/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/980112.MBX T R O U B L E D C O M P A N Y R E P O R T E R Monday, January 12, 1998, Vol. 2, No. 7 Headlines ADVANCED PROMOTION: Plan of Reorganization Confirmed ANCHOR RESOLUTION: Sonoco Seeks Hearing for Claim BARRY'S JEWELERS: Application to Employ Financial Advisors BARRY'S JEWELERS: Reports December 1997 Sales Results BIG RIVERS: Court Denies $25 Million Claim DOEHLER-JARVIS: Motion of FANUC Robotics ERD WASTE: Requests Bar Date FARM FRESH: Details How it Will Repay Debt FLAGSTAR: New Name Following Emergence from Bankruptcy GAYLORD: Needs to Extend Use of Cash Collateral GREATE BAY: Sands Hotel Has Chance to Restructure L. LURIA: First Amended Disclosure Statement LOTSOFF: Sales Gains of Nearly 30 Percent MONTGOMERY WARD: Interim Credit Card Deal with Monogram MONTGOMERY WARD: Wants to Restructure Workers' Comp Program PARTY WORLD: Hearing Date for Rejection of Contracts PHOENIX INFORMATION: Equity Committee Wants Counsel RDM SPORTS: Sale of Hutch Sports RDM SPORTS: Trademark License Agreement Order SA TELECOMMUNICATIONS: Scheduling Proposed Sale to EqualNet SA TELECOMMUNICATIOMS: Greyrock Replies to Committee --------- ADVANCED PROMOTION: Plan of Reorganization Confirmed ----------------------------------------------------- Advanced Promotion Technologies, Inc. today announced that the U.S. Bankruptcy Court for the Southern District of Florida has confirmed its joint plan of reorganization. As a result, APT will sell its assets to xiNETix Inc., which will continue to operate APT's business. xiNETix, a Delaware corporation formed in 1997, will now provide software and services to supermarkets for in-store promotions, detailed reports, financial services and customer specific marketing using an on-line network linked to the point of-sale. Retailers utilize the information provided by the network to recognize and reward shoppers based upon their marketing goals by delivering real-time benefits to specific shoppers. The system can deliver benefits in the form of credits, printed communication and loyalty points. APT filed for Chapter 11 Reorganization on Aug. 15, 1996 and served its core group of retail clients since that time. xiNETix, the successor to APT, will continue to support APT's clients, improve the product and expand the client base. ANCHOR RESOLUTION: Sonoco Seeks Hearing for Claim ------------------------------------------------- Sonoco Products Company is requesting that it be permitted to present its motion for allowance and payment of an administrative claim against the debtors on April 15, 1998. Sonoco claims that it has a valid administrative claim against the debtors in the sum of $925,838.85. This matter was originally a reclamation claim against the debtors representing goods shipped to the debtor, unpaid for, upon which a demand was made for the reclamation of the goods. The amount of the claim is presently being disputed by the debtors and is the subject of a contested matter. BARRY'S JEWELERS: Application to Employ Financial Advisors ---------------------------------------------------------- Barry's Jewelers, Inc., a California corporation ahs submitted to the Office of the United States Trustee its application to employ SBC Warburg Dillon Read Inc. as financial advisors. BARRY'S JEWELERS: Reports December 1997 Sales Results ----------------------------------------------------- Barry's Jewelers Inc., one of the nation's largest independent retailers of fine jewelry, last Thursday reported a strong 15.5 percent increase in same store sales for the month of December 1997 from last year. December sales results were 6.4 percent greater than projections filed in July of last year. Barry's reported total net sales for the month of December 1997 of $27,991,000 generated by its 128 stores, compared with $30,538,000 last year produced by its 174 stores then in operation. Sales for the 128 stores open in both December 1997 and 1996 were $27,991,000 and $24,240,000, respectively. This reflects a total net sales decrease of 8.3 percent with a same store sales increase of 15.5 percent. For the seven-month period ended December 1997, total net sales decreased by 14.1 percent to $73,864,000 from $85,987,000 last year. Same store sales for this period rose from $67,304,000 to $62,873,000, a 7 percent increase. In July 1997, the company filed projections with the United States Bankruptcy Court. These filings projected sales of $26,302,000 for the month of December 1997 and $71,359,000 for the seven months ended December 1997. The actual results exceeded projected results by $1,689,000 or 6.4 percent for the month and $2,505,000 or 3.5 percent for the seven months ended December 1997. Samuel J. Merksamer, president and chief executive officer said, "These results confirm the successful repositioning of the company as a mainstream retail jewelry chain and validate our decision to shift the merchandising strategy toward higher quality products and to target a middle income, fashion and gift conscious customer. The December sales results are especially encouraging as they represent the first month in which we have fully re-merchandised the stores." Barry's Jewelers filed a petition for chapter 11 protection in Los Angeles on May 11, 1997. The case was assigned to the Honorable Vincent Zurzolo of the Central District of Los Angeles. The current management team, led by Merksamer, has been in place since February 1997. Since then management has, as a part of its turnaround strategy, closed 41 underperforming stores, reduced corporate overhead, increased the provision for doubtful accounts by $7 million (at fiscal year ended May 31, 1997), implemented an integrated targeted marketing program and is currently in the process of re- negotiating store leases and working to modernize its management information systems, including a new point-of- sale system and a new merchandise planning system. Barry's Jewelers operates 128 retail jewelry stores in 18 states throughout the country including Hatfield Jewelers, Schubach Jewelers, Samuels Jewelers, A. Hirsh & Son and Mission Jewelers. BIG RIVERS: Court Denies $25 Million Claim ------------------------------------------ On January 2, 1998, Judge J. Wendell Roberts entered an order sustaining the objection to claim #135 filed by PacifiCorp Kentucy Energy Company in the sum of $25 million. The Court stated that PacifiCorp and its entities have throughout this case viewed the Big Rivers Chapter 11 proceeding as a vehicle under which they could acquire the Big Rivers assets free of the claims of any creditors without having to expose their deal to the offers of competing buyers. If this had been a pre-packaged bankruptcy and acceptable to all creditors, the court states that this MIGHT have been acceptable. However, the court found that PacifiCorp's no shop clause is nothing more than an illegal attempt to control Big Rivers for the sole benefit of PacifiCorp. The court states that it did not approve of these tactics and ordered the bidding process to ensure that Big Rivers maximized the value of the estate. The Court stated that it will not now reward PacifiCorp by approving these claims. The Court states that LG&E Energy Corp. submitted a proposal to Big Rivers that would pay Big Rivers between $37 million and $57 million more than PacifiCorp would pay under the agreement. During the bidding process, the LG&E bid offered $50 million more in value to creditors than did the PacifiCorp plan. The Court found that the agreement with PacifiCorp was not an executory contract, that Big Rivers had no obligation under the agreement until it was approved by the court, that it was a void and unenforceable agreement due to the no-shop clause and that Big Rivers had a duty to maximize the bankruptcy estate's value. In addition, an administrative priority claim by PacifiCorp for making a "substantial contribution" to Big Rivers for almost $700,000, was denied and an unopposed claim for $423,948.95 was approved. DOEHLER-JARVIS: Motion of FANUC Robotics ---------------------------------------- FANUC Robotics North America, Inc. and Doehler-Jarvis Toledo, Inc. are parties to an agreement whereby the debtor was to purchase robotics equipment for installation in debtor's Toledo, Ohio facility. FANUC has nearly completed production of the robotics for General Motors engine blocks. The debtor, however, failed to make post-petition milestone payments under the agreement and also informed FANUC that it does not intend to fulfill its obligations under the agreement. FANUC has the opportunity to sell the robotics to a third party, and to mitigate its damages, but it needs expedited treatment of these motions. FANUC can not sell its Remaining Cells to Ryobi, the proposed purchaser, until the agreement is terminated with the debtor. A hearing on the motion will be held on February 5, 1998. ERD WASTE: Requests Bar Date ---------------------------- The debtors, ERD Waste Corp., et al. are seeking a Bar Date of March 12, 1998 for filing of claims as well as forms of proofs of claim. FARM FRESH: Details How it Will Repay Debt ------------------------------------------ The Richmond Times-Dispatch reported on January 8, 1998 that it finally happened, supermarket chain Farm Fresh Inc. filed a prepackaged Chapter 11 bankruptcy petition that spells out how it will repay its debt. Yesterday's bankruptcy filing, which was expected, was necessary for grocery wholesale distributor Richfood Holdings Inc. to buy the Norfolk-based chain. The petition was filed in U.S. Bankruptcy Court in Delaware. "It is one more hurdle we've cleared in selling the company," said Richard D. Coleman, Farm Fresh's chief financial officer. Farm Fresh stores, including the three in the Richmond area that operate under the Rack & Sack banner, will operate normally while the chain is under the court's protection. Farm Fresh was able to submit a plan of reorganization to the court because it won the support of a majority of Farm Fresh's senior debt note holders. The company believes the senior note holders' vote is sufficient to enable Farm Fresh to receive court approval for its plan. If all goes according to plan, the bankruptcy court will approve Farm Fresh's plan by mid-February and the deal with Richfood will be completed by the end of February, Coleman said. Under the deal, Richfood will pay $220 million in cash and assume $30 million in leases. The company also will issue warrants to Farm Fresh's senior debt holders to purchase 1.5 million shares of Richfood stock at $25 a share in five years. The Virginian Pilot Ledger Star quoted retail analyst Kenneth M. Gassman Jr. with Davenport & Co. in Richmond who said that the filing is good news for Farm Fresh and its customers. "I don't think there are any surprises in there," he said. "We'd been expecting them to do this months ago. It should be routine and settled soon." Gassman said Farm Fresh's future is now on much more stable ground, and customers should expect to see changes soon. "This should improve vendor confidence in the company," Gassman said. "Customers service should improve because employees won't be worried about their jobs. There will be a lot of benefits, and we shouldn't have to wait long for them." Once the deal is final, Richmond-based Richfood intends to continue operating 44 of Farm Fresh's 47 stores under the Farm Fresh, Rack & Sack and 3 Stores, 1 Roof names and retain nearly all of their 5,200 employees. Richfood already has hired a president, Ronald E. Dennis, to run the chain once the sale is complete. Under the reorganization plan, Farm Fresh's secured creditors are expected to be fully repaid. Unsecured creditors are to receive an estimated 90 cents on the dollar; however, suppliers and trade creditors, which are also unsecured, would be repaid in full. Creditors and owners of FF Holdings would get nothing. Farm Fresh and FF Holdings listed $200 million in assets and $431 million in liabilities. A press release from the company reported that its senior noteholders had voted to accept the proposal by mail-in ballots that were due Dec. 30. Richard Coleman, Farm Fresh's chief financial officer, said the court accepted the company's motions to continue operating the business as usual and pay its vendors. Also, the company's existing bank group led by Fleet Capital Corp. has agreed to provide Farm Fresh with up to $40 million in debtor-in-possession financing. Richfood agreed to buy most of Farm Fresh's assets for about $220 million in cash, $30 million in assumed leases and 1.5 million warrants, or rights, to buy a share of Richfood stock for $25 after five years. FLAGSTAR: New Name Following Emergence from Bankruptcy ------------------------------------------------------ Flagstar Cos. said Wednesday it emerged from Chapter 11 bankruptcy protection and began operations as Advantica Restaurant Group Inc. The restaurant company said, following its restructuring, it has $1 billion less in debt, a new financial structure and board, and newly issued common shares that will trade under the symbol DINE on the Nasdaq National Market. James Adamson will continue as chief executive and chairman. The company also said it entered into a five-year, $200 million line of credit with a syndicate led by Chase Manhattan Bank. Flagstar said it will use the new credit for working capital and general purposes. The reorganization plan includes 40 million shares of new common stock, to be traded on the Nasdaq exchange. About three-fourths of the stock is owned by four of the former Flagstar's senior creditors: Loomis Sayles & Co. Inc., Magten Asset Management Corp., Moore Capital Management Inc., and Morgan Stanley & Co. Those four have agreed to give James Adamson, Advantica's chairman and chief executive, five years to put the company in sound financial shape. The reorganization was designed to cut in half Flagstar's $2.2 billion debt, left from a 1989 leveraged buyout. "We could have continued to survive through the year 2000, but we weren't investing in the business, in people," Adamson said. The company could not have survived repaying bonds totaling $270 million in 2001, $280 million in 2002, $125 million in 2003 and $722 million in 2004, he said. GAYLORD: Needs to Extend Use of Cash Collateral ----------------------------------------------- Gaylord companies, Inc. is requesting authority to continue use of cash collateral of its secured lender, Greenfield Commercial Credit., LLC. pursuant to the terms of an order authorizing use of cash collateral. The debtors are unable to obtain sufficient credit on either an unsecured or a secured basis from an alternative lender to Greenfield. The debtors currently owe Greenfield approximately $1.275 million in pre-petition indebtedness. Prior to the commencement of these cases, Greenfield financed the operation of the debtors providing a $1 million revolving credit facility and a $350,000 term note. Without the use of the cash collateral the debtors will be unable to pay employees or buy inventory and meet their current obligations. GREATE BAY: Sands Hotel Has Chance to Restructure ------------------------------------------------- Greate Bay Casino Corp.'s main subsidiary filed for Chapter 11 bankruptcy protection, giving the owner of the Sands Hotel & Casino in Atlantic City, N.J., a chance to restructure its long- term debt, the company said. The subsidiary that filed for Chapter 11, Great Bay Hotel & Casino Inc., said it will keep the Sands open during the proceedings. While Greate Bay Hotel & Casino has been able to generate enough cash to cover day-to-day operating costs, it hasn't been able to generate sufficient cash to meet interest requirements on its long- term debt, the company said. Greate Bay Casino Corp., which isn't part of the bankruptcy, said it now doesn't meet the American Stock Exchange's financial guidelines for a listing on the exchange. The company said no assurance can be given that the listings of its stock, 10.875 percent first mortgage notes and 11.625 percent senior notes will be continued. In the third quarter, Greate Bay Casino had a loss of $2.3 million, or 43 cents a share, on revenue of $69.7 million. The Dallas-based company has reported losses in each of the past eight quarters. Greate Bay Hotel & Casino said it hired Ladenburg Thalmann & Co. as financial advisers for the reorganization. L. LURIA: First Amended Disclosure Statement -------------------------------------------- A disclosure statement was submitted by the debtor, L.Luria & Son, Inc. in connection with the solicitation of acceptances or rejections of the plan. The purpose of the disclosure statement, is to provide adequate information to enable creditors to make an informed judgment as to whether to vote for the Plan. The summary of the plan provides the following treatments for classes of claimants: Class 1. Secured Tax Claims. To the extent that such claims exist, they will be paid in full on the Distribution Date of the plan. Class 2. Foothill Capital Corporation Secured Claim. Unimpaired. To the extent that a claimant lawfully draws down on a letter of credit issued by Foothill capital Corporation for the benefit of various of the debtor's creditors, such claim shall be paid directly from the cash collateral being maintained by Foothill Capital Corporation. Class 3. Allowed Secured Claims. Unimpaired. To the extent that a secured claim becomes an ultimately allowed secured claim, it will paid in full without interest. The debtor is not aware of any Class 3 claims. Class 4. Priority Claims. (Employee Claims) Unimpaired. To the extent of available funds and not to exceed $4000. these claims will be paid. Class 5. Priority Claims (Returns and Layaway Claims). Unimpaired. to the extent funds are available and not to exceed $1800. Class 6. Convenience Claims. Claims of $1500 or less. Impaired. Holders will be paid a cash dividend of 20% in cash, without interest. Class 7. General Unsecured Claims. Impaired. To the extent that these claims can not be paid in full, they will be paid on a pro rata basis. Class 8. Equity Interests. The debtor does not expect that there will be funds or property available for distribution to holders of equity interests under the plan. As of December 11, 1997 the cash balance on hand in the estate was approximately $2,496,878. The Disclosure Hearing is set for February 3, 1998. The deadline for objections to the disclosure statement is January 27, 1998. LOTSOFF: Sales Gains of Nearly 30 Percent ----------------------------------------- San Antonio-based LotsOff Corp., a retailer that sells goods at close-out prices, said Wednesday that its same- store sales rose almost 30 percent, to $9.4 million from $7.2 million, for the month long period that ended Jan. 2. The company's same-store sales for the nine-week period ending Jan. 2 rose 34 percent, to $13.6 million from $10.1 million, the company said. Same-store sales, regarded as a key measure in the retail industry, are a comparison of sales at stores open at least a year. Chief Executive Officer Charles Fuhrmann said the comparison was made easier because last year's sales were achieved at a time of low store inventories and when there were few resources to boost customer traffic. LotsOff operates 44 stores in Texas and four other states. MONTGOMERY WARD: Interim Credit Card Deal with Monogram ------------------------------------------------------- Bankruptcy Creditors' Service reported in Issue Number 19 of the Montgomery Ward Bankruptcy News, that under seal, Monogram and GE Capital filed a Motion with the Court to compel the Debtors' assumption or rejection of the Private Label Credit Card Agreement. At the parties' behest, Judge Walsh has held in-chambers conferences and has permitted the filing of responses and objections to Monogram's Motion to be filed under seal. In connection with the filing of a Response by the Debtors, the Debtor disclosed publicly that they have reached an Interim Agreement with Monogram Credit Card Bank of Georgia and Montgomery Ward Credit Corporation with respect to the continued performance of the PLCC contracts, the salient terms of which are: (1) Effectiveness of Credit Card Agreements. Except as modified by the Interim Agreement, the Credit Card Agreements shall remain in effect during the Interim Period. (2) Term of Interim Agreement. The Interim Agreement shall remain in full force and effect until consummation of a plan of reorganization unless: (a) the Debtors discontinue all or substantially all of their ongoing retail business operations; or (b) Monogram Credit Card Bank together with Montgomery Ward Credit Corporation consummates a "Portfolio Sale": (i) At any time, upon the Debtors' request, Monogram/MWCC shall sell the entire Private Label Card portfolio to a third party at a price acceptable to Monogram/MWCC in its sole discretion. (ii) In connection with a Portfolio Sale, the Debtors may reject the Credit Card Agreements, and Monogram/MWCC shall not have any claim against the Debtors arising out of such sale transaction and rejection; provided, however, that Monogram/MWCC may assert a claim for any amount owed to it prior to the effective date of such sale transaction and court-approved rejection, but excluding Rejection Damages; and Monogram/MWCC may assert a claim for any amount owed in respect of contractual claims (excluding claims arising out of a Portfolio Sale and related rejection of the Credit Card Agreements) that Monogram/MWCC may have based on rights that survive termination of the Credit Card Agreements; or. (c) the Bankruptcy Court enters an order approving assumption of the Credit Card Agreements after December 31, 1998, provided, however that Monogram/MWCC reserves the right to withdraw its consent to assumption of the Credit Card Agreements. (3) Ongoing Loss Sharing. Montgomery Ward shall pay its estimated ongoing net loss sharing obligations to Monogram/MWCC (other than amounts relating to Prepetition Loss-Sharing Debt) monthly, in cash, in an amount adjusted quarterly pursuant to the Credit Card Agreements and settled annually. With respect to accounts written off between July 7, 1997 and the date the Bankruptcy Court enters an order approving the Interim Agreement, payment in cash of contractual loss-sharing obligations will be made on February 28, 1998. (4) Arrearages. Monogram/MWCC acknowledges that as of November 20, 1997, there are no net past due postpetition amounts due and owing under the Credit Card Agreements. (5) Interim Payments. Subject to specified limitations, Montgomery Ward shall reimburse Monogram/MWCC, in cash, by interim payments, for actual operating losses incurred by Monogram/MWCC under the Credit Card Agreements. The total estimated amount of these Interim Payments to be paid through December 31, l998, is approximately $60,000,000. The Interim Payments are subject certain terms: (a) If the Interim Agreement continues past November 1, 1998, Monogram/MWCC, by November 20, 1998, and each November 20 thereafter, shall provide Montgomery Ward with the Interim Payment amounts for Monogram/MWCC's following fiscal year based on a budget prepared by Monogram/MWCC in accordance with past practices and the True Up provisions; and Montgomery Ward shall pay such amounts. (b) To the extent that Monogram/MWCC realizes operating profits in any quarter while the Interim Agreement is in effect, such profits shall be credited against the next subsequent Interim Payment. This crediting of profits shall not limit Monogram/MWCC's obligation to reimburse Montgomery Ward for any overpayments based on the True Up. To the extent that the Interim Agreement is terminated, any outstanding Credit Balance Carryforward shall be eliminated without payment. (c) If the amount of the Reconciled Interim Payment for any calendar quarter differs from the amount of the Interim Payment for such quarter, the parties shall pay each other interest on the difference between the Reconciled Interim Payment and the Estimated Interim Payment at the annual three month LIBOR rate plus 200 basis points calculated from the 45th day of the corresponding calendar quarter. (6) Timing of Interim Payments. Montgomery Ward shall make the Interim Payments in equal monthly installments. The amount of each such monthly installment shall be 1/3 of the amount of Monogram/MWCC's projected losses for the fiscal quarter in which such month falls. Upon approval of the Interim Agreement, Montgomery Ward shall make all Interim Payments for the fourth quarter of 1997 that otherwise would have been made had the Agreement been in effect at the beginning of such quarter prior to the date the Bankruptcy Court approves the Interim Agreement. (7) True-Up. To ensure that Monogram/MWCC does not retain Interim Payments exceeding actual operating losses, there shall be a "true-up" not more than 30 days after the end of each quarter to determine the amount of Monogram/MWCC's actual operating losses, the Reconciled Interim Payment. Monogram/MWCC shall be required to reimburse Montgomery Ward in cash for any overpayments, Conversely, if Monogram/MWCC's actual operating losses exceed projected amounts, Montgomery Ward shall be required to pay the difference. (8) Calculation of Actual Operating Losses. These provisions apply to calculation of Monogram/MWCC's actual operating losses: (a) Monogram/MWCC shall calculate actual operating losses in accordance with its historical practices; provided, however, that in the event the Interim Agreement is terminated, such calculation shall include an adjustment as of the end of the calendar month preceding such termination with respect to bad debt reserves, and except that (b) these items shall be excluded from the calculation of actual operating losses: (i) any interest or costs associated with the Prepetition Loss-Sharing Debt; (ii) the "Administrative and Advisory" fee charged by GECC; (iii) any amounts attributable to goodwill amortization; and (iv) gains or losses resulting from Monogram/MWCC's securitization of receivables. (9) Administrative Claims Upon Rejection. If the Debtors reject the Credit Card Agreements, upon such rejection Monogram/MWCC shall have an administrative claim limited to: (a) Montgomery Ward's contractual loss-sharing obligations with respect to accounts written off after the date of such rejection, which, for the first 13 months after July l7, 1997, shall be prorated based on the assumption that the receivables portfolio turns over every 13 months; 1/13 each month for the first 13 months, and thereafter no proration; and (b) amounts due as a result of postpetition returns, chargebacks, similar adjustments and credit promotions. Monogram/MWCC reserves its right to file a general unsecured claim for any amounts due under the Credit Card Agreement as of the date of such rejections that are not afforded administrative expense priority, including any claim for that portion of an account that has been written off and is not treated as an administrative expense claim; provided, however, that in the event of a Portfolio Sale, such general unsecured claim shall not include any claims for damages that may arise in connection with or as a consequence rejection of the Credit Card Agreements, except for claims arising in connection with the Prepetition Loss- Sharing Debt. (10) Technical Modifications to Credit Card Agreements. The parties shall agree to certain technical modifications to the Credit Card Agreements, including changes to credit policies, promotional discounts and certain matters related to closed stores, that will remain in effect during the Interim Period and are intended to have an economically neutral impact upon the Debtors. MONTGOMERY WARD: Wants to Restructure Workers' Comp Program ----------------------------------------------------------- As reported in Issue 19 of the Montgomery Ward Bankruptcy News, the Debtors told the Court that they are requesting authorization to restructure their workers' compensation insurance program from one using a Guaranteed Cost Structure to a program employing a structure similar to the Deductible Structure used in the program maintained with the American International Group, Inc. prior to the Petition Date. Because the Debtors were unable to provide the necessary collateral to secure their reimbursement obligation to AIG under the Deductible Structure, during the negotiations for renewal conducted prepetition, a Guaranteed Cost Structure was agreed upon, whereby the Debtors paid AIG an up-front premium of approximately $10,000,000. The parties, recognizing that the Guaranteed Cost Structure will be more costly to the Debtors than the Deductible Structure, agreed informally that once the Debtors gained sufficient liquidity to provide the necessary collateral, the parties would endeavor to convert the policy (retroactive to June 23, 1997, commencement date of the new Guaranteed Cost Structure policy) to a revised Deductible Structure policy. The Debtors point out that, with their DIP Facility now in place, they have ample credit availability to collateralize fully a conversion of their workers' compensation insurance to a Revised Structure, a structure almost identical to the Deductible Structure in place prepetition. The salient features of the Revised Structure are: 1. The conversion to the Revised Structure policy will be retroactive to June 23, 1997, the date of commencement of the Guaranteed Cost Structure policy. 2. AIG is responsible for all losses up to $2,000,000 per claim, but has a right of reimbursement against the applicable Debtor for the first $500,000 of losses per claim, with the following exception: Because AIG purchased reinsurance for losses per claim exceeding $250,000, AIG will have a right of reimbursement against the applicable Debtor for the first $250,000 of losses per claim for claims arising from June 23, 1997 through and including December 22, 1997. 3. In the event of default, AIG may cancel the Insurance Program without further order of the Court and foreclose on any collateral posted with respect to the Insurance Program, including, without limitation drawing on any letters of credit, all in accordance with the documents governing the Insurance Program. The automatic stay imposed by the Bankruptcy Code is modified to the extent necessary to permit AIG to take these actions. 4. The Insurance Program may not be altered by any plan of reorganization confirmed in these cases and shall survive the confirmation of any such plan; provided, however, that the Insurance Program may be altered or terminated in accordance with the applicable provisions of the documents governing the Insurance Program. 5. Because the Debtors are to meet their obligations under the Insurance Program without further order of the Court, no additional proof of claim or request for payment of administrative expense need be filed in these chapter 11 cases with respect to the Debtors' obligations under the Insurance Program. However, nothing in the order shall be construed to exempt AIG from the requirement to file a proof of claim for payment of administrative expense arising out of any claim other than the Insurance Program. 6. The Debtors' rights with respect to all collateral held by AIG in connection with the Insurance Program shall be governed by the relevant documents entered into by the parties, and the Debtors shall not take any action against AIG in this Court inconsistent with the terms of such documents, including any proceeding to estimate a claim under the Insurance Program. The Debtors inform the Court that this conversion will result in substantial savings. The Debtors estimate that, after accounting for the Debtors' reimbursement of losses under the Deductible Structure, the Debtors would save approximately $1,948,000 by converting the Guaranteed Cost Structure to the Revised Structure, retroactive to June 23, 1997. The above savings estimate may be understated, insofar as such estimate does not take into account the interest savings or earnings attributable to AIG's refund of approximately $6,500,000 of the Guaranteed Cost Premium upon conversion to the Revised Structure. PARTY WORLD: Hearing Date for Rejection of Contracts ---------------------------------------------------- January 15, 1998 has been set as the date for the hearing on the debtors', Party World, Inc., and Party America, Inc., motion for authority to reject executory contracts. PHOENIX INFORMATION: Equity Committee Wants Counsel --------------------------------------------------- The Official Equity Security Holders' Committee is seeking to retain Adelman Lavine Gold and Levin as counsel to give the Committee legal advice with respect to its duties, the operation of the debtor's business, to advise in the formulation of a plan, and to assist the Committee in requesting the appointment of a Trustee or examiner should such action become necessary. RDM SPORTS: Sale of Hutch Sports -------------------------------- RDM Sports Group, Inc., et al., debtors, request court approval of certain bidding procedures for the sale of substantially all of the assets of Hutch Sports USA Inc. A hearing will be held on January 16, 1998. Bids must be in excess of $250,000. The highest and best bid received by January 21, 1998 shall be come a protected bid. The debtors, the Unsecured Creditors' Committee, the Bondholders' Committee and Foothill Capital Corporation will review all timely advance bids and will determine which advance bids qualify as a protected bid on January 22, 1998. RDM SPORTS: Trademark License Agreement Order --------------------------------------------- This matter first came before the court on a motion of the Official Committee of Unsecured Creditors of RDM Sports Group, Inc. and related debtors regarding compliance with a trademark license agreement with Maurice Pincoffs Company, Inc. The debtors sought ratification of the agreement, and the court entered an order based on the facts presented at the ratification hearing. The license agreement provided that the debtor parties, as licensor, gave Pincoffs the exclusive right to use names and trademarks on certain home gym fitness products. The agreement was entered into without court authority after the petition in Chapter 11 was filed. The agreement provided for a term of ten years and Pincoffs was required to pay a 2% royalty on all licensed products sold. The court determined that this agreement was not in the ordinary course of business and that the court can not ratify the license agreement. The court relied on the fact that Pincoffs directed a letter to each of the customers that had a purchase order with the debtors, asking them to reissue a purchase order with Pincoffs, as the factual basis for determining that this agreement was not within the ordinary course of business. The court is unable to say that the terms of the license agreement represent the highest and best obtainable value for the license agreement. The license agreement will be auctioned for sale, and the Pincoffs have the right to participate in the Auction Sale. The Committee has through and including January 30, 1998 to commence an adversary proceeding against Pincoffs to seek affirmative relief. SA TELECOMMUNICATIONS: Scheduling Proposed Sale to EqualNet ----------------------------------------------------------- SA Telecommunications, Inc. et al., debtors are seeking an order authorizing an auction at which the debtors may sell substanitally all of their assets to EqualNet Holding Corp. The amount of consideration to be paid by Equal Net shall be the amount of the DIP Financing provided to SA Telecom by The Willis Group, plus a cash payment in an amount equal to the excess of $3 million over the outstanding DIP plus all cure payments as defined in the agreement plus a payment in the amount of $22,500 per day for the period from January 30, 1998 through the closing date, not to exceed $472,500 plus a promissory note to Greyrock Business Credit. In order to be a qualified competing bidder, the competitor must offer a bid with a fair market value which exceeds by $750,00 the fair market value of the total consideration to be paid by EqualNet. February 9, 1998 is set for the Sale Approval Hearing. A break-up fee of $400,000 has been proposed by EqualNet, and a maximum expense reimbursement of up to $150,000. SA TELECOMMUNICATIONS: Greyrock Replies to Committee ---------------------------------------------------- Greyrock Business Credit filed a response to the objection of the Committee to the debtors' motion for an order approving the breakup fee and minimum overbid provisions and approving the overadvance facility under the post- petition lending facility. The Committee stated that the Letter of Intent between the debtors and EqualNet provides that until the Greyrock DIP facility is repaid in full, Greyrock will enjoy both a first priority lien on the assets acquired by Equalnet as well as a first priority lien on the consideration paid by Equalnet to the debtors for such assets. "The granting to Greyrock of this double collateral package is unfair and prejudicial to the creditors of these estates." The Committee argues that allowing Greyrock to expand its lien will result in an undue windfall, while burdening the creditors with a delay. Greyrock states that the court should grant the debtor's motion because the Committee appears to be operating under the misapprehension that the same assets that are the subject of Greyrock's pre-petition liens and DIP financing liens will, after a sale to Equalnet is consummated, continue to collateralize the Greyrock loan and will continue to have the same value as prior to the sale. Currently, Greyrock has a security interest in all of the debtor's assets. Greyrock states that if the automatic stay were lifted, Greyrock could conduct a sale of an ongoing buisness. Once the sale to Equalnet is concluded, the debtors' subscriber bases will be integrated into Equalnet's subscriber base. Upon resale in the event of foreclosure by Greyrock, there will be less value if subscribers tire of changing companies. Also, the debtors' assets will be commingled with Equalnet assets, and the process of untangling them to assert a lien by Greyrock will be difficult. To compensate Greyrock for the increased risk it is taking, Greyrock is entitled under the proposed sale to a lien on the Preferred Stock being given by EqualNet. Greyrock argues that permitting Greyrock to retain a lien on the subscriber base being transferred does not adversely impact creditors. Or, if it does, it is only as a delay since creditors cannot resort to the Preferred Stock until Greyrock has been paid by Equaltnet, and Greyrock argues that this delay could be minimized by a sale of the Preferred Stock, with the proceeds being set aside to satisfy Greyrock's claim. --------- 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, Editor. 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 * * *