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/raid1/www/Hosts/bankrupt/TCR_Public/980108.MBX T R O U B L E D C O M P A N Y R E P O R T E R Thursday, January 8, 1998, Vol. 2, No. 5 Headlines AUTOMOBILE CREDIT: Closing of Litigation Trust CAMPO ELECTRONICS: Agreed Order for Cash Collateral EVANSVILLE BREWERY: Delay in Sale Makes Some Nervous EXCALIBUR FINANCIAL: Objection to Extension for Leases FARM FRESH: Financial Status & 20 Largest Creditors FARM FRESH: Debtors' Professionals Named GAYLORD: Requests Extension to Assume or Reject Leases GUY F. ATKINSON: Hearing on Cash Collateral and DIP HARRAH'S JAZZ: Jan. 16 - Last Date to Accept or Reject Plan HOMEPLACE STORES: Financial Status & 20 Largest Creditors HOMEPLACE STORES: Debtors' Professionals Named LOUISE'S TRATTORIA: Order Approving Sale of Assets MIDCOM COMMUNICATIONS: Foothill Capital Responds OLYMPIA & YORK: Noteholders Committee Announces Agreements PARAGON TRADE: Announces Chapter 11 Filing PARAGON TRADE: Proctor & Gamble Surprised at Filing SA TELECOMMUNICATIONS: Committee Taps Cornwell Consulting SA TELECOMMUNICATIONS: WorldCom Objects to Stay SEARCH FINANCIAL: Restructures Agreement With Lenders THE WIZ: Order to Show Cause for Stay Bonuses --------- AUTOMOBILE CREDIT: Closing of Litigation Trust ---------------------------------------------- The Litigation Trust created under the plan of reorganization in the case of Automobile Credit Fund 1991- III, Inc., et al., consummated the settlement agreement with Search Financial Services, Inc., f/k/a Search Capital Group Inc., and the settlement proceeds have been distributed. The Litigation Trust is closed and the Litigation Trustee is discharged from further obligation. CAMPO ELECTRONICS: Agreed Order for Cash Collateral --------------------------------------------------- Judge T.M. Brahney, III entered an order authorizing use of cash collateral of Transamerica Commercial Finance Corporation (TCFC) and a final order authorizing post- petition financing by Transamerica Commercial Finance Corporation (TCFC). As of the petition date, the debtor was indebted to TCFC in the principal amount of approximately $3.8 million. The debtor is authorized by this Order to use cash collateral and incur post-petition indebtedness in accordance with the provisions of the court Order. The debtor must pay TCFC on a daily basis, in advance, and the debtor must prepare and maintain daily and weekly reports. The court states that the entry of this order will minimize the disruption of the debtor's existing business and will increase the possibility for a successful reorganization of the debtor as a going concern. The court notes that the debtor is unable in the ordinary course of business or otherwise, to obtain unsecured credit allowable under the bankruptcy code as an administrative expense in an amount necessary for the maintenance and preservation of its assets and operation of its business. EVANSVILLE BREWERY: Delay in Sale Makes Some Nervous ---------------------------------------------------- The Evansville Courier reported on December 31, 1997 that the chief of the company scheduled to close a $3 million buyout of Evansville Brewing Co. on Tuesday says "paperwork" and lack of a brewer's license forced a delay. But both Michael Lynch, president of Michigan Avenue Partners of Chicago, and a brewery attorney insisted the deal is still alive. Lynch's investment group, ruled best bidder for the brewery during a Dec. 16 U.S. Bankruptcy Court hearing, was the only bidder pledged to keeping the 147-year-old brewery in operation. "We feel, we believe there is a cooperative spirit on the part of both sides to conclude the transaction," said Stanley Talesnick, Evansville Brewing's bankruptcy attorney. Lynch, who met a court requirement to put up $250,000 earnest money, orally agreed with Talesnick on Tuesday afternoon to put up $100,000 more to pay brewery operating expenses until the deal is closed. "Attorneys are working arduously on a written agreement," Lynch said. The agreement and the money are due at noon today, Talesnick said. Lynch said the agreement will allow a callback of some brewery workers before the closing. "We want to start brewing late next week." No beer has been brewed since Oct. 1, when the brewery's bank froze its accounts. Talesnick said he now expects the closing "within a week to 10 days." Lynch said it would come "in the next day or two, or no later than early next week." Asked what would happen if Lynch should miss today's deadline, Talesnick said: "We just have to take it a day at a time. Anything that could be said might be taken as pessimism or threat. We don't want to give any impression that such things exist." Talesnick had criticized Lynch in October after Lynch made a $3 million offer to buy the brewery, but missed a deadline for earnest money. Evansville Brewing promptly filed for bankruptcy, leaving Lynch to vie with other bidders in bankruptcy court. That soured the relationship between Lynch and brewery President Stephen W. Cook, as well as with Talesnick. But Lynch made a point Tuesday of lauding Cook for his "cooperation in this transition phase. I thank him for his support." Historically, bidders who have failed to complete a court-approved bankruptcy purchase have sometimes lost their earnest money, or have been sued for damages, or have come back to court to renegotiate terms. "But I want to be clear that we feel it's going to go forward," Talesnick said of the purchase. "We feel we're going to save the whole deal. The ultimate goal for everyone is to preserve the brewery and provide the jobs and enterprise for Evansville, as well as some return for the stockholders." EXCALIBUR FINANCIAL: Sublessor Stuck with Rental Payment -------------------------------------------------------- PMT Services, Inc. objects to Excalibur Finacial Services, L.P.'s motion for an order extending the time within which the debtor must assume or reject unexpired leases of non- residential property. Excalibur subleases from PMT certain non-residential property located at 215 Centerview Drive, Suite 300, Brentwood, Tennessee. The term of the sublease extends to December 31, 2000. The monthly rental obligation is currently $25,776.48, and adjusts up each year. PMT has rental obligations to the underlying Landlord of $24,056, which sum also adjusts up each year. Excalibur is currently in default under the sublease. According to PMT, the extension sought by the debtor would force PMT alone to bear the risk that rent will not be paid under the sublease so that Excalibur can continue to preserve an asset which may not even be part of the debtor's estate. In fact, PMT argues that regardless how the adversary action with Credit Suisse First Boston Mortgage LLC is determined, there is substantial risk that debtor will continue to default on its obligations to PMT. PMT also argues that Excalibur does not need more time to consider whether to assume or reject this last remaining sublease - PMT states that it has already decided to reject it, since the debtor is not using additional space that it was required to sublease. FARM FRESH: Financial Status & 20 Largest Creditors --------------------------------------------------- FF Holdings Corporation, together with its wholly-owned Farm Fresh, Inc., subsidiary filed chapter 11 petitions on January 7, 1997, in Delaware. The chapter 11 cases are being jointly administered under Bankruptcy Case No. 98-37. District Court Judge Joseph Farnan will preside over Farm Fresh's chapter 11 proceedings. FF Holdings Corp., on a consolidated basis with its subsidiaries,as of December 28, 1996, reports total assets of $200,789,300 and total liabilities of $431,441,000, with $63,049,000 of that debt being secured. On a deconsolidated basis, Farm Fresh, Inc., reports, as of December 28, 1996, total assets of $199,000,000 and total liabilities of $342,836,000, of which $63,010,000 is secured. FF Holdings Corporation provides the Court with the following list of its 20 largest unsecured creditors (excluding any insider or undersecured claims): Creditor Claim -------- ----- Fleet Trust Bank $99,218,500 (14.25% Senior Notes) Farm Fresh, Inc., provides the Court with the following list of its 20 largest unsecured creditors (excluding any insider or undersecured claims): Creditor Claim -------- ----- First Trust Bank $165,000,000 (12.25% Senior Notes) First Trust Bank 36,000,000 (12.25% Series A Senior Notes) Crestar Bank 7,203,000 (7.5% Conv. Subord. Notes) Richfood, Inc. 5,513,676 Pepsi-Cola Company 945,589 Amerisource Corp. 694,191 Mid-Atlantic Coca-Cola Co. 492,307 Crestar Bank 319,551 Frito Lay, Inc. 247,645 Kotarides Deli 231,457 Flowers Baking Company 196,157 Nabisco Brands, Inc. 178,692 Aramark - Washington 170,864 Kotarides Private Label 151,765 JWL Produce, Inc. 143,391 Nabisco 138,522 Edy's Grand Ice Cream 138,329 Crestar Bank 101,074 Tony's Pizza Service 99,081 United States Postal Service 95,048 FARM FRESH: Debtors' Professionals Named ---------------------------------------- To prosecute their chapter 11 cases before the Delaware Bankruptcy Court, Farm Fresh Holdings Corporation and Farm Fresh, Inc., have retained the New York law firm of DECHERT, PRICE & RHODES as lead bankruptcy counsel and the law firm of KLEHR, HARRISON, et al., as local counsel. DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION serves as the Debtors' financial advisor. The Debtors have arranged for a DIP Financing Facility led by FLEET CAPITAL CORPORATION. GAYLORD: Requests Extension to Assume or Reject Leases ------------------------------------------------------ Gaylord Companies, Inc. et al., debtors, are seeking an Order extending the time to assume or reject 13 unexpired leases covering retail space in Ohio, Kentucky, and Indiana until March 13, 1998. The debtors claim that the leases are a primary asset of their respective bankruptcy estates and the decision to assume or reject the leases is central toward their reorganization. The debtors need additional time to analyze and gauge the performance of their stores and determine the number and location of stores which will maximize profits. GUY F. ATKINSON: Hearing on Cash Collateral and DIP --------------------------------------------------- A hearing will be held on January 23, 1998 at which time the debtors, Guy F. Atkinson Company of California, Guy F. Atkinson Company, and Guy F. Atkinson Holdings, Ltd. will seek authority of the court to continue to use collateral and cash collateral and to continue to borrow under DIP financing agreements as provided in the supplement to the motions for authority to use collateral and cash collateral. The debtors request that the court extend until April 30, 1998 the debtors' authority to use collateral and cash collateral and to provide adequate protection to the the Banks, the Bonding companies, and Yale University on substantially the terms described in the proposed order authorizing use of the cash collateral. The debtors also request authority to enter into and perform the DIP Credit Agreement between debtors and the Bonding companies, as amended. The balance outstanding on the Bonding Company loans as of December 23, 1997 was approximately $48.7 million. As of the same date, the debtors held approximately $6.2 million in cash in the Bonding Companies' disbursement accout. The Banks' collateral and cash collateral far exceeds the Banks' $55 million debt. (By over $30 million) HARRAH'S JAZZ: Jan. 16 - Last Date to Accept or Reject Plan ----------------------------------------------------------- The U.S. Bankruptcy Court for the Eastern District of Louisiana entered an order approving the adequacy of the debtors' fifth amended disclosure statement. January 16, 1998 is fixed as the last date for filing written acceptances or rejections of the plan. The hearing on confirmation of the plan shall commence on January 21, 1998. HOMEPLACE STORES: Financial Status & 20 Largest Creditors --------------------------------------------------------- As previously reported HomePlace Stores, Inc., filed for chapter 11 protection in Delaware on January 5, 1998. HomePlace Stores of Two, Inc., HomePlace Management, Inc., and HomePlace Holdings, Inc., filed simultaneous separate petitions. Homeplace Holdings is principally owned by Robert Hurwitz and James A. Monro, Jr. Holdings, in turn, owns the other three HomePlace Debtors. The Clerk has assigned case numbers 98-8 and 98-10 through 98-12 to the Debtors' chapter 11 proceedings, which will be jointly administered under Case No. 98-8. On a consolidated basis, the HomePlace Entities report total assets of $314,308,000 and total liabilities of $307,214,000, with $138,854,000 of that debt being secured. The HomePlace Debtors provide the Court with the following list of their 20 largest unsecured creditors (excluding any insider or undesecured claims): Creditor Claim -------- ----- Stern Advertising $7,471,000 Calphalon Corporation 3,772,900 Spectrum (Div. ABC Industries) 2,829,300 Braun, Inc. 2,206,200 Salton/Maxim Housewares, Inc. 2,091,300 Fieldcrest Cannon 2,028,700 Hardline Services Co. 1,793,300 Burnes of Boston (Newell Cos.) 1,784,000 Colonial Candle 1,724,600 Professional Business Systems 1,625,200 Kitchenaid, Inc. 1,616,500 Lifetime/Hoan Corporation 1,341,700 Creative Bath Products, Inc. 1,312,800 J.C. Moag Corporation 1,277,700 National Paper and Packaging Co. 1,230,700 Krups North America, Inc. 1,151,100 Carlton Cards 1,143,700 J.A. Henckels 1,142,100 Winsome Trading Co. 1,124,200 Michael Alen Designs 1,044,000 HOMEPLACE STORES: Debtors' Professionals Named ---------------------------------------------- To prosecute their chapter 11 cases before the Delaware Bankruptcy Court, HomePlace Stores, Inc., and its debtor affiliates have retained the New York law firm of KIRKLAND & ELLIS as lead bankruptcy counsel, the law firm of YOUNG, CONAWAY, STARGATT & TAYLOR, LLP, as local counsel and the law firm of KAHN, KLEINMAN, YANOWITZ & ARNSON CO., L.P.A., as special counsel. HomePlace has retained PRICE WATERHOUSE, LLP, as its accountants and PETER J. SOLOMON COMPANY LIMITED as its financial advisor. LOUISE'S TRATTORIA: Order Approving Sale of Assets -------------------------------------------------- A valuation trial and auction sale was held on December 11, 1997. The debtor has submitted an order for signature by the court representing the determinations at the sale. In order to bid at the auction sale, bidders were required to submit a deposit of $500,000. Three different bidders submitted the required $500,000 deposit. LT Acquisition Corp. was deemed by the court to be the winning bidder with a purchase price of $7 million based upon its bid consisting of cash and the Senior Note and Junior Note as valued by the court. LT must increase the bid to $1 million. After a demonstration of adequate assurance of future performance LT must deliver an additional $6 million. LT has four options, in combinations of notes and cash to deliver the additional $6 million. In addition, as part of the closing of its purchase of the assets, LT shall assume all of the debtor's postpetition trade payables. LT must assume certain of debtor's real property and personal property leases, executory contracts and the debt to General Electric Capital in the sum of over $400,000. MIDCOM COMMUNICATIONS: Foothill Capital Responds ------------------------------------------------ Foothill Capital Corporation responded to the objection of the Unsecured Creditors' Committee of Midcom Communications Inc., to the postpetition financing arrangement. After admonishing the Committee of Unsecured Creditors for branding Foothill Capital Corporations as an "overreaching" and "arm twisting" lender "conjuring up visions of a Shylock or loan shark," Foothill states that concessions will not be made with respect to interest rates and other charges for borrowed funds or a separate "carve out" for the Committees' expenses. Foothill states that the rollover issue is "the tempest in the teapot." Foothill states that these cases were intended from the outset to be liquidating Chapter 11 cases. Substantially all of the assets of Midcom are to sold in early 1998. Foothill states that it would have to be paid the proceeds of sale because there is not other property that could serve as adequate protection replacement liens permitting Midcom to use Foothill's share of the proceeds. Foothill says that the fact that the payment to Foothill may include both prepetition and postpetition debt is, in the context of a liquidating Chapter 11 case, a distinction with out a difference. Foothill states that the sale of Midcom's assets for $97 million will more than cover its proposed $24 million claim, although it is amenable to continued time for the Committee to object to the postpetition financing. OLYMPIA & YORK: Noteholders Committee Announces Agreements ---------------------------------------------------------- The Ad Hoc Committee of the Olympia & York Maiden Lane Noteholders (the "Committee") announced today the following: 1. Settlement with The Home Insurance Company. On December 11, 1997, Marine Midland Bank, as Indenture Trustee (the "Indenture Trustee") for the holders of the 10-3/8% Secured Notes Due 1995 of Olympia & York Maiden Lane Finance Corp. (the "Issuer"), notified the Noteholders that the Indenture Trustee anticipated that final documents evidencing the settlement among The Home Insurance Company ("Home") and its affiliate, Risk Enterprise Management Ltd. ("REM"), Mitchell E. Rudin, as Receiver of Olympia & York Maiden Lane Company, LLC (the "Receiver"), and the Indenture Trustee, would be executed by year-end. We are pleased to announce that the Settlement Agreement and related documents were executed as of December 22, 1997. The Commissioner of Insurance of the State of New Hampshire issued an order approving of the execution, delivery and performance by Home of the Settlement Agreement. Closing of the settlement is subject to certain conditions. The basic terms of the settlement with Home are summarized below: -- Home agreed to the immediate release to the Indenture Trustee, for the benefit of the Noteholders, of $10.7 million in funds held by Mr. Albert Sontag, a temporary receiver appointed by the Hon. Justice Norman Ryp of the New York State Supreme Court. The release of the funds to the Indenture Trustee, which took place in August, shortly after the execution of the original Term Sheet, is irrevocable and is not conditioned on the closing of the settlement. -- Home paid $49,850,000 to Stroock & Stroock & Lavan LLP, counsel to the Committee and special counsel to the Indenture Trustee, to be held in escrow until the closing of the Settlement, at which point the funds will be released to the Indenture Trustee, for the benefit of the Noteholders. -- Home and the Indenture Trustee agreed to the terms of a new lease, pursuant to which Home will pay current rent for less space at a reduced rate. Specifically, under the new lease, Home will occupy approximately 272,000 square feet through December 31, 1997; 195,000 square feet from January 1, 1998 through June 30, 1999; and 147,000 square feet from July 1, 1999 through December 31, 2000. Home will pay rent at the rate of $27.00 per square foot (including electricity charges) through June 30, 1999; $28.00 per square foot (including electricity) from July 1, 1999 through December 31, 1999; and $29.00 per square foot (including electricity) from January 1, 2000 to December 3l, 2000. The term of the lease ends on December 3l, 2000. -- The settlement preserves the right of the Indenture Trustee to pursue the action (the "Fraudulent Conveyance Action") commenced by it against Zurich Insurance Company ("Zurich"), Home, and certain Zurich affiliates. -- Home has assigned to the Indenture Trustee, for the benefit of the Noteholders, all sublet income received by it for the period June 1, 1997 through December 31, 2000. 2. Anticipated Bankruptcy Filings by Olympia & York Entities. As reported by the Indenture Trustee on December 11, 1997, both the Indenture Trustee and members of the Committee met with officers of World Financial Properties ("World"), the ultimate corporate parent of Olympia & York Maiden Lane Company, LLC, the owner of 59 Maiden Lane, and Olympia & York Maiden Lane Finance Corp. (together, the "O&Y Entities"), the issuer of the Notes. After discussions, World agreed to cause the O&Y Entities to file Chapter 11 petitions for a facilitation fee of $650,000 (plus legal fees in an amount still being negotiated). In order to assure World that the Home Settlement and the proposed action to be taken with respect to the 59 Maiden Lane premises are supported by the Noteholders, the Indenture Trustee, together with the Committee, have scheduled an informal meeting of all Noteholders to be held at 10:00 a.m. on January 7, 1998, at the offices of the Indenture Trustee's counsel, Kelley Drye & Warren LLP, 101 Park Avenue, 29th Floor, Cook Conference Room, in New York City. Additionally, the Indenture Trustee and the Committee have preliminarily determined to file a "prepackaged bankruptcy plan," i.e., to prepare and negotiate the terms of the plan of reorganization (the "Plan") and accompanying disclosure statement and to solicit the votes of all creditors of the O&Y Entities, prior to the filing by the O&Y Entities of the bankruptcy petitions. It is expected that the Plan will provide, among other things, for the following: i. Approval of the terms of the Home settlement by the Noteholders and the Bankruptcy Court. ii. Transfer of 59 Maiden Lane to a newly-formed corporation ("Newco"), the shares of which will be owned by the Noteholders. iii. Distribution to the Noteholders, in exchange for their Notes, of (a) cash in an amount to be decided, but in an expected amount of $60,000,000, in the aggregate, (b) shares of stock in Newco and (c) interests in a liquidation trust formed to continue the prosecution of the Fraudulent Conveyance Action. 3. Status of Fraudulent Conveyance Action. As noted above, the Indenture Trustee has commenced the Fraudulent Conveyance Action against Zurich, Home, REM and certain Zurich affiliates in the Supreme Court of the State of New York. In response to the Complaint filed by the Indenture Trustee, each of the defendants filed motions to dismiss the Complaint. In an Opinion and Order entered on December 12, 1997, the Hon. Justice Beatrice Shainswit denied the motions of Zurich and the other defendants, except for the motion of REM to dismiss the fifth cause of action, which was granted. It is expected that the discovery process will begin shortly. As noted above, it is anticipated that a liquidation trust will be formed pursuant to the Plan which will continue to prosecute the Fraudulent Conveyance Action against Zurich and the other defendants. 4. Arbitration with The Federal Reserve Bank. The second largest tenant at 59 Maiden Lane is the Federal Reserve Bank. The lease with the Federal Reserve provides that the amount of rent payable thereunder will be adjusted by the landlord and tenant for the last five years of the lease, beginning January 1, 1998. In the event that the landlord and tenant are not able to agree on new rent terms, the lease requires that the issue be decided through binding arbitration. The landlord, currently Mr. Mitchell Rudin, court-appointed receiver for 59 Maiden Lane, and the Federal Reserve Bank were not able to agree on new rent terms and have submitted the dispute to the American Arbitration Association. A decision is expected in March 1998. 5. Cash Collateral. The Trustee held approximately $21.6 million as of December 31, 1997 (which includes the $10.7 million received from Mr. Sontag described above). That amount fluctuates regularly as additional rental income is received and operating expenses are paid. In addition, Stroock & Stroock & Lavan LLP, the escrow agent, held approximately $56.5 million as of December 31, 1997. That figure includes the $49,850,000 payment described above, monthly rental income from Home and its subleases and accrual of earnings on the escrowed funds. It is anticipated that a large percentage of the funds, approximately $60 million, will be distributed under the Plan, as described above. Additional funds will be held in reserve accounts to operate and maintain the building and to pay for fees and expenses related to the bankruptcy filing, the Fraudulent Conveyance Action and related matters. PARAGON TRADE: Announces Chapter 11 Filing ------------------------------------------ Paragon Trade Brands, Inc. (NYSE: PTB), today announced that it has filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code. The petition was filed with the federal court in the Northern District of Georgia. The goal of the Chapter 11 petition is to enable the Company to conduct its business in the ordinary course and propose a plan of reorganization to restructure its financial obligations. The filing will also enable Paragon to pursue an appeal of a recent adverse judgment in a patent infringement lawsuit with The Procter & Gamble Company (P&G) as well as an antitrust counterclaim which was previously dismissed by the Court. At the time the judgment was rendered, Paragon also announced that it had previously entered into an agreement with P&G which is designed to ensure that this patent dispute will not inhibit Paragon's ability to provide its customers a continuous supply of products for six months while pursuing the appeal. In late December, Paragon announced that the federal district court in Delaware had rendered an unfavorable judgment against the Company in its lawsuit with P&G regarding whether either company had infringed a valid patent of the other. The judgment entitled P&G to damages based on sales of Paragon diapers containing an "inner leg gather" feature. While a final number has not been entered by the Court, Paragon has estimated the liability to be approximately $160 million to $200 million. At the time the decision was rendered, Paragon announced its intent to appeal this decision as well as the dismissal of its antitrust counterclaim against P&G. "The decision to file under Chapter 11 was a difficult and painful one," stated Bobby Abraham, Chief Executive Officer of Paragon. "After attempts to engage in discussions to resolve the patent issues with P&G proved fruitless, it became apparent that it was necessary to file in order to allow for an orderly appeal of the Court's recent decision, to enable us to restructure our financial obligations, including the judgment, and to continue to meet our obligations to our customers. We continue to believe that the patents asserted by P&G are invalid and not infringed by our products. Paragon Trade Brands is the leading manufacturer of store brand infant disposable diapers in the United States and Canada. Paragon has also established international joint ventures in Mexico, Argentina and Brazil for the sale of infant disposable diapers and other absorbent personal care products. PARAGON TRADE: Proctor & Gamble Surprised at Filing --------------------------------------------------- Proctor & Gamble (P & G) said it was very surprised by Paragon's decision to file Chapter 11 bankruptcy. P&G had agreed to Paragon's request to meet today and attempt to work out payment of a recently awarded patent infringement judgment. Paragon canceled the meeting late Tuesday night. P&G has repeatedly offered to license Paragon to practice the patents which the courts recently upheld. These same patents have been respected and licensed by other competitors. The opportunity to license was first offered Paragon in March, 1992, and that offer was still on the table as part of our anticipated payment settlement discussions. After trying to get Paragon to respect its diaper barrier leg-cuff patents out of court, P&G finally took legal action in January, 1994. Importantly, following the filing of the lawsuit and again before the final judgment was handed down, P&G once more offered to settle this matter out of court. The Delaware federal court ultimately upheld the validity of these patents and awarded P&G past damages. P&G is absolutely convinced that the court's patent infringement decision will be upheld on appeal. SA TELECOMMUNICATIONS: Committee Taps Cornwell Consulting --------------------------------------------------------- The Official Committee of Unsecured Creditors filed an application to approve retention of Cornwell Consulting services, Inc. as financial and telecommunications consultants to the Official Committee of Unsecured Creditors. The Committee states that the retention of a firm such as Cornwell is essential if the Committee is to receive an independent analysis of the debtors' operations. the hourly rate of Cornwell's personnel ranges from $110 to $250 per hour, and the Committee requests that Cornwell submit monthly invoices not to exceed $20,000 per month. SA TELECOMMUNICATIONS: WorldCom Objects to Stay ----------------------------------------------- WorldCom, Inc. f/k/a LDDS Communications, Inc. and WorldCom Network Services, Inc., f/k/a WilTel, Inc. and the debtors, SA Telecommunications, Inc. et al. were parties to certain executory contracts. The debtors agreed to pay for telecommunications services provided by World Com to the debtors. The debtors' average daily usage of WorldCom's network and services is approximately $25,000 a day. WorldCom sent the debtors a notice of termination in November of 1997. The debtors had previous defaults and adverse changes in their creditworthiness. By the petition date the debtors owed WorldCom more than $3.8 million. In December the court instructed the debtors to wire transfer to WorldCom on a weekly basis, sufficient funds to cover the debtors' anticipated weekly usage of WorldCom's services and the court refused to allow WorldCom to stop servicing the debtors. WorldCom now objects to the debtors' adequate assurance motion as it states that the debtors do not address several issues of payment for the money due prior to the weekly payments, that WorldCom deems necessary. WorldCom also argues that because it is a utility, the automatic stay provisions of the Bankruptcy Code do not prevent WorldCom from terminating the services it provides the debtors. And finally WorldCom states that given the debtors' precarious condition, WorldCom is being forced to involuntarily extend credit to the debtors and subject itself to unreasonable risk of non-payment. WorldCom is seeking a 3 month deposit for usage as adequate assurance or it is asking that the court compel the debtor to reject its agreement with WorldCom. SEARCH FINANCIAL: Restructures Agreement With Lenders ----------------------------------------------------- Search Financial Services Inc. announced that it and its subsidiary, MS Financial, Inc. ("MSF"), have reached agreement in principle with Fleet Bank, N. A., and the other members of the MSF bank group to restructure MSF's loan agreement. Search had guaranteed the loan agreement as part of its acquisition of MSF in July 1997. Under the restructured agreement, the banks would waive the original requirement that the outstanding balance of the $70 million line of credit be reduced to $50 million at December 31, 1997. In exchange for this waiver, Search would agree to move the maturity date of the loan to March 31, 1998 from the original date of July 31, 1998 and the requirement to reduce the outstanding balance of the line prior to maturity would be eliminated. Full implementation of the loan restructuring is subject to various conditions, including approval by each bank's internal credit committee and execution of definitive documentation. Pending such implementation, the banks have extended the date for the required reduction to January 15, 1998. George C. Evans, Chairman and Chief Executive Officer of Search, said, "We are extremely pleased that Fleet and the other banks are willing to work with us to restructure this loan and we will aggressively pursue transactions that will enable us to meet the new March 31 maturity date." Evans noted that prior to reaching this agreement in principle on restructuring the loan, Search was prepared to sell a portion of the bank-pledged receivable portfolio in order to meet the year-end payment requirement. However, the restructured bank arrangement allows Search to retain that revenue producing portion of the portfolio. Search also announced that it is continuing to negotiate with Hall Phoenix/Inwood, Ltd. ("HPIL") to restructure its $5 million subordinated indebtedness to HPIL and resolve the event of default that HPIL has notified Search exists under the terms of the note. HPIL has sent Search notice of acceleration of the note based on an alleged technical, non-monetary default arising from Search's not paying dividends on its preferred stock for the quarter ended September 30, 1997 and has filed suit in state court in Dallas seeking payment of the note and appointment of a receiver for Search. Search believes appointment of a receiver is unwarranted and intends to defend itself vigorously if a mutually satisfactory restructuring of the subordinated debt is not agreed upon. Resolution of this matter with HPIL is also a condition to implementation of the MSF loan restructuring. Search Financial Services Inc. is a specialized financial services company engaged in the purchasing, financing, and servicing of nonprime automobile installment loans originated by franchised and independent automobile dealers. Search also engages in direct lending consumer finance operations through its 21 branch offices in six states and Puerto Rico. Search common shares and its 9%/7% convertible preferred shares are traded on the NASDAQ National Market under the symbols "SFSI" and "SFSIP", respectively. THE WIZ: Order to Show Cause for Stay Bonuses --------------------------------------------- Judge Cornelius Blackshear has entered an order to show cause scheduling a hearing with respect to the motion of the debtors seeking authorization for the debtors to pay stay bonuses to key employees. The hearing will be held on January 15, 1997. --------- 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 1998. All rights reserved. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *