judge Basil H. Lorch III. Lynch landed the 147-year-old brewery Tuesday with the same $3 million bid he made two months ago, just before Evansville Brewing filed for bankruptcy. If Lynch meets the bankruptcy court's requirements, including closing the deal 11 days after Lorch issues a signed order approving the sale, it means the brewery's work force of about 90 people will return soon, maybe sometime in January. "Think of it as Michigan Avenue Partners' present to the employees of Evansville Brewing Co. Merry Christmas," Lynch said moments after the brewery's Chapter 11 hearing ended Tuesday afternoon in federal court. Lynch said one of his first tasks would be the "repositioning of senior management," and he wasted no time offering the position of brewery chief executive officer to Michael Exline, the current financial chief. Though Exline said he is still responsible to current management until Lynch closes the deal, he indicated he will then accept the offer. Lynch said he would announce other appointments and "structural changes" by year's end. Of 13 bids in all, only one -- from Shula Inc. of Chicago, allied with the Pittsburgh Brewing Co. -- was for all brewery assets. It came in "at least a couple hundred thousand" below the successful bid, according to Stanley Talesnick, Evansville Brewing's bankruptcy attorney. And Pittsburgh was anything but the hometown favorite because the company had made little effort to allay fears that it would close the local brewery and take its brands back home, where brewing capacity outstrips production. Lynch and Michigan Avenue Partners, on the other hand, had the clear backing of brewery workers, including several who attended the entire 5 1/2 -hour hearing. At the end, Lynch approached a few of them, thanked them for supporting him, and said, "Merry Christmas. Let's make this very profitable for all of us." "Great," said 2 1/2 -year brew house worker Craig Abshier, in his late 20s. "I've been off work over six months out of the last 12." Current brewery president and chief executive Stephen W. Cook seemed relieved and pleased at the outcome. "This is what I've been working six to eight months for -- to get a suitable buyer. I'm very pleased someone bought it who's going to operate it here." Cook said his tenure with the brewery will end when Michigan Avenue takes over. Though relations between Evansville Brewing officials and Lynch have been strained since Lynch missed an October deadline for paying earnest money and the brewery proceeded with its bankruptcy petition, Cook said he "felt all along that Mr. Lynch would be the one who would acquire the brewery." Talesnick also was bluntly critical of Lynch in October, but said Tuesday that Lynch had his confidence. "He came with the money, he came with a signature. There is no reason to think (Michigan Avenue officials) don't intend to consummate the deal and keep the brewery operating " Michigan Avenue put up $250,000 in earnest, which it will forfeit if the deal isn't completed within 11 days. Of the $3 million purchase price, $2.5 million is due at the closing, with the balance to be paid in quarterly installments of $25,000 over five years beginning March 1. The actual purchaser will be Evansville Acquisition Co. LLC, a subsidiary of Michigan Avenue Partners. Lynch testified at the hearing that he is the majority shareholder and CEO of the subsidiary, which he said involves no Evansville Brewing officials, shareholders or employees. Lynch said he plans to use the subsidiary to acquire other brewing interests. He also has acquired other brands he intends to brew in Evansville, but could not disclose them immediately because of "confidentiality requirements." FLAGSTAR: Sets Jan. 7 As Effective Date for Emergence ----------------------------------------------------- Flagstar Companies, Inc. (NASDAQ:FLST) announced that the company has set January 7, 1998 as the Effective Date for its emergence from Chapter 11. The company has also filed a motion with the U.S. Bankruptcy Court for an order establishing January 2, 1998 as the Record Date for determination of debt security holders entitled to distributions under the Amended Joint Plan of Reorganization (the "Amended Plan") as confirmed by the U.S. Bankruptcy Court by order entered on November 12, 1997. Holders of record of the Old Senior Notes, Senior Subordinated Debentures and 10% Convertible Junior Subordinated Debentures will be furnished with a letter of transmittal by the Disbursing Agent for use in tendering old debt securities in exchange for new securities to be issued on or soon after the Effective Date. First Trust National Association will act as Disbursing Agent for the New Senior Notes and Continental Stock Transfer & Trust Company will act as Disbursing Agent for the New Common Stock and New Warrants. Under the Amended Plan, 40 million shares of New Common Stock will be issued, with holders of Senior Subordinated Debentures receiving 95.5% of the New Common Stock and holders of the 10% Convertible Subordinated Debentures receiving 4.5% of the New Common Stock plus four million New Warrants exercisable at $14.60 per share over a seven- year term. The Amended Plan does not allocate distributions to holders of Old Common Stock or Old Preferred Stock and such securities will be canceled on the Effective Date. Holders of Old Senior Notes will receive New Senior Notes representing 100% of the principal amount of the Old Senior Notes plus accrued interest through the Effective Date. A limited "when issued" trading market for the New Common Stock has developed in the over-the-counter market under the trading symbol DINEV. Upon emergence from Chapter 11, the company will change its name to Advantica Restaurant Group, Inc. and will list the New Common Stock and New Warrants on the Nasdaq National Market under the trading symbols DINE and DINEW, respectively. Flagstar is one of the nation's largest restaurant companies with nearly 3,300 moderately priced restaurants and annualized revenue of approximately $2.7 billion. Flagstar owns and operates the Carrows, Coco's, Denny's, El Pollo Loco and Quincy's Family Steakhouse restaurant brands and is the largest franchisee of Hardee's. FLOWIND: Subsidiaries Intend to Sell Inventory ---------------------------------------------- Advanced Wind Turbines, Inc. (AWT) and Advanced Blade Manufacturing, Inc.,(ABM) two subsidiaries of debtor FloWind Corporation intend to enter into a contractual arrangement with the Conservation and Renewable Energy System (CARES) and Illinova Energy Partner,(IEP) with the approval of the Export-Import Bank (Ex-Im) of the United States and the debtor. AWT and ABM would sell certain wind turbine inventory to IEP at less than its book value for use in the CARES windfarm project. The inventory has a book value of about $4.54 million and requires about $500,000 to be workable. The sales price of the inventory before the reworking would be $4 million. Of the $4 million purchase price for the inventory, $1.58 million will be paid to the vendors of AWT and ABM. The remaining $2.42 million will be set aside for payment to Ex-Im on account of its secured claim. As a result, Ex-Im's $9 million secured claim against the debtor and the debtor's unsecured intercompany receivable from AWT and/or ABM which is also collateral for the EX-IM loan, will both be reduced by $2.42 million providing a substantial benefit to the debtor's estate. A portion of the amount reserved for Ex-Im not to exceed $1.42 million might be set aside to cure any defects in the inventory that are identified prior to passage of the buyer's acceptance test. HARRAH'S JAZZ: Asks Court Approval of New Plan ---------------------------------------------- Harrah's Jazz Co. will ask a federal bankruptcy judge on January 21 to approve the company's revised reorganization plan for the idled land casino. The date for the "confirmation" hearing was set by U.S. Bankruptcy Judge Thomas Brahney III. The scheduling of the confirmation hearing came a day after the state Gaming Control Board unanimously approved Harrah's Jazz's revised casino operating contract with the state. The Legislature has the final say on the contract. Governor Mike Foster is urging state lawmakers to convene a special session early next year and approve the contract. Harrah's Jazz officials are hoping to open the casino in early 1999. Brahney approved the previous reorganization plan in April, but the Legislature rejected Harrah's Jazz's earlier casino operating contract with the state in June, sending the company back to the drawing board. Harrah's Jazz's bondholders and unsecured creditors overwhelmingly approved the previous reorganization plan, with 99 percent of the unsecured creditors supporting it and 96 percent of the bondholders voting in favor of it. Patrick said that only those bondholders and unsecured creditors who voted on the previous reorganization plan are entitled to vote on the revised plan. Patrick said those bondholders and unsecured creditors will be mailed a revised plan, but only those who wish to change their vote need to vote again. Those votes are due by January 16, he said. Bondholders would own slightly more than 50 percent of the project, but the value of their junk bonds would be $187 million instead of the $435 million when they were originally purchased. Brahney also approved Harrah's Jazz's "disclosure statement," or outline, of its plan to reorganize the casino's finances and emerge from bankruptcy protection. Patrick said the statement was mailed to bondholders and unsecured creditors in mid-November, and only one bondholder objected. The entire reorganization plan still must be approved. In addition to guaranteeing the state's $100 million annual tax payment, the revised casino operating contract approved by the Gaming Control Board now: * Prohibits the casino from operating hotels. * Prohibits activities aimed at minors on the casino's second floor, such as a children's arcade. The second floor will be used as an entertainment venue. * Provides for better public access to information about the casino. * Requires any lawsuit arising out of the casino contract to be filed in the 19th Judicial District Court in Baton Rouge, keeping litigation in the state. The Baton Rouge Advocate reported on December 13, 1997 that the Legislature's special session in late January may be a waste of tax payer's money. Sen. Ken Hollis, R-New Orleans, and Rep. Edwin Murray, D-New Orleans, two of the main proponents of the contract, have said they will travel the state to gain enough signatures for the Legislature to call the special session. Lawmakers have never before taken advantage of the procedure that allows them to call a special session, but Gov. Mike Foster has said if there are not enough legislators willing to meet, then there are obviously not enough votes to approve the contract. That makes sense, although some legislators might sign the petition for a special session and still vote against the contract. Others might refuse to sign, but end up voting for the contract if the session is called. It takes a majority of each house for the Legislature to call itself into special session - the same number it will take to approve a resolution ratifying the casino contract. That means proponents must get the signatures of 20 senators and 53 representatives to call the special session. Foster has urged the lawmakers in a letter to approve the contract. He contends that the issue is about the state honoring its contracts, and not about gambling. We do not find that contention convincing. The state did not void the contract. The original casino contract with Harrah's was voided by Harrah's when it abruptly shut down the temporary casino in November 1995 and declared bankruptcy. In our view, the most compelling argument for approval of the contract is that it would ensure payment of some $56 million to unsecured creditors who were left holding an empty bag when the casino shut down. Those creditors would likely receive only pennies on the dollar if the assets of the casino company are liquidated. The state would also be guaranteed at least $100 million in tax revenue. While the state can certainly find good uses for that money, the state can also do without the extra money with relative ease. Some proponents, especially in New Orleans, would also argue that the contract should be approved because it will guarantee completion of the casino building. However, the property at the foot of Canal Street is valuable to the city with or without the building, and it is questionable whether the structure is ideal for the location. Before addressing the question of whether the contract should or shouldn't be approved, lawmakers must decide whether the issue is of such compelling urgency that it deserves the attention of a 10-day special session of the Legislature. While it is true that special sessions have become almost commonplace, we think they should be restricted to issues of an urgent and compelling statewide interest. The casino contract does not fit that definition. It has been two years since Harrah's shut its doors and turned its employees out into the streets just before the holiday season. Will a few more months make that much difference? Last summer, when the Legislature considered the first new contract, proponents argued immediate approval was necessary or the project would be dead forever. While opponents might wish that had been so, it obviously didn't work out that way, since six months later a new "new" deal is on the table. If a special session is not called by the Legislature, Foster could certainly place the issue before lawmakers in the multi-purpose special session he plans immediately prior to the 1998 regular session. If it is not considered in that special session, it is possible the issue could be decided in the regular session, even though that session is restricted to fiscal matters, since it would require only a resolution to ratify the contract and not the adoption of a law. Whatever the outcome, we do not believe the contract merits a special 10-day special session all its own. It is not of sufficient importance or urgency. HARRAH'S JAZZ: Lawyers Want to Quiz Foster ------------------------------------------ The Baton Rouge Advocate reported that attorneys for six former casino regulators want to question the governor under oath about his involvement in the sudden closure two years ago of the state agency that oversaw the troubled New Orleans land casino. Demands to appear for sworn testimony were issued late last week to Governor Mike Foster and his top aide, Stephen Perry, in a federal lawsuit filed here by displaced board members of the Louisiana Economic Development and Gaming Corp. Attorneys for the former regulators also demanded records from Foster's transition organization, which Perry headed, in an attempt to determine whether gambling interests paid any of the expenses the governor had between his election in November 1995 and his swearing-in January 1996. Cheney Joseph, the governor's executive counsel, has said he will oppose any attempt to turn over the transition office's financial records, saying they have nothing to do with the lawsuit, and any attempt to compel sworn testimony from the administration. The lawsuit stems from the sudden closure of the LEDGC office in December 1995. LEDGC was shut down by members of the state attorney general's staff and by Murphy J. Foster III, the son of Mike Foster, who was then the governor- elect. The younger Foster said he was working on behalf of his father and under the authority of then-outgoing Gov. Edwin Edwards. The six former board members, who regulated the New Orleans land casino, contend in the federal lawsuit that their civil rights were violated by being illegally removed from their jobs. They are seeking back pay. Five of the former board members have filed a related lawsuit in state court in Baton Rouge that could, were they to win, hamstring attempts to revive the new casino. That lawsuit contends the Louisiana Gaming Control Board, created in 1996 to regulate the casino and other forms of gambling, does not have the authority to approve a new state contract with the casino because LEDGC's functions were not legally transferred. State attorneys disagree, saying the new board was given all of LEDGC's responsibilities and the lawsuit is merely an attempt by the former board members to be paid salaries cut off at the time of LEDGC's closure. Last Tuesday, the Gaming Control Board approved a new contract with Harrah's Jazz Co., the bankrupt casino's owner, setting up an attempt by backers to have the Legislature ratify the pact in a special session next month. William Patrick, an attorney for Harrah's Jazz, which is not involved in the displaced regulators' lawsuit, said he believed the Gaming Control Board had the proper authority to approve the new contract. In December 1995, Murphy Foster and the Attorney General's Office said LEDGC had to be closed because it depended upon funding from Harrah's temporary casino, which had closed. During the takeover of LEDGC's office, employees were laid off immediately, and the board members' salaries were cut to nothing. However, board members were placed on call during the early portion of 1996 by the state in case action was needed on the Harrah's case. HEILIG-MEYERS: Plans Cuts, Closings ----------------------------------- Heilig-Meyers Co. will close about 60 stores and eliminate about 400 employees as part of an effort to reduce costs and boost profits at its core furniture business. The home-furnishings retailer said late Wednesday that it would take a $134 million pre-tax charge over the third and fourth quarters to cover the expenses associated with the restructuring. Wall Street barely reacted to the news, although analysts said it will help the company control expenses. Heilig-Meyers stock rose 25 cents to $12.9375 Thursday on the New York Stock Exchange. "This is a very healthy move for them," said Wallace W. Epperson Jr., a furniture analyst with Richmond-based Mann, Armistead and Epperson Ltd. The restructuring will focus on its Heilig-Meyers furniture division, which generates about 63 percent of the company's total revenues. About 60 stores will be closed early next year in large markets like Atlanta, Cleveland and Milwaukee, where it has been difficult for the company's small-town format to be successful. It will relocate another 20 or 30 stores to higher-traffic areas. Also, it will initiate a new merchandising and advertising strategy that will differentiate between larger and smaller markets. Heilig-Meyers will also slow its expansion plans. In the last four years, between 45 and 100 stores were opened annually. Nearly 400 jobs will be cut companywide, including about 80 people at its corporate headquarters. The company employs about 22,000 workers. Heilig will also change its credit-card operations, looking for better ways to predict potential bad-risk customers. About 85 percent of Heilig-Meyers merchandise is bought on credit. The company will put aside $50 million to increase a reserve for customers who file for bankruptcy or fall behind on payments. Also Wednesday, the company reported a loss of $49.1 million, or 85 cents a share, compared with earnings of $9.5 million, or 19 cents a share a year ago. For the first nine months of the year, Heilig-Meyers lost $26.1 million, or 46 cents a share, compared with earnings of $29.61 million, or 60 cents a share, a year ago. Standard & Poor's lowered its corporate credit rating on Heilig-Meyers Co. to double-'B'-plus from triple-'B'- minus. In addition, Standard & Poor's lowered its senior unsecured debt rating on the company's wholly owned subsidiary, MacSaver Financial Services Inc., to double- 'B'-plus from triple-'B'-minus. MacSaver's ratings reflect the unconditional guarantee for payment of principal and interest by Heilig-Meyers. The outlook is revised to negative. The ratings downgrade is based on erosion in the credit quality of Heilig-Meyers' credit operations and operating difficulties with its core store format. Heilig-Meyer's will take a $134 million pretax charge over the third and fourth quarters related to problems in its credit operations and its core Heilig-Meyer furniture stores. A high level of personal bankruptcies and loan loss provisions are expected to continue to plague the company's credit portfolio. The company now expects to operate the Heilig-Meyer store division with loan loss provision at 6.0%-6.5% of sales, up from a previous target of 5.0%-5.5%. While the company has operated within this new range for the last few quarters, bankrupt accounts have increased. Heilig-Meyers has allocated $50 million of the special charge to its bad debt reserve, largely reflecting a new, more conservative charge-off policy. The ratings on Heilig-Meyers still reflect its leading position in the highly competitive home furnishings industry. The company should be able to use its size to benefit from purchasing economies. At the same time, Standard & Poor's believes its growing exposure to the more competitive metropolitan and large town markets increases business risk. While the returns are higher, these larger markets are more competitive, expensive, and vulnerable to economic downturns. The rating also recognizes the company's cost-cutting initiatives that are estimated to save $30 million annually, as well as slower new store growth and less capital spending. In addition, nearly $50 million in cash flow from the disposition of accounts receivables at the closed stores will bolster financial flexibility. The potential for profit improvement and higher cash flow is particularly important given the increase in the company's leverage following the special charge. Total debt will be at over two thirds of the capital structure, yet also recognizes that much of the company's outstanding debt is used to support its in-house credit operations. The outlook is negative. Weakness at the company's credit operations has demanded attention. New credit scoring models and outside expertise to help identify credit risk better will be utilized. Nevertheless, credit trends in bankruptcies and provisions for charge-offs have yet to improve. Further deterioration in the company's credit portfolio coupled with greater risks entailed in its new store formats and lingering problems at the core Heilig-Meyers stores could further impact profitability, cash flow, and credit protection, Standard & Poor's said. CreditWire HOLTRACHEM: Agreement with State Finalized ------------------------------------------ The Bangor Daily News reported on December 18, 1997 that after months of difficult negotiations, the Board of Environmental Protection on Wednesday finalized an agreement between the state and HoltraChem Manufacturing of Orrington, committing the company to $2.2 million in fines and corrective actions after years of releasing dangerous chemicals -- including mercury -- into the environment. "This has not been a pleasant negotiation for us," said Ned Sullivan, commissioner of the Department of Environmental Protection. At times, he said, working with the chemical company on the banks of the Penobscot River was like "hand-to-hand combat." The commissioner reiterated his desire for HoltraChem to convert its plant to a mercury- free process. HoltraChem, which employs about 70 people, produces chlorine and caustic soda by sending an electrical charge through salt water. Mercury is used in small amounts as a part of that chemical reaction, and the company recycles nearly all of it. Sullivan said he would urge the Legislature to consider either lowering the limit for mercury releases or requiring mercury-free processes. The chemical company, the only one in Maine that uses such a process, has said such a costly conversion would force it to close the Orrington plant. This year alone, the aging HoltraChem plant accidentally released hundreds of thousands of gallons of mercury- contaminated water into the ground or the river in four events. Company officials point to a series of improvements made to the plant since they bought it out of bankruptcy in 1994. The company reduced mercury discharges into the Penobscot by 25 percent, slashed airborne mercury emissions by 50 percent and cut production of hazardous waste by 17 percent. Those hazardous wastes are shipped to Canada. HoltraChem President Bruce Davis said he believes the settlement, which represents more than 7 percent of the company's annual revenues, is too high. On Wednesday, in response to statements about the company's lack of cooperation at the BEP meeting, Davis stressed his organization's cooperation with the state. "All of the issues raised in the order were being addressed, and almost all were corrected before the negotiations began, which the DEP appreciated," he said in a prepared statement. "We have been working diligently with the DEP and are anxious and willing to correct our problems ... and will continue to do the best we can to improve our operations in order to be a good neighbor." Sullivan cited the spills that have occurred on HoltraChem's watch and said the company was responsible for knowing the condition of the plant before its sale. "The kinds of releases that have happened on HoltraChem's watch are intolerable, and we are going to use all the powers available to us to make sure that they stop," he said. In addition to pushing for the elimination of the mercury process, the DEP also could push for a change in the permitting process. No date has been set for formally renewing HoltraChem's air and water pollution permits. The order, which the board unanimously approved, requires the company to: * Pay $736,000 in fines and interest and $1.5 million in corrective actions. * Conduct comprehensive monitoring of ground water, surface water and air emissions. * Hire an independent engineer to evaluate risks in the plant's infrastructure and provide a plan to address any such concerns. * Monitor air around the plant to collect data about emissions leaving the property's boundaries * Prevent contaminated ground water from entering a nearby stream and prevent contaminated sediments from reaching the Penobscot River. The company also was required to test nearby drinking wells for contamination from the plant. Scott Whittier, director of DEP's hazardous material regulation division, said the most recent tests found no mercury or caustic in those wells. The state is still studying the samples for evidence that any ground water could travel from the plant to the neighbors' drinking water. INTERSCIENCE: Sells Xerox Maintenance Division ----------------------------------------------- Interscience Computer Corporation (Nasdaq: INTRO) announced that it had sold its Xerox laser printer maintenance business to Anacomp, Inc. (Nasdaq: ANCO), a major international provider of information delivery systems and services. The assets sold were maintenance contracts with 34 customers, certain accounts receivable, inventory located at customer sites or with field engineers, and certain diagnostic equipment used by field engineers. Anacomp paid $1,200,000 for the above assets plus an earnout up to $500,000 after one year based on their gross receipts for 12 months post closing. Anacomp also agreed to assume the Company's obligations under the maintenance contracts. The inventory and diagnostic equipment were sold at 80% of book value. The sale was approved by the U.S. Bankruptcy Court on December 1, 1997. The sale was effective as of November 1, 1997. The Xerox maintenance business currently represents approximately 35% of the company's gross revenues. Interscience had filed for protection under Chapter 11 of the U.S. Bankruptcy Code on March 6, 1997. The Company submitted a plan of reorganization and a disclosure statement on December 2, 1997 to the bankruptcy court. The Plan is subject to amendment prior to its confirmation hearing. A hearing on the adequacy of the disclosure statement and the accompanying plan is presently scheduled for January 7, 1998. Interscience continues to operate its business selling consumable products (including its patented fusing agent) and its maintenance services for Siemens laser printers and other non-Xerox peripherals. LAMONTS: Court Approves Reorganization Plan ------------------------------------------- Lamonts Apparel, Inc., which operates 38 family apparel stores in five northwestern states, announced that the U.S. Bankruptcy Court in Seattle has confirmed the company's Plan of Reorganization, which describes the manner in which Lamonts will restructure its debt. The Plan is expected to become effective on Jan. 31, 1998, at which time Lamonts will emerge from Chapter 11 protection. The company will exit with $42 million of financing under the terms of its existing agreement with BankBoston, N.A. Mr. Schlesinger recalled that "When new management came on board three years ago, we found a retail chain that was unfocused in its merchandising and marketing strategies. A number of stores had not operated profitably and were subsequently closed in order to redirect resources to profitable operations. "Today, Lamonts is a smaller but stronger competitor and the preferred source of casual family clothing for the customer seeking popular branded apparel at value pricing. "Our position as a Northwest-based regional retailer gives us a competitive advantage in assessing and meeting the needs of families in the five Northwestern states. The seasoned managers we have attracted to our team are continually fine-tuning our merchandising strategy to expand and improve our product offerings." Lamonts also announced a new five-member board of directors, which will commence responsibilities once the company emerges from Chapter 11. The new board will include Mr. Schlesinger and Loren R. Rothschild, Lamonts' current vice chairman, as continuing director; as well as Paul M. Buxbaum, chief executive officer of The Buxbaum Group; Stanford Springel, management consultant; and John J. Wiesner, former chief executive officer of C.R. Anthony Company. Confirmation of the Plan followed a hearing to assure that all reorganization requirements had been met under the Bankruptcy Code, including approval by the requisite majorities of creditor and shareholder classes. The Plan calls for creditors and shareholders to receive an initial distribution of nine million shares of new common stock in the reorganized company. Various classes of warrants will also be distributed as detailed in the Plan and Disclosure Statement. The old common stock and notes will be canceled when the Plan takes effect. MANHATTAN BAGEL: Recognizes Franchise Advisory Council ------------------------------------------------------ Manhattan Bagel Company, Inc. (Nasdaq: BGLSQ) today announced that it has recognized the independently elected MBC Franchise Advisory Council as the official association representing the chain's franchisees. The 12-member council is comprised of one representative for each of the Company's regions, including two members for the heavily stored Pennsylvania/Southern New Jersey/Delaware region. Candidates were placed into nomination and elected by the entire franchisee body, with ballots tabulated under franchisee and Manhattan Bagel Company (MBC) supervision. "We are truly an independent group, and have no agenda other than serving the best interests of the MBC franchisees," said Bob Higgs, president of the council. Higgs, representative for the Northern New Jersey/Lower New York State region, was elected president in a vote by council members at the initial meeting this month. The council plans to convene four times a year. The process of establishing the council began several months prior to Manhattan Bagel Company's filing for Chapter 11 Bankruptcy Protection on November 19, 1997. Subsequent to the filing, Manhattan Bagel regional franchisors formed a separate independent Regional Franchise Association (RFA). Jack Mangan, regional franchisor for Georgia and the Carolinas, was elected president of that group. Other members elected by the franchisees are: Pat Wangsness, representative for Virginia/D.C./Maryland, Peter Bulkley, for Ohio/Michigan/Pittsburgh; Tom Collins, for Rhode Island/Massachusetts/ Connecticut; Bob Hendrickson, for Florida; Nick Panagopoulos, for Georgia and the Carolinas; Shirley Monahan and Steve Ratowski for Pennsylvania/Southern New Jersey/Delaware; Wassim Issa, for Upstate New York/Metro Cleveland; Paul Barnett for Texas; Joanna Daszek, for Southern California; and Joel Carson, for Northern California. The council also elected Wangsness as vice president, Bulkley as secretary and Collins as treasurer. Among other things, the council will appoint an advertising committee that will work with MBC on future programs, and monitor disbursements from and payments to the fund. Committees are also being formed for new product development, purchasing and Chapter 11 liaison. The initial meeting of the council was held on December 3 and 4 at the Sheraton Hotel in Eatontown, N.J. Following the meeting, detailed minutes and a letter from Higgs were mailed to the entire membership. "We intend to emerge a better, larger and stronger group than when we started," said Higgs. Sanford (Sandy) Nacht, the turnaround consultant retained by MBC, commented: "Formation of the council represents a significant step in our turnaround process. It establishes an important vehicle for input and communication. We will work hand-in-hand to address all areas of concern." Nacht, who has worked extensively with franchise and retail companies, added: "A franchise organization is like a three-legged stool, comprised of the franchisor, franchisees and regional franchisors. If any of these groups pull in a different direction, the stool isn't sturdy. We intend to do our best to ensure that all three 'legs' are working together for our mutual interests." Manhattan Bagel, headquartered in Eatontown, N.J., currently has approximately 320 franchised, licensed or company-owned stores in 19 states and Washington, D.C. The Company also operates manufacturing plants in Eatontown, MAX: Given 10 Days to Return Airplane ------------------------------------- Dornier Aviation has requested one of the five planes it provides Mountain Air Express, and a federal bankruptcy judge has given the airline until December 22 to hand it over. Dornier, maker and lessor of the 32-seat turboprop planes that MAX flies, made a request late Thursday for the plane's return this weekend, and MAX immediately filed a notice of appeal. In an emergency hearing in Denver, Judge Sidney Brooks gave MAX 10 days to return the plane. The judge ruled that Dornier has the right to repossess one of the airline's planes because a short-term lease had expired last month. But the judge also urged the two sides to work out a deal to keep the plane in MAX's fleet. The continued use of the plane is vital to MAX's survival and emergence from bankruptcy. MAX will appeal the decision to the U.S. District Court, a move that, if heard, could delay the repossession. MAX officials said the delay could give them time to work out a deal with Dornier. Dornier officials said the company is open to a deal, but hasn't been approached by MAX. They also said the company could turn around and lease the plane to any of several other clients immediately. If that happens, MAX would be forced to change its flight schedules and accommodate potentially thousands of passengers during the peak holiday period. MAX officials say they have not made those changes, but they won't cut any destinations from their roster - including Steamboat Springs and Gunnison, to be added next week. MOLTEN METAL: Wants to Pay Employees' Prepetition Claims -------------------------------------------------------- At a December 17 hearing, and upon the debtor's motion for authority to pay employees' prepetition vacation, expense and benefit claims, Judge Carol J. Kenner, authorized the payment in full of expense reimbursement claims sought to be paid by the debtors as well as that portion of aggregate vacation claims that are entitled to priority under the Bankruptcy Code. A continued hearing is set for December 23, 1997 to consider the balance of the relief sought by the debtors. MONTGOMERY WARD: Fixed Fee to Arthur Andersen --------------------------------------------- Montgomery Ward Holding Corp. obtained authority by the court to retain Arthur Andersen LLP to provide internal audit and tax services. Payment was to be made based on hourly billing. On November 14, 1997, Andersen and the debtors reached a fixed fee agreement regarding services that are not covered by the contract and for which Andersen had been billing the debtors on an hourly basis. Montgomery Ward ahas agreed to pay Andersen $511,600 for these services, including out of pocket expenses. Andersen would be relieved of any obligation to submit monthly statements or file fee applications for its fees charged under the agreement. In addition, the debtors request that they be allowed to pay Andersen the full amount owed under the agreement, rather than 80% of the fees as set forth in the Administrative Order. MONTGOMERY WARD: Requests Rejection of Equipment Leases ------------------------------------------------------- Montgomery Ward Holding Corp., et al., has requested that the court authorize the rejection of certain equipment leases with a Sanwa Business Credit Corporation. The monthly rent for the equipment leased totaled about $63,000, and the term of the leases continued until August 31, 1998. The debtor no loner needs the equipment leased in the operations of its business. Montgomery Ward is closing 46 stores that utilized the leased equipment. MONTGOMERY WARD: Seeks More Professionals ------------------------------------------ Montgomery Ward Holding Corp., et al., is seeking court approval to employ and retain the Bentley Group as Management Consultants for Customer and Product service and support.Bentley will be compensated on a fixed fee basis pursuant to a contract between the parties. The primary objectives of the services to be provided is to improve the efficiency and manageability of the call management process, recude the cost of service delivery and reduce the cost of inventory by designing and implementing an inventory m,anagement process and improving inventory distribution ppprocesses and develop an optimized servicesupport model and develp a comprehensive service plan. Bentley will be paid no more than $350,000 plus expenses for services rendered. The debtors are also seeking court approval to retain and employ Holland & Hart as Special Counsel in connection with a purported class action case pending in Wyoming. Holland & Hart will be paid their usual hourly rates. PHOENIX INFORMATION: Files Chapter 11 ------------------------------------- Phoenix Information Systems Corp, Phoenix Systems Group Inc. and Phoenix Systems Ltd. filed for Chapter 11 protection on December 3, 1997 in the U.S. Bankruptcy Court for the District of Delaware. The debtors have operated under the additional names: SC Primo and Dynasty Travel Group. A meeting of creditors is scheduled for January 9, 1998. Co-Counsel for the debtors are LeBouf, Lamb Greene & Macrae, LLP and Young, Conaway Stargatt & Taylor. RICKEL HOME: Seeks Approval for Stalking Horse Agreement -------------------------------------------------------- On December 24, 1997, the court will entertain the motion of the debtor, Rickel Home Centers, Inc., seeking approval for a Stalking Horse Agreement for the sale of the debtor's leases and fleet. The debtor is also seeking approval of bidding procedures, the payment of a 3% break-up fee, and authorizing borrowing of up to $1 million by spending the deposit under the Stalking Horse Agreement. The debtor's most important remaining asset is its 53 leases representing all of the stores and the debtor's headquarters and distribution center. The debtor received two proposals for a bulk purchase of its leases. One, from Rickel Realty (members of Rickel Realty include members of the Creditors' Committee) as well as a less attractive proposal from a joint venture of Schottenstein/Bernstein Capital Group LLC and Keen Realty. The Stalking Horse Agreement provides for the sale of the leases and the fleet for a total purchase price of $30.55 million. To secure its performance under the agreement, Rickel Realty has agreed to post a deposit of $1 million. The debtors are seeking a $2.45 million overbid increment. The court has reserved January 22, 1998 as the day for a hearing on which it will hear one or more subsequent motions by the debtor for the approval of the disposition of its property - to assume and assign those of the leases that will be sold. The debtor expects to consider bids and to determine the best qualifying bids by January 22. WESTERN PACIFIC: Announces Cash Infusion ---------------------------------------- On Friday, Western Pacific Airlines announced it has received approximately $1.5 million from Smith Management Company ("SMC") as an advance against the commitment of $20 million "debtor in possession" financing, which was approved by the Court on December 3, 1997. The $20 million commitment is in addition to Smith's initial funding of $10 million, which occurred December 4, 1997, for a total of $30 million. In order to make this possible, SMC has agreed that certain conditions in the initial term sheet have been satisfied and has postponed Western Pacific's requirement to file a plan of reorganization, which was originally due December 20, 1997. "This is truly a measure of Smith's confidence in Western Pacific and its future and allows us to continue our positive discussions with the Creditor's Committee," said President and Chief Executive Officer Robert A. Peiser. Peiser added,"The only remaining requirement necessary to consummate the agreement with SMC for the full $20 million is the filing of a plan of reorganization that is acceptable to Smith Management. Any concerns that Smith's intentions were not to provide ongoing, adequate funding should be alleviated by today's announcement." --------- A listing of meetings, conferences and seminars appears every Tuesday. Bond pricing, appearing each Friday, is supplied by DLS Capital Partners, Dallas, Texas. S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc.,Princeton, NJ, and Beard Group, Inc., Washington DC. Debra Brennan and Rebecca A. Porter, Editors. Copyright 1997. All rights reserved. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * *