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/raid1/www/Hosts/bankrupt/TCR_Public/971223.MBX T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, December 23 1997, Vol. 1, No. 85 Headlines BRADLEES: Receives Six Month Extension of Exclusivity CINCINNATI MICROWAVE: Purchased by Disposition Services ENTERNET: Files For Chapter 7 Leaving Angry Investors GAYLORD: Transfers For Consignment Agreements Ordered GIBSON'S: Requests Extension of Exclusivity KIA MOTORS: Symbol of Korea's Woes LIL' THINGS: To Employ Keen Realty Consultants MIDCOM: Withdraws Appeal of NASDAQ's Decision to Delist MOLTEN METAL: Secures $7 Million In DIP Financing MONTGOMERY WARD: Chief Operating Officer Donoho is Leaving MONTGOMERY WARD: Lechmere's Creditors Object ORTMANN & HERBST: Crown Simplimatic Makes Offer PAYLESS CASHWAYS: Stipulation Regarding Synthetic Claims QNIX: Goes Bankrupt on December 10 REXON: Settlement with GSS Array Technology SINGING MACHINE: Amended Disclosure Statement Approved TELESEAT: Denver Alternative to Ticketmaster Closing TODAY'S MAN: Motion to Compel Production of Documents WESTERN PACIFIC: Airport Use Agreements and Leases Rejected WESTERN PACIFIC: Court's Findings for Financing WESTERN PACIFIC: Wants to Assume Aircraft Lease Meetings, Conferences and Seminars --------- BRADLEES: Receives Six-Month Exclusivity Extension -------------------------------------------------- Bradlees, Inc. today reported that the U.S. Bankruptcy Court approved the company's request for a six-month extension through August 3, 1998, of its exclusive right to propose and file a plan of reorganization. Bradlees said it expects to develop and file a consensual plan of reorganization by early April 1998. In addition, the bankruptcy court approved Bradlees' new $250 million financing facility. The new financing is furnished by a bank group led by BankBoston and provides for a $250 million debtor-in- possession (DIP) revolving credit facility for a period of up to 18 months and a $250 million post-bankruptcy revolving credit facility for an additional three-year period. The DIP facility will provide Bradlees with up to $50 million of additional liquidity, as well as enhanced borrowing capacity, acceptable financial covenants and lower financing costs. It will replace the current $200 million DIP facility, due to expire June 28, 1998. The post-bankruptcy revolving credit facility is subject to the satisfaction of certain conditions at the time Bradlees emerges from Chapter 11. Peter Thorner, Bradlees Chairman and Chief Executive Officer, said, "We are pleased with today's positive court decisions. We look forward to working with our creditor constituencies to develop and file a consensual plan of reorganization that will allow Bradlees to successfully emerge from Chapter 11. "During 1997, we have refocused our merchandising and marketing strategies, built a team of seasoned retail executives, and delivered significantly improved year-to- date operating results, compared with the same period last year. We are focused on three key merchandise lines: moderately priced family apparel and home goods, emphasizing quality and fashion in these businesses, and selective hardlines merchandise. The breadth of our apparel and home businesses provides a foundation to differentiate Bradlees from our competitors," Mr. Thorner said. Bradlees, a regional discount retailer, operates 109 stores in seven Northeastern states with annual total sales of $1.6 billion. CINCINNATI MICROWAVE: Purchased by Disposition Services ------------------------------------------------------- Disposition Services Group, Ltd., (DSG) a new company that provides the antidote for a rapidly growing concern in the high technology marketplace, has announced its purchase of Cincinnati Microwave Inc. cordless telephone assets. DSG, which specializes in handling volume returns for technology-related product manufacturers and distributors, purchased Cincinnati Microwave's 900-megahertz telephone business with a 400,000 customer base, intellectual property, testing and repair equipment, and inventory of wireless communications devices that operate in the ultrahigh-frequency radio and microwave spectrum under the trademark, Surelink I(tm). DSG was the highest bidder in bankruptcy court for the 20- year-old company that introduced the world's first consumer cordless telephone in 1993. "We bought the cordless phone assets of Cincinnati Microwave to support our expansion into the 900-megahertz cordless and cellular phone repair business," said Sean Repko, DSG president and chief executive officer. "Studies show that there is a huge demand from manufacturers to outsource disposition services for an annual $115 million in cordless phone product returns." According to Repko, very few companies in the United States can cost-effectively manufacture or repair large volumes of cordless phones. DSG will handle repair and shipment out of its 70,000-square-foot production plant in Tijuana, Mexico. Repko said that although no defects are found in 90 percent of cordless phone returns, U.S. law states that retailers cannot resell returned equipment as new. DSG will handle the return, repair, resale, and recycling of cordless phone products, as well as provide regular updated reports of product status and inventory. Repko said returned cordless phones will be repaired and resold as remanufactured equipment with a generous parts and labor warranty. The parts inventory will be made into finished goods and resold. As the new owners of the technology, DSG will notify Cincinnati Microwave product users that for a minimal fee DSG will handle warranty claims on all previously sold equipment. A growing trend in liberal retailer return policies has created a multimillion dollar industry in volume returns of technology-related products. DSG is an information technology company that was formed in 1997 to provide volume return services for consumer electronics and computer manufacturers and distributors. DSG will audit returns, as well as test, repair, repackage, and recycle consumer electronics and computer products in an environmentally-compatible manner. ENTERNET: Files For Chapter 7 Leaving Angry Investors ----------------------------------------------------- The Ft. Lauderdale Sun-Sentinel reported on December 21, 1997 that South Florida's sex magazine, Xcitement, was not what investors expected. Some spent thousands of dollars on a private offering of stock for the parent company, Enternet Entertainment Group Inc. The promise of rich returns, however, never materialized. Enternet recently filed for Chapter 7 bankruptcy, leaving about 30 miffed investors in South Florida and elsewhere some so embarrassed that they bought into the nude magazine that they didn't want their names used in this article. The company also leaves $428,000 in debts, owed to 49 merchants or service providers, and three government agencies. Also, the federal court-appointee overseeing the bankruptcy case is investigating several elements, including whether Enternet tried to hide some assets by selling them off before filing. He also wants to know why Xcitement, Enternet's flagship property, is still appearing on the racks in the same form and with the same top employees; and why no investor is mentioned in the bankruptcy files. "We never got dividends," said a Boca Raton Enternet investor, Carlo Brutto, waving a certificate for $11,000 in stock. "We never had a shareholders' meeting. Never a corporate report. Nothing. They used sex to get our money, and in the meantime, they weren't paying their bills. What I want to know is, where's my money?" U.S. Bankruptcy Court trustee Soneet Kapila is working on an answer to that. "We are conducting an investigation," Kapila said. "I was surprised to hear they even had investors." By all accounts, the Enternet concept was brilliant. Its management team wanted to build a multimedia sex conglomerate with branches across the country established around its star product, Xcitement. The 25,000-circulation magazine was created in 1991 by two students at the Art Institute of Fort Lauderdale, Bob Newman and Adam Fiveson. The latter was then 22. With less than $1,000 for printing expenses, the two worked out of Fiveson's kitchen to build the first issue, a badly printed tabloid with black-and-white pictures. "We wanted to capture a market," said Fiveson, adding that he sold his shares in the company earlier this year because he didn't like its direction. "In 1995, we were flying high," said Fiveson. "We grossed $80,000 an issue. Each page in the magazine was worth $500 to $1,000 in advertising." As it grew into a color publication, Xcitement also started to sell franchises for up to $30,000 each, said Fiveson in other cities. In 1994, Atlanta, Atlantic City and New York had their versions of Xcitement. Behind the scenes, meanwhile, not all was as rosy as the magazine's pictures. In 1996, hoping for better exposure, Newman and Fiveson moved to a warehouse near Lockhart Stadium in Fort Lauderdale. Within months, they diversified: 16 side companies were started, some off- shoots of the magazine and others to handle graphics, distribution, video production and Internet sites. All were part of Enternet Entertainment Group. For all its ventures, Enternet needed fresh cash _ as much as $1 million, according to its private offering filing with the federal Securities and Exchange Commission. So it started looking for investors by merging with a nearly bankrupt, publicly held company, Sweepstakes News Inc. Then, it made two public offerings: $1 shares through the spring of 1996, and $5 shares a year later. "It sounded like a good deal," said an elderly Fort Lauderdale woman who, with a partner in California, invested $60,000. Still, Newman said, the sale of stock went below expectations, precipitating the bankruptcy. "In the first offering we sold $150,000 to $180,000 worth of stocks, at best," he said. "Fifteen to 20 investors, at most. It wasn't much money. We didn't make anything on the second one." The SEC would only say that Enternet offered two private placements. Because the company reported it intended to raise less than $1 million, it was not subject to SEC or state Division of Securities scrutiny. "We wouldn't know how much they raised," said SEC spokesman Duncan King. The company's accounting practices, too, were unusual by most business standards. "This was mostly a cash business," said Brutto, who worked at Xcitement for close to two years as a distribution coordinator. "Owners of businesses like escort services didn't want paper trails of their transactions. Many of them came in with cash, $2,000 or $3,000 at a time, to pay for their ads. Often, they didn't even get receipts. No one knew where that money was going." No one, including trained accountants. "From what I could see, they had a hard time covering their expenses," said Harvey Birnholz. A retired IRS agent, Birnholz was hired by Enternet to evaluate its assets before it could sell stocks. "If they grossed $60,000 a month, they spent it." Enternet still owes Birnholz a $42,250 consulting fee, according to court records. Enternet filed lawsuits against three of its own employees, including Brutto, for allegedly conspiring to take over the company. It sued a printing company for not delivering the magazine on time. The printer, Sun-n-Fun Printing of Clearwater, responded that Enternet hadn't paid for its work. Enternet also sued its direct South Florida competitor, Gold Coast Publishing's Florida Playtime, for plagiarism. In turn, Enternet was sued by its former Atlanta affiliate, investors, and Fiveson, who said he was promised $750,000 in the buyout of his shares but only received "a few thousand." By late September, as Enternet was ready to file for bankruptcy, Newman said he "gave the magazine up for free" to a friend, British business consultant David Harrison, 49. Soon, it became the flagship property of Harrison's Media International Inc., which incorporated one month later. "It was practically dead," Newman said about the magazine. Harrison then hired Newman as the $500-a-week publisher of Xcitement, and said he bought some Enternet properties. "I paid the previous owner [Enternet) $113,000 for the magazine's customer base and its photo archives," Harrison said. Yet, according to Newman's Oct. 9 bankruptcy filing, Enternet's assets totaled only $21,000: $6,800 cash, $8,000 in office supplies and furniture and a $6,300 van. So what happened to the $113,000? "We used it to pay for some of the debts," said Newman. "At the end, it was chaos in here. Money was being sucked out left and right." Among the creditors Enternet listed: its own employee payroll, $46,000; the IRS, $110,000; American Express, $36,700; Mid Web Press, $66,600; Walzburg and Renzy attorneys, $45,400; the Sun-Sentinel, $900. And there are still an undetermined number of investors, who have two months to file their claims. "I feel stupid," said Brutto. GAYLORD: Transfers of Consignment Agreements Ordered ---------------------------------------------------- On December 11, 1997 the Honorable Charles M. Caldwell entered an order stating that as of the filing of these proceedings, the debtors had cash on hand and in its prepetition bank accounts totaling $84,211 and of that sum, $60,498.43 represents proceeds generated by sale s of consigned Ingram books made prior to the filing of the debtors' chapter 11 petitions, which are to be immediately paid by the debtors to Ingram upon the entry of the order. All inventory transferred by Ingram to the debtors pursuant t o the consignment agreements whether prior to the commencement of the cases or thereafter constitute property of Ingram and are not subject to the claims of creditors of the debtors, whether arising prior to, or subsequent to, the commencement of these cases. All proceeds of Ingram Inventory to which Ingram is entitled pursuant to the consignment agreements shall constitute property of Ingram and shall not be subject to the claims of creditors of the debtors, whether arising prior to, or subsequent to, the commencement of these cases. The right title and interest of Ingram in the Ingram Inventory and in the Ingram Inventory Proceeds arising under the Consignment Agreements are deemed to be valid, perfected, enforceable and non-avoidable by any party including the debtor. Unless the parties agree otherwise, the provisions of the Order authorizing transfers under the Consignment Agreements expires on January 10, 1998. GIBSON'S: Requests Extension of Exclusivity ------------------------------------------- A hearing will be held on December 29, 1997 to consider the motion of the debtors, Gibson's Holding Company et al., to extend the period of time within which the debtors may file a plan and solicit acceptances thereof. The debtors are seeking an additional extension of thirty days, through January 19, 1998 and through March 18, 1998 for solicitation of acceptances to the plan. The debtors met with the Committee in early December 1997 to review available alternatives with respect to a plan of reorganization. They have agreed that an additional extension of the exclusive periods is appropriate and necessary in order to allow the parties to continue to explore and develop the various plan scenarios, several of which have significant potential according to both the debtors and the Committee. KIA MOTORS: Symbol of Korea's Woes ---------------------------------- The International Herald Tribune reported on December 19, 1997 that Dan Dong Ho, a general manager at the company's largest production facility said, "The line is going half speed." The facility is a modern complex capable of producing 650,000 cars a year. The dilemma at the unit of Kia Group, one of the first major South Korean conglomerates, or chaebol, to go into receivership and near-bankruptcy, mirrored that of a range of domestic industries and financial institutions and indeed that of the entire nation in an era of crippling debts and supervision by the International Monetary Fund. Although the Fund wants to impose a kind of discipline that shuts down money-losing companies, most of the chaebol are struggling to stay alive and afloat in the same do-or-die spirit that elevated South Korea to economic success after the devastation of the Korean War. Kia serves as a symbol of the myriad financial and economic dilemmas to be faced by the incoming government of President Kim Dae Jung, who was elected Thursday, as it tries to balance the need to save jobs and even entire industries against the necessity of restructuring and opening up the nation's economy for the era of international competition. Kia Motors, often dismissed as barely alive amid mounting debts and pessimistic forecasts for the auto industry, keeps right on humming albeit at a speed that raises daily alarms about its viability five months after it was put into receivership. In this huge complex, built on reclaimed land by a natural port, the evidence of Kia's profligate investment as well as its will to succeed is apparent. Robots do more than 90 percent of the work once expected of humans in some of the individual plants, including one producing engines for all Kia vehicles. Kia Motors executives cite an Economist Intelligence Unit survey this year that judged the automaker the world's fourth most efficient after the Japanese giants Honda Motor Co., Toyota Motor Corp. and Nissan Motor Co. in terms of work accomplished per employee. Intermittent stoppage of the assembly line, carrying the Shuma, a sedan that Kia unveiled just last week, is commonplace in this period of tight money and an increasingly sluggish domestic market. For Kia Motors, the fact that the assembly lines are moving at all may be a miracle and yet company executives and managers talk of expanding production into the next century. "Our major investment in infrastructure was completed two years ago," said Um Sung Yong, a director at the Seoul headquarters. "Now is the time to reap all the fruits. All our lineups of new cars guarantee money coming in." The start-and-stop style of assembly line production reflects not only Kia's troubles but a tangled web of integrating relationships spreading through the parts industry on which any motor vehicle manufacturer depends. "The parts suppliers have money problems too," Mr. Dan said as the line ground to a halt with its row of glistening Shumas as well as Sportages and Sephias, both already being exported to the United States and other Western countries. "They don't supply the parts on time," Mr. Dan said of suppliers. "Today we are missing frames for the Sportage." Sportages and Shumas roll out on the same line, he added, and the missing frames delay both. Bankruptcies of key suppliers heighten the uncertainty. Mando Machinery, a key company in the bankrupt Halla Group, the No.12 chaebol, is still supplying air conditioners and heaters but no one knows for how long. All 18,000 Kia Motors workers, from top management to assembly line worker, have accepted without complaint the loss of the bonus the company traditionally handed out around the end of the year. Workers have also given up much of the overtime to which they had become accustomed. The union representing the workers is adamant, however, against layoffs as a solution. "There will be no loss of jobs and no reduction in wages," said Yoon Young Mo, speaking for the Korean Confederation of Trade Unions. LIL' THINGS: To Employ Keen Realty Consultants ---------------------------------------------- LiL ' Things, Inc., as debtor is presently party to 15 leases, including leases of real property for thirteen store locations, its distribution center and its corporate offices. On November 25, 1997 the court signed an order authorizing the debtor to conduct store closings and related going out of business sales and to retain a liquidation professional as a consultant or agent. In order to reduce administrative rent payments and maximize value for the estate, the debtor will be required to dispose of its leasehold interests after the going out of business sales are completed. LiL' Things desires to employ Keen Realty Consultants, Inc. to have the sole and exclusive authority to offer for disposition all of the properties on an "exclusive right to sell" basis. When the debtor completes a transaction prior to the rejection of such lease, then Keen shall have earned a fee, per property an amount equal to 10% of the first $1 million in gross proceeds and 15% thereafter, to be paid at closing. MIDCOM: Withdraws Appeal of NASDAQ's Decision to Delist ------------------------------------------------------- MIDCOM Communications Inc. announced that, on December 19, 1997, the U.S. Bankruptcy Court approved, with minor modification, the sale procedures set forth in the asset purchase agreement entered into with WinStar Communications Inc. In addition, MIDCOM announced that it has withdrawn its appeal of a decision by NASDAQ to delist its securities. The decision not to appeal was based upon the company's filing for protection under Chapter 11 of the United States Bankruptcy Code and the ensuing signing of the asset purchase agreement with WinStar for the sale of substantially all of MIDCOM's assets as well as those of its subsidiaries, PacNet Inc. and Cel-Tech International Corp. Based upon the withdrawal of the appeal, MIDCOM's stock was delisted by NASDAQ as of the close of trading Dec. 19, 1997. The company's stock will continue to trade off the exchange, although the liquidity of the stock may be affected. MOLTEN METAL: Secures $7 Million In DIP Financing ------------------------------------------------- Molten Metal Technology, Inc. (Nasdaq: MLTNQ) announced today it has secured $7 million in financing. "This financing will allow us time to pursue medium-term financing required to get the company back on track," said F. Gordon Bitter, chief executive officer of Molten Metal Technology. "Our Q-CEP facility in Oak Ridge, Tenn., continues to be our priority and this cash infusion will enable us to continue to deliver the highest quality service to our customers." The loan, which is due on January 30, 1998, is secured with a lien on substantially all of the assets of the company and its subsidiaries. The lender has expressed an interest in providing a $20 million medium-term financing, although it has made no commitment to provide such facility and is under no obligation to do so. In addition, The Blackstone Group, the company's investment banker, is pursuing financing alternatives with other potential lenders. Molten Metal Technology filed for reorganization under Chapter 11 of the Federal Bankruptcy Code on December 3, 1997 and has been seeking a variety of financing alternatives, including the possible sale of some or all of its assets. Based in Waltham, Mass., Molten Metal Technology, Inc. is an environmental technology company commercializing pollution prevention and waste recycling methods that are broadly applicable to a wide variety of hazardous, non-hazardous, and radioactive wastes. The company's patented core technology, Catalytic Extraction Processing (CEP), takes waste and transforms it into reusable industrial products using a molten metal bath. Quantum-CEP(R), an application of the technology designed for radioactive waste, reduces the volume of radioactive materials, provides a safe final form for disposal or storage, and can also produce some reusable industrial products. The company currently operates two commercial Quantum-CEP facilities in Oak Ridge, Tenn. MONTGOMERY WARD: Chief Operating Officer Donoho is Leaving ---------------------------------------------------------- Montgomery Ward & Co., Incorporated announced that Burnie Donoho, vice chairman and chief operating officer, is leaving the company to return to his consulting practice at year end. Donoho, 58, joined Wards in February of this year and has had responsibility for the operational activities of the business. "Burnie has been a valued member of our executive team and we wish him success in his consulting business," said Roger Goddu, chairman and chief executive officer. Donoho's operations and financial responsibilities will be assumed by two current Wards executives who will report directly to Goddu. Tom Paup, executive vice president and chief financial officer, will have added responsibility for treasury and logistics. Paup, 48, joined Wards in August 1997 after working at May Department Stores and Federated Department Stores over the last 20 years. In addition to his store operations duties, Kevin Freeman, executive vice president operations, will assume responsibility for all product service and asset protection activities for the company. Freeman, 47, joined Wards in April 1997. Prior to Wards, he worked in various senior store operations positions with Target and Caldor. Spencer Heine, executive vice president, general counsel and president Montgomery Ward Properties, and John Workman, executive vice president corporate restructuring, will also now report directly to Goddu. "I have enjoyed working with all the fine people at Wards and I wish them continued success in the reorganization," said Donoho. MONTGOMERY WARD: Lechmere's Creditors Object -------------------------------------------- As reported in Issue 18 of the Montgomery Ward Bankruptcy News, Lechmere's creditors are objecting to (i) the authorization of the Debtors borrowing money from Lechmere; (ii) the authorization of Lechmere to loan the money to the Debtors; and (iii) the granting of superpriority status in the amount of the Loan to Lechmere. First, the Creditor Objectors claim that the making of the Loan violates Lechmere's fiduciary obligations to its Creditors: (1) The Debtors state that Lechmere does not need the money; but Lechmere's Creditors assert that they need it. (2) It is a violation of Lechmere's fiduciary obligation to loan money to the Debtors at substantially below market terms. (3) Lechmere's Creditors are entitled to decide what to do with their money. They should not be forced to make an undocumented, unsecured DIP loan at a below market interest rate in lieu of a prompt distribution on which thay can receive higher rates of return in vehicles safer than a DIP loan. Second, the terms of the Loan are not adequate: (1) The Debtors have not indicated the reason for requiring the Loan. (2) The Debtors, unable to find a comparable rate from any other lender, turned to Lechmere; or, more correctly, since Lechmere is nothing more than its sale proceeds, to Lechmere's Creditors. For a speculative .25% better return, the Debtors would have Lechmere loan the Creditors' money to a Chapter 11 Debtor at a below market interest rate and subordinate the Loan to claims with a value potentially in excess of $1,000,000,000. (3) The terms of the Loan are also inadequate in that the Loan has no termination date; there are no documents; there is no provision for defaults; there are no financial covenants and no independent party to monitor the Loan and declare a default. (4) The dates of repayment are highly speculative: the Debtors propose to repay the Loan on either conversion to Chapter 7 or the effective date of a plan. Third, the Debtor fails to disclose even the basic facts necessary for Lechmere's Creditors to evaluate the Loan: (1) The Debtors fail to disclose fully the value of the claims to which the Lechmere Loan will be subordinate. Aside from the $1,000,000,000 Postpetition Financing Agreement, the Lechmere Loan will be subordinate to reclamation liens, other third party liens and "other permitted expenses" as allowed under the DIP financing order. None of these are quantified, and the Debtors do not indicate what limits have been imposed on the "other permitted expenses." (2) Without offering any basic facts, the Debtors state that there is no question but that Lechmere will be repaid, even in liquidation. However, the Debtors fail to provide a liquidation analysis. In conclusion, the Objectors assert once more that the money held by Lechmere belongs to its Creditors. The Creditors should not be required to make a DIP Loan to a Chapter 11 debtor on below market terms with inadequate information as to the possibility of repayment. The Creditor Objectors are: OTR Limited Partnership; Maine Associates and Poughkeepsie Galleria Company; Crystal Run Company LP; Independence Mall Group; Pyramid Company of Holyoke; Carousel Center Company, LP; Pyramid Company of Watertown; Pyramid Company of Plattsburgh; Pyramid Company of Ithaca; Senpike Mall Company; and Pyramid Company of Buffalo. ORTMANN & HERBST: Crown Simplimatic Makes Offer ---------------------------------------------- The Board of Directors of Crown Simplimatic, Inc., has approved unanimously a resolution to make a formal offer to purchase certain assets of the bankrupt Ortmann + Herbst GmbH in Hamburg, Germany. In accordance with German law, this formal offer will be submitted to the bankruptcy trustees upon formal opening of the bankruptcy proceedings anticipated to begin on January 1, 1998. At that time, it is expected that Crown Simplimatic will obtain ownership. The purchase price to be offered was not disclosed. Assets to be acquired include the O+H facility in Hamburg, Germany, which manufactures high-speed bottle and can fillers, beverage processing equipment, bottle washers, labelers, spare parts and has the intellectual properties related to these products. Crown Simplimatic has offered to employ 130 workers at the Hamburg location. Throughout the world, Crown Simplimatic employs 1,100 people (700 in the United States) in ten factories, which are located in the United States, Mexico, Uruguay, United Kingdom and Belgium. Annual turnover of the company is $200 million (U.S.). O+H serves European markets primarily, while Crown Simplimatic products are concentrated in North America. In 1996, O+H reported sales of DM 149.4 million (U.S. $84.25 million). In addition to diversified lines of other products, Crown Simplimatic is a global leader in the design and manufacture of conveyors, palletizers and other equipment used on the "dry side." PAYLESS CASHWAYS: Stipulation Regarding Synthetic Claims --------------------------------------------------------- On October 13, 1997 the members of the Synthetic Lease Bank Group each filed separate proofs of claim. Pursuant to the debtors first amended plan of reorganization, the Synthetic Lease Bank Group claims were classified as Class 2C and Class 3A claims. The debtor and Synthetic Lease Bank Group reached an agreement as to the treatment of the claims . Pursuant to the agreement, the Synthetic lease Bank Group will, among other things, have an allowed Class 2C claim in an aggregate amount of $16 million and an allowed Class 3A claim in an aggregate amount of $15,947,970.29. The debtor informed the Synthetic Lease Bank Group that certain of its claims might be regarded as duplicative, therefore the Synthetic Lease Bank Group and the debtor agreed that the claim of FBTC Leasing Corp., that was originally listed as $208,395.72 is listed as a Class 3A claim in the amount of $87,713.84 and Security Pacific Leasing Corp., which originally listed its claim as $416,791.44 is a Class 3A claim in the amount of $173,832.81. The claim of BA Leasing & Capital Corporation was reduced and the Agent `s Claim and the Trustee Claim were eliminated. QNIX: Goes Bankrupt on December 10 ---------------------------------- The Korea Economic Weekly reported on December 22, 1997 that Qnix Computer, one of the nation's major computer makers, went into bankruptcy on December 10 after it failed to repay the returning six billion won ($4 million) in bills. The failure of Qnix Computer is largely attributable to the financial crunch of its subsidiary company, Qnix Finance, which is heavily dependent on short-term borrowings from the collapsing merchant banks. Industry experts said that the insolvency may be a start of a subsequent series of bankruptcies in the domestic computer industry, since Qnix has been regarded as a high-grade company in terms of its financial structure and performance. The company reported 130 billion won in sales last year. REXON: Settlement with GSS Array Technology ------------------------------------------- Tom H. Connolly, plan agent of the liquidating estate of Rexon, Inc. entered into a settlement agreement with GSS Array Technology, Inc. and GSS Array Technology Public company limited resolving the adversary proceeding in which the plan agent sought to recover $702,660.20 in allegedly preferential payments made by Rexon, Inc., et al., debtors. GSS Array agreed to pay the liquidating estate the sum of $175,000. in exchange for a mutual release of all claims between the liquidating estate and GSS Array. SINGING MACHINE: Amended Disclosure Statement Approved ------------------------------------------------------ The Singing Machine Company,Inc. (OTC Bulletin Board: SING) has received court approval of its Amended Disclosure Statement. Approval was granted in U.S. bankruptcy court on December 17th. The Company has also filed an Amended Plan of Reorganization and a hearing to approve the amended plan is expected in late February. For voting purposes, the Amended Disclosure Statement, the Amended Reorganization Plan and ballots are now being mailed to the Company's pre-petition shareholders and creditors. The Company expects to emerge from Chapter 11 after court approval. "We're very pleased to have reached this significant milestone in our reorganization process," said Eddie Steele, Company C.E.O. Steele added, "With the continuing support of our key account base in 1997, we were able to get to this point. Upon confirmation of our amended plan, we will have the ability to grow our business in 1998 and beyond in a more controlled manner." The Company has continued to operate under the provisions of chapter 11 and has just completed a very successful selling season. "Karaoke has been an exceptionally strong retail category this season and at this point we are basically sold out of our karaoke systems. Sell through at the retail level has also been very strong," said Company Vice President, Ed Pearson. "We're expecting this momentum to continue, and we've already received substantial orders for early 1998 delivery," he added. The Singing Machine Company, Inc. is America's leading consumer karaoke supplier. Its tape and CD+Graphics karaoke players are marketed under The Singing Machine and Memorex brand names. The Company sells Singing Machine brand karaoke sing along cassettes and CD+Graphics discs. Singing Machine products are sold through major mass merchant and catalog retailers in the United States. TELESEAT: Denver Alternative to Ticketmaster Closing ---------------------------------------------------- The Denver Post reported on December 19, 1997 that the Ticket agent Teleseat is going out of business. The Colorado Rockies, Pikes Peak Raceway and Nobody in Particular Presents, a concert promoter, were looking for new ticket agents Thursday after being told that Rocky Mountain Teleseat, a much-praised Denver alternative to Ticketmaster, is closing. Executives at all three entertainment venues said Thursday they were informed by Teleseat's San Diego parent company, Destinet Service Corp., that it is filing Chapter 7 bankruptcy proceedings and liquidating the company. The liquidation could cost customers of Destinet and Rocky Mountain Teleseat some money. Last year, Ringling Bros. and Barnum & Bailey Combined Shows Inc. sued Rocky Mountain Teleseat in Colorado for withholding more than $300,000 in ticket receipts from the 1996 performance of "Disney on Ice." Destinet filed for Chapter 11 bankruptcy protection last October, effectively freezing any similar payments the company then may have owed its clients. Money lost for good? The liquidation proceedings could mean the money is lost for good. Destinet officials refused to comment Thursday. A local spokesman for the company, Gerry Freeman, said his firm had severed its relationship with Destinet after the first bankruptcy filing. A worker at one Teleseat location in Denver, the company's primary ticket operation, said no one there was available to comment and no one had shut down operations as of Thursday afternoon. The company uses few employees and most ticket sales were electronic. Doug Kauffman, owner of Nobody in Particular Presents, was particularly bitter over the ticket agent's shutdown since he, in 1995, was one of the first significant concert promoters to break with Ticketmaster, the nationwide ticket seller, and go with the cheaper Rocky Mountain Teleseat. "People can always file Chapter 11 or Chapter 7," said Kauffman. "It's not a noble way to do business." Looking for a new agent Sue Ann McClaren, vice president for ticketing for the Rockies, said the baseball club has been looking for a new agent since the Chapter 11 filing in October, but hasn't made a decision. Steve Page, spokesman for Pike's Peak Raceway in Colorado Springs, also has not decided on how to continue selling its tickets. Page said the race track has a large enough inventory of tickets to sell them directly to customers by mail for a time. Kauffman said he has sold about 5,000 tickets independent of Rocky Mountain Teleseat since its Chapter 11 filing. Ticketmaster, the giant of the industry, is currently in play. HSN Inc., the parent of Barry Diller's Home Shopping Network and a 47-percent owner of Ticketmaster, has offered more than $300 million for the remainder of the stock. Ticketmaster has been publicly criticized for years for the stiff fees it adds to the price of concert and other entertainment tickets. TODAY'S MAN: Motion to Compel Production of Documents ------------------------------------------------------ The debtor Today's Man, Inc. et al. states that Leon Frenkel and OTA Limited Partnership have appeared before the court on numerous occasions, and participated as an informal member of the unsecured creditor's committee and filed an objection to the debtors'reorganization plan "all in the guise of being a significant unsecured creditor. " Despite this, the debtors have reason to believe that Frenkel and OTA have accumulated major positions in Today's Man Securities, and thus have a significant undisclosed equity position in these cases. Because of the conflicts an equity position would give Frenkel and OTA vis a vis their good faith obligations in the reorganization, debtors have repeatedly sought disclosure from OTA and Frenkel as to whether they held an equity position in Today's Man. According to the debtor, despite these repeated requests to disclose the true nature and extent of their interests, OTA and Frenkel have steadfastly refused. The debtors believe that Frenkel and OTA abused their confidential position within the bankruptcy process to further their own pecuniary interests at the expense of shareholders, creditor and the debtors by purchasing a strategic position in Today's Man claims, by intimately involving themselves in plan negotiations after posturing themselves as a creditor with a blocking unsecured position without also disclosing their equity position, by obtaining through the plan negotiation process, material non-public information relating to the value of securities to be issued under the plan as well as the enterprise value of the company and by using the aforementioned material non- pubic information to not only take a significant position in Today's Man common stock but short sell a material number of shares; and engaged in negative solicitation against the plan before an approved disclosure statement had been sent to creditors. The debtors have sought documents in an attempt to uncover OTA and Frenkel's dual role as an equity interest holder and creditor. However, their document production failed to reveal information by which the debtors, or committee or court could measure the extent of possible self-dealing. The debtors seek an order to compel production WESTERN PACIFIC: Airport Use Agreements and Leases Rejected ----------------------------------------------------------- Judge Sidney Brooks entered an order on December 11, 1997 rejecting airport use agreements at Indianapolis, Oklahoma City and Tulsa. An order was also entered granting the debtor's motion to reject leases with the City of Houston relating to Western Pacific's airline operations at Houston Intercontinental Airport and Park Meadows mall in Littleton Colorado, Pueblo Mall in Pueblo Colorado and warehouse space in Colorado Springs, Colorado. WESTERN PACIFIC: Court's Findings On Financing ---------------------------------------------- On December 9, 1997 the court entered its findings of fact and conclusions of law with respect to the post petition financing that Western Pacific sought and received from Smith Management Company. The court noted that the terms of the financing are onerous, costly, and tough. And that the terms mandate ceding a significant amount of control over the debtor to Smith financing. The court also stated that the proposed terms are virtually unique. The support of the Creditors Committee was very persuasive to the court, as the Creditors' Committee was extremely active and represented a large portion of the unsecured creditors' claims in this case. The court found that Smith Management lends money in risky situations and that Smith has experience in operating an airline. The Court found that the Smith Management financing is a unique credit facility and that the award of superpriority is justified here. As noted, the loan is largely unsecured. Under the circumstances, the court found that it is not an unreasonable shift of the risk to grant to Smith Management a superpriority for the substantial new money which the debtor will receive and the risk Smith Management will undertake. The court stated that the potential profitability of the debtor and its prospects for reorganization if the financing is granted must be measured against the alternative, which is the immediate collapse of the debtor as a going concern. Judge Sidney Brooks stated, "If the loan is not made, the consequences will be complete and irreversible." And this fact, it itself, seemed the most persuasive to the court. WESTERN PACIFIC: Wants to Assume Aircraft Lease ----------------------------------------------- Western Pacific Airlines, Inc. wants court authorization to assume the aircraft lease between Western Pacific and First Security Bank of Utah, N.A. Western Pacific entered into the lease with the lessor for the lease of a certain Boeing 737-300. Western Pacific paid a $420,000 security deposit and the lessor holds in excess of $1.3 million in maintenance reserves. Western Pacific has determined that it is in the best interest of the estate and its creditors to assume the lease. The lease is at a rate below the current market rate for a similar aircraft. Meetings, Conferences and Seminars ---------------------------------- January 29-February 1, 1998 COMMERCIAL LAW LEAGUE OF AMERICA 37th Southern District Annual Meeting Plaza San Antonio, San Antonio, Texas Contact 1-972-285-0391 February 5-7, 1998 AMERICAN BANKRUPTCY INSTITUTE Rocky Mountain Bankruptcy Conference Westin Tabor Center, Denver, Colorado Contact: 1-703-739-0800 February 19-22, 1998 COMMERICAL LAW LEAGUE OF AMERICA Annual Western District Meeting Universal City Hilton Hotel Los Angeles, California Contact 1-310-470-8487 February 22-25, 1998 NORTON INSTITUTES ON BANKRUPTCY LAW 12th Annual Norton Bankruptcy Litigation Institute I Olympia Park Hotel, Park City, Utah Contact 1-770-535-7722 March 19-20, 1998 TURNAROUND MANAGEMENT ASSOCIATION Spring Leadership Meeting Hotel del Coronado, San Diego, California Contact 1-312-857-7734 March 20, 1998 AMERICAN BANKRUPTCY INSTITUTE Bankruptcy Battleground West Century Plaza Hotel, Los Angeles, California Contact: 1-703-739-0800 March 26-29, 1998 NORTON INSTITUTES ON BANKRUPTCY LAW 10th Annual Norton Bankruptcy Litigation Institute II Flamingo Hilton, Las Vegas, Nevada Contact 1-770-535-7722 April 30-May 3, 1998 AMERICAN BANKRUPTCY INSTITUTE Annual Spring Meeting Grand Hyatt, Washington, D.C. Contact: 1-703-739-0800 May 22-25, 1998 COMMERICAL LAW LEAGUE OF AMERICA 50th New England District Annual Meeting Ocean Edge Resort & Golf Club, Cape Cod, Massachusetts Contact 1-617-720-1355 June 8-9, 1998 TURNAROUND MANAGEMENT ASSOCIATION Advanced Education Workshop & Legislative Conference Radisson Plaza, Charlotte, North Carolina Contact 1-312-857-7734 June 11-14, 1998 AMERICAN BANKRUPTCY INSTITUTE Central States Bankruptcy Workshop Grand Traverse Resort, Traverse City, Michigan Contact: 1-703-739-0800 July 2-5, 1998 NORTON INSTITUTES ON BANKRUPTCY LAW Western Mountains Bankruptcy Law Institute Jackson Lake Lodge, Jackson Hole, Wyoming Contact 1-770-535-7722 July 16-19, 1998 AMERICAN BANKRUPTCY INSTITUTE Northeast Bankruptcy Conference Sea Crest Resort, Falmouth, Massachusetts Contact: 1-703-739-0800 August 6-9-1998 AMERICAN BANKRUPTCY INSTITUTE Southeast Bankruptcy Workshop Daufuskie Island Club & Resort, Hilton Head, South Carolina Contact: 1-703-739-0800 September 9-13, 1998 NATIONAL ASSOCIATION OF BANKRUPTCY TRUSTEES Annual Convention Sheraton El Conquistador, Tuscon, Arizona Contact: 1-803-252-5646 September 17-20, 1998 AMERICAN BANKRUPTCY INSTITUTE Southwest Bankruptcy Conference The Inn at Loretta, Santa Fe, New Mexico Contact: 1-703-739-0800 October 16-20, 1998 TURNAROUND MANAGEMENT ASSOCIATION 1998 Annual Conference The Westin Hotel, Chicago, Illinois Contact 1-312-857-7734 December 3-5, 1998 AMERICAN BANKRUPTCY INSTITUTE Winter Leadership Conference Westin La Paloma, Tucson, Arizona Contact: 1-703-739-0800 The Meetings, Conferences and Seminars column appears in the TCR each Tuesday. Submissions via e-mail to conferences@bankrupt.com are encouraged. --------- 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. 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