/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/980102.MBX T R O U B L E D C O M P A N Y R E P O R T E R Friday, January 2, 1998, Vol. 2, No. 1 Headlines 5 COUNTY: Files for Chapter 11 Protection AFP, INC.: Settlement of Hilco & Wal-Mart Litigation AL TECH: Files For Chapter 11 Protection AVOCA NATURAL: Extension of Lease Decision Period to Mar. 31 BONNEVILLE PACIFIC: Proposal to Pay Post-Petition Interest BRADLEES: Objections to Committee's Application Under Seal BRADLEES, INC.: North Attleboro Sale to Yield $8.4 Million CLASSIC FIRE: S&P Downgrade Following Regulatory Action CM HOLDINGS: Battle Brews with Internal Revenue Service COMMONWEALTH SNACK: Trustee Auctioning Production Equipment CONTINENTAL AIRLINES: Settlement of Memorex Telex Claims DOEHLER-JARVIS: Amendment to DIP Facility DOEHLER-JARVIS: Toledo Assigning Equipment Lease to Ford DONGSHU SECURITIES: Korean SEC Approves One-Month Shut-Down EDISON BROTHERS: CFO David Cooper Leaving in January ELDER-BEERMAN: Company Emerges from Chapter 11 FARM FRESH: On the Road to a Delaware Prepack GRANT GEOPHYSICAL: Elliott & Westgate Register Shares GUY F. ATKINSON: Second Extension of Exclusive Periods GUY F. ATKINSON: Salomon Brothers' Market Efforts Update HARRAH'S JAZZ: Merrill Lynch Stays on Bondholder Committee HIUKA AMERICA: Judge Declines to Retain Oversight of Case IN-FLIGHT PHONE: Exclusive Period Extended to June 17, 1998 INTERSCIENCE COMPUTER: Completes Sale of Assets to Anacomp JOHNS MANVILLE: Manville Trust Sues Seven Tobacco Companies MERCHANTS FAST: Settlement Reached on Menard Leases MORTGAGE AND REALTY: Request for Final Decree MUSICLAND: Repays February Balances Owed to Major Vendors NEW SEABURY: Debtor's Plan of Reorganization Proposed NOXSO CORPORATION: Tennessee Facility Sold for $11 Million OMEGA ENVIRONMENTAL: September & October Operating Results ORANGE COUNTY: Litigation Fund 1997 Audit Results PRINS RECYCLING: Authur Andersen Engagement Continued REEVES INDUSTRIES: Oaktree & Goldman Disclose Claims Held SEATTLE LIGHTING: Settlement with Foothill, GE & Committee TECKSON FABRICS: U.S. Trustee Appoints Creditors' Committee TECKSON FABRICS: Court Approves Use of Cash Collateral THAILAND AIR FORCE: Insufficient Cash to Pay for Jets TRINITY GAS: Files for Chapter 11 Protection WICHITA RIVER: November Operating Results --------- 5 COUNTY: Files for Chapter 11 Protection ----------------------------------------- 5 County of Texas LTD-A Texas Limited Partnership d/b/a Good Eats d/b/a Good Eats Cafe, 13413 Saddle Buck Pass 78736 filed for chapter 11 protection in the U.S. Bankruptcy Court in Austin, Texas. The Company estimates its assets and liabilities in the range of $1 and $9 million. Sarah B. Foster, Esq., is counsel to the Debtor. AFP, INC.: Settlement of Hilco & Wal-Mart Litigation ---------------------------------------------------- Douglas R. Johnson, the Trustee appointed to oversee the liquidation of AFP, Inc., and AFP Color Lab, Inc., pending before the U.S. Bankruptcy Court for the Eastern District of Tennessee at Chattanooga, asserted claims against: (a) Hilco Trading Company, Inc., for $1.7 million and (b) Wal-Mart Stores, Inc., for $118,000 in connection with the cessation of AFP's photo processing operations at various Wal-Mart locations and transfer of the operations to Portraits International, Inc., and James E. Kraxner. Hilco filed a Third-Party Complaint against PII and Kraxner; Hilco filed proofs of claims for $300,000 against the Debtors' estate; and the Trustee objected to each of Hilco's claims. After lengthy negotiations among the parties, they have agreed to settle all pending litigation on the following terms: (1) Hilco will pay $70,000 to the Trustee; (2) the Trustee will pay $4,000 to Wal-Mart; (3) each of the five litigating parties will exchange mutual releases; (4) each Plaintiff will dismiss its adversary proceedings with prejudice and will refrain from initiating any new adversary proceeding; and (5) the Trustee will indemnify Hilco for any other claims against it. The parties ask the Bankruptcy Court for its approval of this settlement at a hearing scheduled for January 15, 1998. AL TECH: Files For Chapter 11 Protection ---------------------------------------- AL Tech Specialty Steel Corp. filed for protection under chapter 11 Wednesday in Albany, New York. Headquartered in the western New York town of Dunkirk, the steel maker has 600 employees at its manufacturing facilities there and 250 in the Albany suburb of Watervliet. AL Tech reportedly generates annual sales of $100 million. AL Tech's announcement came nine months after its parent, Sammi Steel Co. -- the flagship company of Korea's 26th largest conglomerate, Sammi Group -- filed for bankruptcy in South Korea. Contemporaneous with the filing of its chapter 11 petition, AL Tech commenced an adversary proceeding asked the court to issue an injunction prohibiting Sammi and a Canadian affiliate from interfering with the company's operation. AL Tech outlined for the bankruptcy court that it intends to propose a plan of reorganization that will break its tie to Sammi. AL Tech COO Jin Park said the chapter 11 filing should not be surprising in light of the Sammi Steel bankruptcy, and state of the South Korean economy. Sammi collapsed under $2.1 billion in debt from loans used to finance rapid expansion in the face of a sluggish international steel market and steep drop in prices. "As a result, AL Tech was left with no financial assistance or expectation of future capital from its parent company," Park told the Associated Press in an interview. AVOCA NATURAL: Extension of Lease Decision Period to Mar. 31 ------------------------------------------------------------ Avoca Natural Gas Storage asks the Honorable Sue L. Robinson in Delaware to extend the deadline by which it must decide whether to assume or reject unexpired leases of non- residential real property to March 31, 1998. The Debtor reminds the Court that it has set a hearing on February 20, 1998, to consider matters related to the Company's environmental remediation issues and whether the automatic stay should be terminated. The determination of those issues, the Debtor notes, may be dispositive of the entire case. BONNEVILLE PACIFIC: Proposal to Pay Post-Petition Interest ---------------------------------------------------------- Roger G. Segal, as the Chapter 11 Bankruptcy Trustee for Bonneville Pacific Corporation (BPCO), announced Wednesday that he has reached conditional settlements with the holders of certain senior claims with respect to the calculation and payment of post-petition interest and with holders of certain subordinated claims and equity interests who will not oppose a Chapter 11 plan to be filed in the future by the Trustee. The settlements and some of the general terms of a Chapter 11 plan to be proposed in the future by the Trustee are detailed in an eight-page letter agreement, a copy of which is on file with the United States Bankruptcy Court for the District of Utah and can also be obtained by contacting the Trustee at 801-532-2666. The Trustee cautions that the letter agreement must be read in its entirety for all the provisions of the conditional settlements. The Trustee's conditional agreement with certain senior creditors provides, among other things, as follows: * Generally, holders of Senior Claims (bank, debenture and trade claims) would receive in full satisfaction of their approximately $100 million of senior unsecured debt, approximately $145.25 million as of December 5, 1997, plus interest after that date. * Specifically, the banks would receive post-petition interest on their allowed claims of approximately $31.5 million at an effective rate of 8.03% through December 5, 1997, and at 8.1% thereafter; * the debentures would receive post-petition interest on their allowed claim of approximately $64.75 million at a rate of 7.32%; and * allowed general unsecured trade claims of approximately $3.75 million would receive post- petition interest at 5.5%. * No interest would be compounded. * All payments to the Senior Claims would be in cash at the distribution date of a confirmed plan of reorganization; * at the Trustee's discretion, certain senior creditors have agreed that up to $3.25 million of the payment on the Senior Claims can be in the form of a one-year 10% unsecured note payable to those certain senior creditors; * one of the senior creditors would also receive an additional $400,000.00 for partial reimbursement of its post-petition attorneys' fee expense provided for under its loan documents. The Trustee's conditional agreement with certain holders of subordinated claims and existing equity interests provides, among other things, that the Trustee will file a proposed Chapter 11 plan which will propose to pay the Pre-petition section 510(b) Selling Debenture Claims, the Post-petition section 510(b) Selling Debenture Claims, the Deeply Subordinated Claims and Limited Partner Claims in New Common Stock of the reorganized debtor. Part of the New Common Stock would be distributed as follows: (a) For Pre-petition section 510(b) Selling Debenture Claims, 100% of the allowed (compromised and without post-petition interest) claim in New Common Stock; (b) For Post-petition section 510(b) Selling Debenture Claims, 70% of the allowed (compromised and without post-petition interest) claim in New Common Stock; (c) For Deeply Subordinated Claims, 10% of the allowed claim (without post-petition interest) in New Common Stock; and (d) For Limited Partner Claims, 25% of the allowed claim (compromised and without post-petition interest) in New Common Stock. After distribution of the New Common Stock as set forth above, the remaining New Common Stock will be divided: 50% to section 510(b) Equity Claims (which would also include the Cigna Claim, which will be separately classified and treated as an allowed section 510(b) Equity Claim plus ten percent) and 50% to then existing shareholders. The Trustee's proposed Chapter 11 plan will not be prepared and filed with the Bankruptcy Court for at least 30 days; the proposed plan will set forth in detail all the numerous terms and conditions relating to payment of claims in the Debtor's Chapter 11 case. The Trustee further cautioned that these settlements are conditioned upon approval by the Bankruptcy Court in the context of a Chapter 11 plan confirmation process; such process includes the approval by the Bankruptcy Court of a disclosure statement; until a disclosure statement has been approved by the Bankruptcy Court, no party-in-interest may solicit the acceptance or rejection of any plan. If the Bankruptcy Court does not confirm the proposed Chapter 11 plan to be submitted by the Trustee, then the settlements and the letter agreement will be void. Any Chapter 11 plan must first be approved (and confirmed) by the Bankruptcy Court after full notice and hearing (with an opportunity for any party-in-interest to object) before any plan can become effective. BRADLEES: Objections to Committee's Application Under Seal ---------------------------------------------------------- As previously reported, the Official Committee of Unsecured Creditors of Bradlees Stores, Inc., filed a Confidential Application with the Court under seal. The Committee explained that, if the information in the Confidential Application or the nature of the Confidential Application were disclosed, it would have a significant adverse affect upon the Company and its business operations and would impact the markets for the buying and selling of claims, thereby adversely affecting plan negotiations. Under seal earlier this week, the Unofficial Committee of Trade Claim Holders, comprised of Stonington Management Corporation and Anvil Investment Partners, filed a document with the Court on December 30, 1997, captioned: Objection of Unofficial Committee of Trade Claim Holders to the Official Committee's Application for an Order to Retain Peter J. Solomon Company Limited as Investment Banker for the Official Committee. Gabriel Capital, L.P., without disclosing the subject matter to which its pleading relates, also filed an objection under seal Creditors' Committee's Confidential Application. BRADLEES, INC.: North Attleboro Sale to Yield $8.4 Million ---------------------------------------------------------- Judge Lifland approved bidding procedures relating to Bradlees' sale of its North Attleboro Property in Massachusetts. The Bidding Procedures permit higher and better offers to be put before the Court at a hearing scheduled for January 7, 1998 in Manhattan. Currently, the Debtors are in receipt of an $8.4 million cash bid put on the table by Beckenstein Enterprises - No. Attleboro L.L.C., which, the Debtors believe, is the highest and best offer for the Property. CLASSIC FIRE: S&P Downgrade Following Regulatory Action ------------------------------------------------------- Standard & Poor's announced that it revised its quantitative claims-paying ability rating on Classic Fire & Marine Insurance Co. to 'R' (Regulatory Action) from 'Bq' (Vulnerable), following the placement of the company into rehabilitation by Indiana insurance regulators. According to the rehabilitation petition filed by Indiana regulators in Marion Country Circuit Court on Dec. 10, the company's reported capital as of Sept. 30 "may be overstated" by a sufficient degree to place the company below "mandatory control level" under risk-based capital guidelines. The insurance department also expressed concerns about the "competence and continuity" of Classic's management. Classic is the principal insurer unit of Concord General Corp., a holding company controlled by Californian Jeffrey W. Beresford-Wood. Earlier this year, Florida regulators placed another insurer affiliate, United Southern Assurance Co., into liquidation. Classic Fire & Marine is the successor organization to two defunct syndicates of the Illinois Insurance Exchange: Classic Syndicate, Inc. and Geneva Assurance Syndicate, Inc. The latter was placed into liquidation by Illinois regulators in 1996. At its height in 1995, Classic Fire & Marine's assets swelled to $168 million and its net premiums were $68 million, Standard & Poor's said. CM HOLDINGS: Battle Brews with Internal Revenue Service ------------------------------------------------------- Camelot Music, Inc., and its debtor affiliates are battling over $7.8 million in claims filed by the Internal Revenue Service in CM Holding's cases. The IRS is CM's single largest alleged holder of an unsecured priority claims. The IRS bases its claims on the disallowance of Camelot's interest deductions for Premium Loans under Sections 163 and 264 of the Tax Code. The Debtors commenced their chapter 11 cases in Delaware on August 9, 1996. The IRS presented the Debtors with a Notice of Proposed Adjustment on December 12, 1996. On January 10, 1997, the IRS filed its Proofs of Claim. The Debtors objected to those proofs of claim on October 15, 1997, serving a copy on the U.S. Attorney who filed a Notice of Appearance on the Government's behalf. The IRS did not reply to the Debtors' objection by a November 24 deadline. Rather, the IRS filed an Amended Proof of Claim on October 27, 1997 for $8.8 million, and then filed a Motion to Withdraw the Reference and a Stay of Proceedings on November 21, 1997, raising procedural defects concerning the Debtors' objection to the IRS' claims. The Debtors oppose the request for a Withdrawal of the Reference. The issues presented by the IRS' claims are straightforward and have been decided against the IRS in previous cases. The Debtors ask Judge Walsh in the Bankruptcy Court to consider their objection to the IRS' claims at a hearing scheduled for January 6, 1998, to decide the issue on the papers before him, and to reject the IRS' eleventh-hour suggestion to move the matter to the District Court. COMMONWEALTH SNACK: Trustee Auctioning Production Equipment ----------------------------------------------------------- David J. Ferrari, the Trustee appointed to oversee the liquidation of the estates of Commonwealth Snack Company, Inc., State Line Snack Corporation, and Boyd Acquisition Company, Inc., whose chapter 7 cases pend before the Bankruptcy Court in Boston, asks Judge Hillman to approve his plan employ a local auction firm to sell, at public auction on January 27, 1998, a half-ton popcorn popper, a conveyorized chip fryer, packaging line equipment, and other warehouse equipment. CONTINENTAL AIRLINES: Settlement of Memorex Telex Claims -------------------------------------------------------- Continental Airlines, Inc., its debtor affiliates, Memorex Telex Corporation and Memorex's secured lenders have entered into a settlement, subject to bankruptcy court approval by Judge Balick, that will resolve all of Memorex Telex's claims against Continental in exchange for: $40,810 in Cash paid by Continental; $2,604,000 General Unsecured Claim against Continental; $189,028 General Unsecured Claim against Chelsea; and $988,221 General Unsecured Claim against System One; all of which are to be allowed and paid pursuant to Continental's Revised Second Amended Joint Plan of Reorganization, as modified. Continental will seek Judge Balick's approval of this compromise and settlement on January 7, 1998. DOEHLER-JARVIS: Amendment to DIP Facility ----------------------------------------- Harvard Industries, Inc., reported in its Form 10-K filed December 29, 1997, that its $175 million DIP Financing Agreement contained a covenant requiring a fixed charge coverage ratio requiring the companies from and after October 1, 1997 to maintain a ratio of EBITDA to Fixed Charges from and after October 1, 1997, of 1:1 for the period from the beginning of the fiscal year to the end of the most recently completed calendar month in such fiscal year for which financial statements are available. The DIP Financing Agreement also contained a covenant requiring the maintenance of a minimum amount of EBITDA and restrictions on the amounts expended for capital expenditures. The Company failed to meet the fixed charge ratio financial covenant during the months of October and November 1997, but obtained a waiver of such default from its lenders. The Company and the lenders have amended the DIP Financing Agreement to provide that the Companies shall maintain Cumulative EBITDA of not less than: (a) $(7,500,000) for the 3 months ended 12/31/1997; (b) $(10,000,000) for the 4 months ended 01/31/1998; (c) $(10,000,000) for the 5 months ended 02/28/1998; (d) $(7,500,000) for the 6 months ended 03/31/1998; (e) $(5,000,000) for the 7 months ended 04/30/1998; (f) $(2,500,000) for the 8 months ended 05/31/1998; (g) $0 for the 9 months ended 06/30/1998; (h) $(1,000,000) for the 10 months ended 07/31/1998; (i) $1,000,000 for the 11 months ended 08/31/1998; (j) $4,000,000 for the 12 months ended 09/30/1998. and shall maintain during each month set forth below a consolidated Tangible Net Worth of not less than the minimum amount set forth below for such month: (a) $(48,822,000) for the month ended 12/31/1997; (b) $(56,289,000) for the month ended 01/31/1998; (c) $(33,417,000) for the month ended 02/28/1998; (d) $(34,769,000) for the month ended 03/31/1998; (e) $(34,592,000) for the month ended 04/30/1998; (f) $(37,751,000) for the month ended 05/31/1998; (g) $(38,861,000) for the month ended 06/30/1998; (h) $(45,898,000) for the month ended 07/31/1998; (i) $(47,179,000) for the month ended 08/31/1998; (j) $(45,405,000) for the month ended 09/30/1998. Further, the Companies shall not make payments in respect of Capital Expenditures excluding payments on Capital Lease Obligations in existence on the Petition Date in excess of $30,000,000 in the aggregate for all Companies during the fiscal year ending September 30, 1998, without the prior written consent of the Agent (acting on the instructions of the Required Lenders). The Debtors paid a $250,000 fee in consideration of the waiver and amendment. The CIT Group/Business Credit, Inc., serves as the Agent under the DIP Facility, for itself, Congress Financial Corporation, General Electric Capital Corporation, Heller Financial, Inc., Finova Capital Corporation, Foothill Capital Corporation, and BankBoston, N.A., as Lenders. DOEHLER-JARVIS: Toledo Assigning Equipment Lease to Ford -------------------------------------------------------- Doehler-Jarvis, Inc., Harvard Industries, Inc., and their debtor affiliates ask the Delaware Bankruptcy Court for permission to assume and assign a 1993 equipment lease for die cast machines manufactured by Prince Machine Corporation with Mellon Bank to Ford Motor Company. The Debtors remind the Court that their attempts to sell Doehler-Jarvis were not successful, so they have been negotiating a Wind-Up Plan with their Customers (including Ford), CIT Group/Business Credit Inc. (their DIP Lender) and their Creditors' Committee. The Debtors anticipate filing a Motion in short order or implement the Wind-Up Plan. The Debtors relates that the Leased Equipment cost $21 million in 1993. Today, the Debtors owe Mellon $17 million under the Lease. Ford has agreed to pay the Debtors $700,000 in exchange for the assumption and assignment of the Equipment Lease. The Debtors believe that the Lease has no greater value, and would reject it if Ford were not making its offer. DONGSHU SECURITIES: Korean SEC Approves One-Month Shut-Down ----------------------------------------------------------- Dongsuh Securities Co., South Korea's fourth largest brokerage house, suspended its operation for a one-month period, after receiving approval from the Korean Securities Exchange Commission, according to a report published in this week's edition of The Korea Economic Weekly. Along with this move, TKEW reports, the company filed for court receivership at the Seoul district court. Dongsuh reportedly decided upon its suspension as customers rushed to withdraw about 50- 70 billion won a day since its parent company, Kukdong Construction Co. announced that it would sell off its subsidiaries, including Dongsuh. The SEC prohibited Dongsuh from engaging in major businesses, such as brokering, trading and underwritings. Industry watchers told TKEW they forecast that with the successive suspension of Coryo and Dongsuh, the securities industry will inevitably experience full-fledged restructuring. EDISON BROTHERS: CFO David Cooper Leaving in January ---------------------------------------------------- Edison Brothers Stores Inc. (Nasdaq: EDBR) today announced that Chief Financial Officer David Cooper will be leaving the company in January. Cooper has served as Edison's CFO since 1994, and helped steer the specialty apparel, footwear and accessories retailer through its recent restructuring. To assist with financial matters during a transition period, the company has retained David Schwartz, a former partner with Arthur Andersen & Co., to work with management. "David Cooper was a leader in many of the important changes we have made before, during and after our Chapter 11 process," said Alan Miller, Edison's chairman and chief executive officer. "However, it is appropriate and common that the new owners and directors of a company that has emerged from Chapter 11 would want to work with their own senior management team." ELDER-BEERMAN: Company Emerges from Chapter 11 ---------------------------------------------- The Elder-Beerman Stores Corp. announced that the company consummated its plan of reorganization and emerged from Chapter 11 on December 30, 1997. Elder-Beerman's emergence from Chapter 11 follows the U.S. Bankruptcy Court's confirmation of the company's third amended plan of reorganization on December 15, 1997. Shares of Elder-Beerman will trade on the Nasdaq National Market under the symbol EBSC. Shares will begin trading once Elder-Beerman receives approval of its Form 10 registration document from the Securities and Exchange Commission. Elder-Beerman said its plan calls for distribution of 12,279,611 shares in the new, publicly- traded Elder-Beerman and $79.7 million in cash to satisfy creditors claims. Distribution is expected to occur in January. "We are pleased to begin a new chapter in the history of Elder-Beerman," said Frederick J. Mershad, Chairman and Chief Executive Officer of Elder-Beerman. "With Chapter 11 behind us, we are now stronger than ever and look forward to devoting our full attention to running a successful retail operation." The company also said it has obtained agreements providing up to $250 million in new financing facilities through a bank lending group led by Citibank, N.A. and Citicorp Securities, Inc. Elder-Beerman said the Citibank, N.A. and Citicorp Securities, Inc. credit facilities provide for financing for three years, and are effective immediately. The secured credit facilities will be used to pay off the company's existing debtor-in-possession financing, certain prepetition claims and certain administrative claims. Subsequently, the facilities will be used to fund seasonal inventory requirements and general corporate needs. John A. Muskovich, President, Chief Operating Officer and Chief Financial Officer, said, "The company has emerged from Chapter 11 with a renewed commitment to its successful business strategy. This financing ensures that the company has ample liquidity and provides Elder-Beerman with favorable terms and increased flexibility. It is a strong vote of confidence from our bank lenders." The Elder-Beerman Stores Corp. is a regional department store company headquartered in Dayton, Ohio. Annual sales in fiscal 1996 were $569.6 million. Elder-Beerman operates 48 department stores in Ohio, Indiana, Illinois, Michigan, Wisconsin, Kentucky and West Virginia. The company's Bee- Gee shoe division operates 61 El-Bee and Shoebilee! shoe stores in seven states. Elder-Beerman also operates two furniture superstores. FARM FRESH: On the Road to a Delaware Prepack --------------------------------------------- Completing its pre-petition solicitation of votes, Farm Fresh Inc. and its parent company moved closer to commencing their prepack chapter 11 case in Delaware designed to shed $156 million of debt and sell their assets to Richfood Holdings Inc. Richfood agreed in September to buy Farm Fresh for about: (a) $220 million cash, (b) $30 million of assumed leases and (c) 1.5 million warrants, or rights, to buy a share of Richfood stock for $25 after five years. Those sale proceeds are anticipated to pay Farm Fresh creditors an estimated 90 cents-on-the-dollar for what they are owed, but creditors and shareholders of Farm Fresh's parent, FF Holdings Corp., are projected to take nothing. Farm Fresh undertook the pre-petition solicitation process with the support of a majority of holders of $212.8 million of 12.25% Senior Notes due 2000. PPM America Special Investments Fund, Moore Capital Management Inc. and Conseco Capital Management reportedly hold $135 million of Senior Notes and worked with Farm Fresh to propose the restructuring plan. Creditors holding Farm Fresh's Senior Notes are slated to receive approximately $192 million under the Plan. Administrative claims, taxes and wage-related claims, as well as a $26.7 million line of credit used to cover day-to-day needs and roughly $300,000 of trade debt to suppliers will be paid in full. Others creditors are to be repaid about 90 cents-on-the-dollar, including the holders of $7.2 million in 7.5% Convertible Subordinated Debentures due 2010 and about $5.7 million in non-supplier general unsecured claims. Holders FF Holding's debt and equity securities, including $97.2 million of 14.25% Senior Notes due 2002 and $36.7 million of 14.25% Cumulative Preferred Stock, will take nothing under the Plan. Farm Fresh has been highly leveraged since 1988, when it was purchased by a unit of Citicorp in an LBO. Citicorp's venture capital unit owns the bulk of FF Holdings stock through an investment partnership known as 399 Venture Partners. Current and former Farm Fresh executives and directors also hold tiny stakes in FF Holdings. Farm Fresh Chairman Ronald Johnson and CFO Richard Coleman have previous experience in Delaware prepack cases from the restructuring of Kash n' Karry in 1994. GRANT GEOPHYSICAL: Elliott & Westgate Register Shares ----------------------------------------------------- Elliott Associates, L.P. and Westgate International, L.P. filed their Registration Statement with the Securities and Exchange Commission detailing their offer to sell 3,459,414 shares of Common Stock, par value $.001 per share of Grant Geophysical, Inc. in a subscription offering to Eligible Subscribers (which include Eligible Class 5 Claim Holders, Eligible Class 7 Interest Holders, and Eligible Class 8 Interest Holders, each as defined in the Second Amended Plan of Reorganization of the Grant Geophysical's predecessor, GGI Liquidating Corporation) at $5.00 per share. Grant Geophysical will not receive any proceeds from the sale of Common Stock offered pursuant to the Elliott & Westgate Subscription Offering. GUY F. ATKINSON: Second Extension of Exclusive Periods ------------------------------------------------------ To permit the Court and the major creditor constituencies to control the plan process, while avoiding a free fall into the chaos of multiple completing plans of reorganization if exclusivity were to terminate, Guy F. Atkinson Company and its debtor affiliates proposes that the Court approve a proposal where the Debtors will share their exclusive period during which to file a plan of reorganization with their major creditors through March 31, 1998. If the Debtors can file a consensual plan by March 31, 1998, then that plan will be prosecuted to confirmation. If a non-consensual plan is filed, or no plan is filed, then the Banks, the Bonding Companies, or the Committee may file one or more plans without further relief from the Court. Concomitant with an extension of its exclusive period to file a plan of reorganization, the Debtors request an extension of their exclusive period during which to solicit acceptances of such plan through June 1, 1998. GUY F. ATKINSON: Salomon Brothers' Market Efforts Update -------------------------------------------------------- In connection with the Company's request for an extension of its exclusive periods, Guy F. Atkinson Company reminds the Court that Salomon Brothers was brought in roughly four months ago to market the company and solicit competing bids for the Debtors' businesses. The Debtors relate that Salomon contacted 49 prospective acquirers and investors, soliciting indications of interest in a business combination or other form of investment. Positive responses were received from 34 parties, and nine entities executed confidentiality agreements. Six of those nine visited the Debtors' premises in San Bruno, California, met with senior management, and sent professionals to the Debtors' "data room." Two candidates emerged from that process: Morrison Knudsen Corporation and The Clark Construction Group, Inc. The Committee rejected MK, and MK withdrew from the bidding process. Clark remains at the table, and the Debtors intend to press forward on a plan premised on Clark's participation. In that regard, the Debtors advise the Court that it can anticipate receiving pleadings in the next week outlining procedures to protect Clark in the confirmation process. HARRAH'S JAZZ: Merrill Lynch Stays on Bondholder Committee ---------------------------------------------------------- The Bankruptcy Court overseeing the on-going reorganization of Harrah's Jazz Co. ruled that Merrill Lynch Asset Management L.P. may continue to serve on the Official Bondholders' Committee appointed in that case. Dr. Seymour Licht, a holder of 14-1/4% First Mortgage Notes issued by Harrah's, alleged that Merrill Lynch possessed a debilitating conflict of interest that precluded service on the Bondholders' Committee. That conflict was based on Merrill's simultaneous control of $80 million of Notes and 4 million shares of common stock in Harrah's Entertainment, Inc. Merrill countered that the U.S. Trustee was advised of Merrill's interests before the Committee was formed and that applicable case law permits holders of more than one security to sit on committees. HIUKA AMERICA: Judge Declines to Retain Oversight of Case --------------------------------------------------------- The Honorable Robert W. Alberts will transfer from the U.S. Bankruptcy Court in Santa Ana to the Court in Riverside on January 16, 1998. Because he has overseen the reorganization of Hiuka America Corporation from its Petition Date, the Debtors asked Judge Alberts is he would be willing to take the case with him from Santa Ana to Riverside. In a letter to Debtors' counsel, Judge Alberts declined the Debtors' invitation and advised that the cases would be reassigned to The Honorable Merideth Jury. IN-FLIGHT PHONE: Exclusive Period Extended to June 17, 1998 ----------------------------------------------------------- The United States Bankruptcy Court for the District of Delaware granted In-Flight Phone Corp. an extension of its exclusive period during which to file a reorganization plan through June 17, 1998 and a concomitant extension of its exclusive period during which to solicit acceptances of such plan through August 19, 1998. In-Flight said that the extension was necessary because filing a plan at this point in time would be premature since there are no proceeds available to distribute to creditors nor are there accurate estimates available concerning recoveries from on-going litigation. INTERSCIENCE COMPUTER: Completes Sale of Assets to Anacomp ---------------------------------------------------------- Interscience Computer Corporation confirmed that it has sold its Xerox laser printer maintenance business to Anacomp, Inc. (an unrelated public company). The assets sold were maintenance contracts with 34 customers, certain accounts receivable, inventory located at customer sites or with field engineers, and diagnostic equipment used by field engineers. Anacomp, Inc. paid $1,220,000.00 for the above assets plus an earnout 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. Interscience said that the inventory and diagnostic equipment were sold at approximately book value. The contracts sold were basically one year contracts with either party able to cancel with 30 days notice at any time. Interscience has previously determined that it could not continue to profitably operate the Xerox service business and actively sought a buyer. The sale was approved by the U.S. Bankruptcy Court on December 1, 1997, effective November 1, 1997. The Xerox maintenance business represented approximately 30% of Interscience's gross revenue for the year ended September 30, 1997. Interscience filed for protection under Chapter 11 of the U.S. Bankruptcy Code on March 5, 1997. The Company submitted a plan of reorganization and an accompanying 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 Company's disclosure statement is presently scheduled for January 7, 1998. JOHNS MANVILLE: Manville Trust Sues Seven Tobacco Companies ----------------------------------------------------------- The Manville Personal Injury Settlement Trust announced Wednesday that it filed a lawsuit against seven tobacco companies: * American Tobacco Company, * R.J. Reynolds Tobacco Company, * B.A.T. Industries, PLC, * Brown & Williamson Tobacco Corporation, * Philip Morris Incorporated, * Liggett Group, Inc., and * Lorillard Tobacco Company. The 21-page complaint requests that the tobacco companies reimburse the Trust for all sums paid to Trust beneficiaries whose asbestos disease was caused in whole or in part by the smoking-related illness which the tobacco companies caused. The amount in question runs into the billions of dollars. Robert A. Falise, Chairman and Managing Trustee of the Trust, stated that the lawsuit was filed to prevent the proposed tobacco settlement legislation from cutting off the rights of asbestos victims to sue tobacco companies. "The Tobacco Settlement as proposed is unjust and unfair to our Trust beneficiaries, the beneficiaries of the other asbestos trusts, and claimants of all former asbestos manufacturers who are or were smokers," Mr. Falise noted. The complaint charges that the tobacco defendants conspired to withhold information from the public concerning the health dangers associated with smoking and that there is a clear, scientifically established link between smoking and the enhanced risk of lung disease in persons who are occupationally exposed to asbestos. An asbestos worker who smoked is almost 100 times more likely to die of lung cancer, the complaint charges, as compared to a five times greater risk for the asbestos worker who did not smoke. The complaint states that smoking also has been found to increase the severity of other lung diseases from which asbestos workers suffer, including asbestosis. The Trust's complaint further contends that the proposed tobacco settlement would have the effect of eliminating claims by the Trust against the tobacco companies demonstrating that the tobacco defendants are trying to avoid their responsibilities to compensate asbestos victims whose injuries and damages were caused by the defendants' cigarettes. If the lawsuit is successful, the funds received by the Trust will be used to pay victims. As a result, all funds recovered from the lawsuit will go directly to Trust beneficiaries who currently receive only ten percent of what they are owed. To date, the Manville Trust, the largest of the asbestos trusts, has paid approximately $1.7 billion to its beneficiaries. The Trust has approximately $2.5 billion in assets, but it has liabilities anticipated to be $22.5 billion over time. Thus, the Trust pays its beneficiaries only ten percent of the liquidated value of their claims. The Manville Trust was established in 1986 following the bankruptcy of the Johns Manville Corporation. Experts testifying during the Manville bankruptcy hearings predicted the Trust would receive between 83,000 and 100,000 claims during its entire life. However, during the past nine years the Trust has received over 350,000 claims and expects to receive an additional 350,000 claims. MERCHANTS FAST: Settlement Reached on Menard Leases --------------------------------------------------- Merchants Fast Motor Lines, Inc., asks Judge McGuire in Dallas to approve a compromise and settlement it reached with ABN Amro Bank, N.V., Societe Generale Southwest Agency, The Travelers Insurance Company, Heller Financial, Inc., Wells Fargo Bank, N.A., and MDFC Equipment Leasing Corporation concerning Menard, Inc.'s lease of 225 units of Rolling Stock Tractors, Trailers and Trucking Equipment. MDFC leased the equipment to Menard. Wells Fargo secured the Debtors' lease obligations with a letter of credit. When Menard stopped paying, MDFC drew down the L/C, collecting $912,288. The Lenders and the Trustee assert that the L/C draw was improper and the money should be returned. To resolve the dispute without further litigation, MDFC agrees to return $600,000 to Wells Fargo, pay $50,000 to the Trustee and keep the balance in exchange for all its claims against the Debtors' estate. MORTGAGE AND REALTY: Request for Final Decree --------------------------------------------- Value Property Trust, the Reorganized Debtor formerly known as Mortgage and Realty Trust, tells the Bankruptcy Court in Los Angeles that, pursuant to the Plan of Reorganization Proposed by Mortgage Realty and Trust dated July 12, 1995, confirmed by the Court and declared effective on September 22, 1995, has been substantially consummated by: (1) the termination and cancellation of the Outstanding Securities, the Outstanding Note Indenture, the Outstanding Collateral Agreement, the Outstanding Pledge Agreement, the Prior Plan, the Outstanding Stock Rights and all of the Debtor's obligations under any of the foregoing; (2) execution of the New Note Indenture and New Collateral Documents and the issuance of the New Notes and the New Common Shares; (3) the revesting of all property of the Estate in the Reorganized Debtor free and clear of all claims, liens, encumbrances and other interests except as provided in the Plan; and (4) the Reorganized Debtor's delivery to the Disbursing Agent of all cash required to be distributed under the Plan. The Reorganized Debtor further advises the Court that all fees payable to the U.S. Trustee were paid in full on December 19, 1997. Accordingly, the Reorganized Debtor asks that the Court enter a final decree and that its chapter 11 case be closed pursuant to 11 U.S.C. Sec. 350(a) and Rule 3022 of the Federal Rules of Bankruptcy Procedure. MUSICLAND: Repays February Balances Owed to Major Vendors --------------------------------------------------------- Musicland said it has repaid all balances owed to its major vendors for which payment had been delayed from February, 1997. The Company still owes its major vendors for September shipments of holiday selling season inventory, which will be paid under a new agreement providing extended terms. Musicland further announced that it complied with its obligation to reduce borrowing under its revolving credit line by $20 million. NEW SEABURY: Debtor's Plan of Reorganization Proposed ----------------------------------------------------- New Seabury Company Limited Partnership, the owner an operator of a 2,000 acre planned community, begun in the 1960s, located on a peninsula bordered by Nantucket Sound, has proposed a Plan of Reorganization dated December 24, 1997. The Plan proposes to (i) reinstate all secured claims to the extent of the value of the underlying collateral, (ii) pay all unsecured claims in full to the extent funds are available and (iii) distribute New Equity to Old Shareholders contributing new value to the Reorganized Debtor's estate. The Debtor's chapter 11 case pends before the U.S. Bankruptcy Court in Boston. NOXSO CORPORATION: Tennessee Facility Sold for $11 Million ---------------------------------------------------------- NOXSO Corporation (Nasdaq: NOXOQ) announced that it has sold its liquid sulfur dioxide production facility located in Charleston, Tennessee to an affiliate of Republic Financial Corporation for $11 million. The sale of the facility represents a major step in NOXSO's efforts to reorganize under Chapter 11 of the U.S. Bankruptcy Code. The facility, which does not utilize the NOXSO technology, reached production rates required by the end user prior to the sale. The principal elements of NOXSO's plan to emerge from bankruptcy have been the sale of the production facility and organizing a project for the commercial demonstration of the NOXSO process. Approximately $9 million of the proceeds from the sale of the facility have been used to retire claims of creditors of NOXSO holding liens on the facility and to pay administrative expenses. NOXSO will use a portion of the remaining proceeds from the sale to pay its on-going operating expenses while it continues in its efforts to emerge from bankruptcy. Moving forward, the company's focus will be on securing a host site and obtaining the funding and approvals needed to build and operate a commercial demonstration of NOXSO's proprietary technology. OMEGA ENVIRONMENTAL: September & October Operating Results ---------------------------------------------------------- For the month ending September 30, 1997, Omega Environmental, Inc., reports a net loss of $97,893 on sales of $1,360,487. For the month ending October 31, 1997, Omega reports a net loss of $401,467 on sales of $1,201,399. As of October 31, 1997, the Company reports borrowings under its DIP Facility with BNY Financial Corporation were $20,243,285 which exceeded the $17,000,000 borrowing limit in the debtor-in-possession financing agreement by $3,243,285. Additionally, the Company's borrowings exceeded the collateral formula by $11,410,000. Omega says it is fervently negotiating with BNFYC to extend the debtor-in- possession financing agreement which expires by its own terms December 31, 1997. ORANGE COUNTY: Litigation Fund 1997 Audit Results ------------------------------------------------- An audit of the Litigation Fund pursuing claims relating to losses in the Orange County Investment Pool which precipitated a chapter 9 filing by the County in December 1994, shows that Tom Hayes, appointed by the Court to manage the Litigation Fun and direct lawsuits against more than a dozen firms, paid professionals $10.7 million and owed them an additional $3.9 million for 1997. Two law firms, Hennigan Mercer & Bennett and Sheppard Mullin Richter & Hampton, accounted for about 90% of the billings, Hayes said. In addition to attorney's fees, the litigation fund also paid undisclosed expenses for Hayes, plus a $15,000-a-month asset management fee to Hayes' firm, Metropolitan West Securities Inc. Hayes will get a fee of 1.5% of all litigation verdicts or settlements after the first $200 million. The litigation account, funded with $50 million from a county bond issue, was worth $48.2 million on June 30, 1997, including interest earnings and settlements. Hayes said the fund still has about $43 million. The first major payout to public agencies was made Tuesday. Hayes distributed $29.2 million to schools as part of a $30 million deal Merrill Lynch struck with District Attorney Michael Capizzi in June to settle civil charges. Hayes said he still hopes to win a $45 million settlement from the county's former bond attorneys, LeBoeuf Lamb Greene & MacRae. The North Orange County Community College District has blocked that settlement, saying it deserves more than the $6.7 million the county has offered to give it. The district has filed its own suit against LeBoeuf Lamb, which is scheduled to go to trial in February months before the county case could begin. PRINS RECYCLING: Authur Andersen Engagement Continued ----------------------------------------------------- Judge Tuohey has approved the Official Joint Committee of Unsecured Creditors of Prins Recycling Corp.'s retention of Arthur Andersen LLP as its accountants for an additional period of up to 75 person-days or 600 hours, effective December 1, 1997. REEVES INDUSTRIES: Oaktree & Goldman Disclose Claims Held --------------------------------------------------------- In a filing pursuant to Rule 2019 of the Federal Rules of Bankruptcy Procedure, the law firm of Paul, Weiss, Rifkind, Wharton & Garrison, discloses that it represents Oaktree Capital Management LLC and Goldman Sachs & Co. in the chapter 11 reorganization commenced by Reeves Industries, Inc. Paul Weiss further discloses the amount of claims held by Oaktree and Goldman: * Oaktree's prepetition claims against the Debtor generally include, without limitation, $76,780,000 of 11% Senior Notes of the Debtor's, due 2001 and $7,853,000 of 13-1/4% Subordinated Debentures of the Debtor's, due 2001. The approximate amount of Oaktree's claim against the Debtor is $84,633,000. * Goldman's prepetition claims against the Debtor generally include, without limitation, $8,000,000 in 11% Senior Notes of the Debtor's, due 2002 and $320,000 in 13-1/4% Subordinated Debentures of the Debtor's, due 2001. The approximate amount of Goldman's claim against the Debtor is $8,320,000. SEATTLE LIGHTING: Settlement with Foothill, GE & Committee ---------------------------------------------------------- To compromise and settle two 1996 Adversary Proceedings commenced before the U.S. Bankruptcy Court in Seattle: (1) General Electric Company and GE Lighting v. Seattle Lighting Fixture Co. and Foothill Capital Corporation, Adv. Pro. No. A96-10325; and (2) Foothill Capital Corporation v. The Official Committee of Unsecured Creditors of Seattle Lighting Fixture Co., Adv. Pro. No. A96-05048, the parties ask the Honorable Karen A. Overstreet to approve an agreement providing that: (a) Foothill agrees to waive all claims against the estate, including its $675,000 claim under Sec. 364(c), in return for a waiver of all claims by the estate, Genlyte, and the Committee against Foothill; (b) Foothill agrees to pay $45,000 in cash to the estate, (c) Genlyte agrees to settle its Sec. 507(b) claim for $125,000 cash and be allowed an unsecured claim for the remainder of its claim (approximately $1.2 million), and (d) the administrative claimants will agree to be paid up to $75,000, with the remainder of their allowed claims to be paid from the preference recoveries or from any other available funds after payment of the Genlyte Sec. 507(b) claim. The Debtor also asks Judge Overstreet to approve its employment of the law firm of Bucknell Stehlik -- Foothill's local counsel in this case -- to pursue preference claims on behalf of the estate. TECKSON FABRICS: U.S. Trustee Appoints Creditors' Committee ----------------------------------------------------------- The United States Trustee has appointed the following entities to serve on an Official Committee of Unsecured Creditors in the chapter 11 case commenced in the Southern District of New York by Teckson Fabrics, Inc: 1. Heller Financial, Inc.; 2. Republic Business Credit Corporation; 3. NBR Industries, Inc.; and 4. Milliken & Company. TECKSON FABRICS: Court Approves Use of Cash Collateral ------------------------------------------------------ The Honorable Arthur J. Gonzalez, for the U.S. Bankruptcy Court in Manhattan, has granted Teckson Fabrics, Inc., authority to continuing using $140,000,000 of cash collateral in which Finova Capital Corp. and Nationsbanc Commercial Corp. claim an interest and grant the Pre- Petition Lenders adequate protection with respect to the use by the Debtor of cash collateral securing the Debtor's indebtedness to the Pre-petition Lenders. The adequate protection provided to Finova and NationsBanc will be in the form of a second lien and junior security interest upon the same assets and collateral pledged by the Debtor to Commodore Factors Corp., which will provide the Debtor with Post-Petition Financing by factoring Post- Petition Receivables. Commodore's interests will be secured by a first lien on all assets, subject only to valid, existing, nonavoidable and perfected liens. THAILAND AIR FORCE: Insufficient Cash to Pay for Jets ----------------------------------------------------- Thailand's cash-strapped air force cannot complete payments on eight fighter jets ordered from McDonnell Douglas, a Thai newspaper reported this week. The air force has paid $149 million of the $392 million bill for the F/A- 18 jets scheduled for delivery in 1999, and can either delay payments at a cost or resell the planes, the Bangkok Post quoted air force Commander in Chief Thananit Niamthan as saying. The air force's cash problems are part of the Thai currency crisis which prompted a $17.2 billion bailout by the International Monetary Fund. TRINITY GAS: Files for Chapter 11 Protection -------------------------------------------- Bloomberg News reports that Trinity Gas Corporation filed for protection under chapter 11 in San Angelo, Texas, on December 23, 1997, on the heels of a December 8 suit filed by the Securities and Exchange Commission alleging that the Company and CEO Sidney Sers made fraudulent claims about natural gas discoveries in Columbia. Mr. Sers says that the SEC's complaint is based on incomplete information supplied by disgruntled former employees and an auditing firm. Data from two wells the Company has drilled near Cali, Columbia, suggest a major find, Sers told Bloomberg. Financial data was not available with the Company's chapter 11 petition, Bloomberg reported. WICHITA RIVER: November Operating Results ----------------------------------------- For the month ending November 30, 1997, Wichita River Oil Corporation posted a net loss of $14,611 on net revenue of $251,000. --------- 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. 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